Uniper Defends NS2, Still Shuns Fortum
Germany’s Uniper is monitoring new US laws that could impact on its financing of the Gazprom-led Nord Stream 2 pipeline venture, while also fending off an unwelcome takeover bid from Finnish utility Fortum.
Fortum on November 7 publicly launched its public takeover offer to Uniper shareholders November 7. This follows E.ON's acceptance in principle in late September to sell its roughly 46.65% interest on Fortum. Uniper, which until 2016 was wholly-owned by E.ON, indicated then that a Fortum takeover would be unwelcome.
Uniper CEO Klaus Schafer also November 7 said: "Uniper's management board and supervisory board will carefully examine the offer submitted by Fortum and comment on it within the next two weeks. After seven weeks of statements of intent via the media, we finally have something more detailed to work with.”
However Schafer added: “Pending submission of the ‘Reasoned Opinion’, the [Uniper] management board recommends that all Uniper shareholders refrain from accepting the takeover offer."
Uniper declined to take questions at its 3Q results press briefing on the public offer, because it was so recent, but CFO Christopher Delbruck refused to rule out legal action with regard to the Fortum bid and any potential break-up of Uniper that might result.
Fortum's November 7 published offer for outstanding shares of Uniper gives shareholders until 16 January 2018 to accept Fortum’s offer. The Finnish firm said its offer represents a premium of 36% to Uniper’s share price prior to intense market speculation in late May 2017 regarding a potential takeover, and a premium of 120% over the initial post spin-off Uniper stock price of €10/share. Fortum CEO Pekka Lundmark said it was a final offer, that it did not expect a competing offer, and that if E.ON went ahead and sold its stake to Fortum, then Fortum would become Uniper's largest shareholder.
Uniper meanwhile announced November 7 net income of €782mn in January-September 2017 was up considerably from the net loss of €4.2bn in 9M2016, as large impairment charges booked last year on Uniper’s generation and gas storage businesses did not recur in 2017.
Uniper's Delbruck said that the sale to Austria's OMV of Uniper's roughly 25% stake in the Yuzhno Russkoye field in western Siberia was still on track for completion by end-2017 and would reduce Uniper’s net economic debt.
On the Nord Stream 2 pipeline project, Delbruck said that his firm was monitoring US law relating to investments in Russia. He said the US State Dept has issued some guidance relating to Russian export pipelines, which he believed was positive, but which Uniper is still reviewing.
Delbruck said the NS2 project was “important for the gas business in Europe” particularly in order to “diversify gas import channels”. But he said there was uncertainty on whether routing might have to be changed – an admission that the Danish government has yet to approve the route on its subsea territory, and could demand that it bypasses Denmark.
Acknowledging that discussions continue for a new coalition government in Germany, Delbruck said that Germany’s official stance on NS2 remains that it is a purely commercial matter, but one which Berlin supports. He also mentioned the new Dutch coalition’s proposal to end coal-fired generation from 2030, saying this would increase prices for Uniper’s major modern coal-fired plant at Maasvlakte near Rotterdam in the interim.
In Germany, Uniper expects to start up its large Datteln-4 coal-fired plant in 2Q2018, and said that coal had already been delivered to the unit, which was working towards commissioning.
More widely, Delbruck said Uniper expects a recovery post-2017 in European power prices to positively benefit its gas-fired generation capacity, especially as power prices now are around €35/MWh (from lows of €20 a few years back). But he said that an EU carbon price of €25-30 per ton CO2 was needed in the longer term, and urged countries not to set divergent carbon pricing regimes.
Adjusted pre-tax earnings (Ebit) in 9M2017 were €952mn (year ago: €1.3bn) reflected the fact that a significant positive settlement in Uniper’s favour from Gazprom relating to its long-term gas contract occurred last year; that was clearly reflected in earnings from its commodities trading which declined by €1bn to €278mn.
Mark Smedley