Germany's Uniper initiates arbitration proceedings against Gazprom Export

Uniper has initiated arbitration proceedings against Russia's Gazprom Export in an attempt to recover billions of euros in damages related to the under-delivery of Russian gas since June, the German utility said Nov. 30.

Gazprom began to cut gas flows to Germany via the Nord Stream pipeline system in June and continued to reduce supply until the end of August when deliveries were halted completely.

It blamed sanctions-related maintenance issues with turbines at the Portovaya compressor station for the reduction and then suspension of exports via Nord Stream.

As a result, Uniper -- previously one of Europe's biggest buyers of Russian gas -- was forced to buy replacement gas to make up for the Russian shortfall, at significant cost to the company, to meet its supply obligations.

In its statement Nov. 30, Uniper said the replacement gas costs alone currently amounted to at least Eur11.6 billion ($12 billion) and would continue to rise until the end of 2024.

"We are claiming recovery of our significant financial damages in these proceedings," Uniper CEO Klaus-Dieter Maubach said.

"It's about gas volumes that were contractually agreed with Gazprom but not delivered and for which we had to procure replacements at extremely high market prices and still have to do so," Maubach said.

"We incurred these costs, but they are not our responsibility. We are pursuing these legal proceedings with all due vigor: We owe this to our shareholders, our employees and the taxpayers."

The arbitration claim against Gazprom Export will be heard in Stockholm.

In emailed comments, Gazprom Export confirmed that Uniper had initiated the arbitration proceedings.

"Currently we are studying the received request for arbitration and we will protect our interests within the legal framework," it said.

"Gazprom Export does not admit breach of contracts nor the validity of Uniper's claims on damage recovery," it said.

Lower Russian deliveries to Europe drove European gas prices to record levels in 2022, though prices have dropped in recent months on healthy storage levels and lower demand.

Platts, part of S&P Global Commodity Insights, assessed the Dutch TTF month-ahead price at Eur130.23/MWh on Nov. 29, down from a record high of Eur319.98/MWh in late August.

The financial losses at Uniper prompted the German state in September to decide to take a 99% stake in the company.

Unipro unit

Uniper also said Nov. 30 that it had decided to further distance itself as far as possible -- legally and in terms of personnel -- from its Russian business unit Unipro.

Power generator Unipro was put up for sale in the summer of 2021 and a transaction was agreed with a local buyer.

"But the political approval for the transaction is outstanding and uncertain," Uniper said.

Unipro management has not been involved in the parent company's information processes for some time, and financial flows and IT systems have been separated, Uniper said.

In a further step, the Uniper board on Nov. 29 launched a process to further separate the two companies as far as possible.

"We took all the steps possible to divest Unipro," Maubach said. "In September, we even signed a deal, but since then it is still subject to the Russian regulatory authorities with an uncertain outcome."

"With a divestment not being under our control, we have taken far-reaching steps to fully separate our business outside Russia from the Russian activities and the associated risks, even without a sale, as far as is possible under the current circumstances."