Uniper to write down Nord Stream 2, keep existing Russian gas contracts

Uniper has decided to take an impairment loss on its loans towards the Nord Stream 2 pipeline from Russia, restart the divestment process for its 84% stake in Russia's Unipro, but honor its existing contracts for Russian gas imports of around 200 TWh (19 Bcm), the Germany-based energy company said late March 7.

Uniper's long-term import contracts with Russia play an essential role for gas supply in Europe, especially in Germany, covering over a third of the almost 50 Bcm imported from Russia in 2021, it said.

"Uniper will continue to be reliable in fulfilling [its] task on the basis of the existing contracts," the company said, adding that it would not enter into any new long-term gas supply contracts with Russia.

In the event of a short-term curtailment of gas flows from Russia, Uniper said it expected to be able to use its flexible assets, including gas storage, to largely compensate.

Significant interruptions of gas flows, however, would jeopardize the stability of the German gas system and would most likely lead to a declaration of an emergency by the energy ministry, Uniper said.

German energy regulator BNetzA would assume the role of the so-called load dispatcher, effectively taking control of the system and issuing instructions to market participants on the supply and demand side to balance the system.

In such a scenario, Uniper would actively support the BNetzA but it would ultimately be the responsibility of the regulator to decide how the gas is delivered and distributed to customers, it said.

"We expect such measures and events to replace existing contractual arrangements," Uniper added.

While Europe and Germany are not currently planning to include energy supplies as part of any new sanctions against Moscow, Russia's energy minister Alexander Novak said late March 7 that Russia would have the right to halt flows via Nord Stream 1 due to the sanctions imposed on Nord Stream 2.

European gas prices soared March 7 amid fears of sanctions with TTF front-month gas trading as high as Eur345/MWh ($375/MWh), according to ICE data.

By close, the contract was assessed by Platts at Eur208/MWh, data from S&P Global Commodity Insights show.

Related story: European gas, power price spikes ease on Russia sanctions downplay

Nord Stream 2 impairment

Meanwhile, Uniper said it had also taken the decision to record a full impairment loss of Eur987 million related to its investments in Nord Stream 2.

Uniper was one of five European energy companies that provided loans to Nord Stream 2 to help build the 55 Bcm/year pipeline along with Shell, France's Engie, Austria's OMV and Germany's Wintershall Dea.

In addition, Uniper said it would restart the divestment process for its 84% stake in Russian power generator Unipro.

Unipro's activities operating five power plants with 11 GW installed capacity are ongoing, but Uniper will not make any new investments in Russia, it said.

Learn more about the history of the Nord Stream 2 project:

In order to further diversify its gas portfolio, and as requested by the German government, Uniper also plans to bring LNG directly to the German market.

For that, an LNG regasification plant is required, which does not yet exist in Germany. Uniper has therefore resumed its planning for a LNG terminal in Wilhelmshaven with activities closely linked to plans to make Wilhelmshaven a green energy hub with green ammonia imports and hydrogen production to fulfill more than 10% of the German hydrogen demand in 2030.

Talks with the Russian company Novatek on the import of ammonia have been put on hold.