Uniper flags increased Nord Stream 2 risk, lifts 2020 forecast midpoint

London — Germany-based power and gas company Uniper has flagged an increased risk to the Nord Stream 2 gas pipeline from Russia, but also slightly lifted its 2020 earnings forecast midpoint after solid H1 performance, it said Aug. 11.

"With the US intensifying its efforts on targeted sanctions against the Nord Stream 2 project, the probability of a delay or even non-completion of the pipeline is increasing," it said in its earnings report.

"In case the project can ultimately not be completed, Uniper may have to impair the loan provided to Nord Stream 2," it added, without providing further details.

Five European energy companies -- France's Engie, Austria's OMV, Anglo-Dutch Shell and Germany's Uniper and Wintershall Dea -- have co-financed the project, each committing around Eur950 million ($1.1 billion).

Meanwhile, power generation across Uniper including Russia fell 18% in the first six months of the year to 47 TWh, it said.

European generation was down 25% at 25.6 TWh amid lower nuclear in Sweden, while fossil generation declined due to reduced demand amid the coronavirus crisis in Germany, Netherlands and the UK, it said.

Uniper's trading unit benefited from "extraordinary gas optimization" in its midstream business, adding Eur334 million to the unit's H1 EBIT, it said.

The company raised the lower range of its 2020 adjusted net income by Eur50 million to Eur600 million based on a strong H1 and decreasing risks towards year-end, it said, expecting to pay out Eur500 million to shareholders, now mainly Finland's Fortum.

Hedging ratios for hydro in Germany and the Nordics as well as Swedish nuclear increased, with those plants generating some 14 TWh in H1 2020 and the majority of 2021 and 2022 output hedged at above market rates.

New strategy focus on hydrogen

In the long term, Uniper is now focusing on hydrogen, with Europe betting on hydrogen for decarbonization.

Achieving the ambitious targets set for Germany and Europe "will be neither quick nor easy," Uniper CEO Andreas Schierenbeck, who was appointed by the German government to the national hydrogen council, said.

Implementation of Uniper's strategy for its power generation business in Europe to be carbon-neutral by 2035 was progressing, he added, noting partnerships with Siemens and General Electric to assess its power plant portfolio in Germany, the UK and the Netherlands in relation to sustainable hydrogen.

The CEO confirmed Uniper's intention to shut 2.9 GW of German coal by 2025, while the 1.4 GW Irsching 4 and 5 gas-fired units are to return from mothballs in October, one year earlier than planned amid a shift in generation margins from coal to gas.

The risk section in the H1 report also highlighted the risk for its new 1.1 GW German coal plant Datteln 4 commissioned in May to be forced to close earlier with reviews set by the German coal exit law potentially bringing forward closure to 2035.

Commissioning of Uniper's new lignite coal plant in Russia (Berezovskaya 3) was delayed to 2021 due to the coronavirus crisis and required boiler repairs, it said.