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Uniper's power generation H1 earnings rise, plans coal-to-gas conversion

Highlights

Robust tailwind from commodity markets, structural factors

Further upside potential as hedging slowed down for 2020/21

German coal-fired unit at Scholven to be converted to gas

  • Author
  • Andreas Franke
  • Editor
  • Maurice Geller
  • Commodity
  • Coal Electric Power

London — Uniper's first-half European power generation earnings rose 31% on the year on the back of tax reductions on hydro and nuclear in Sweden as well as capacity market payments in the UK and France, the Germany-based energy company said Tuesday.

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Adjusted earnings (EBIT) for the unit was Eur372 million ($431 million) for the period with the FY outlook for the unit lifted "to significantly above" from "noticeably above," it said.

"Over the medium term, the positive developments on international energy and commodity markets will give our business further tailwinds," Uniper CFO Christopher Delbrueck said.

According to slides for the Q2 investor presentation, power market prices are still not reflecting looming structural changes with Uniper especially seeing "upside in the outer years' amid "largely unhedged outright portfolio" positions for 2021, but only limited upside for 2018 and 2019.

Uniper's outright power hedging position for Germany and the Nordics drops from average levels above 75% for 2018-19 to just 15% and 40% respectively by 2020, the slides show with achieved prices also starting to recover from 2020.

HEADWINDS VS TAILWINDS

Uniper continues to face a "mix of political headwinds and tailwinds" for many of its assets and projects, it said specifically referring to the Nord Stream 2 gas pipeline from Russia to Germany, where pipe-laying works in the Baltic Sea started in July with the permit from Denmark still pending.

Uniper also said it was "actively accompanying coal plant exit plans in Europe" with almost 40 TWh of its annual power output impacted in Germany, France and the Netherlands.

French plans to close all coal-fired power station by the end of 2021 are still not confirmed, it said adding to uncertainty and "biting into [its] business case for the French market."

In the Netherlands, Uniper expects a "consensual [coal] exit" adding that it "would need to defend its position legally" otherwise with discussions also ongoing on a carbon floor price proposal by the government, which is "not yet off the table."

In Germany, Uniper favors to extend the concept of a reserve plant mechanism from old lignite units to also include hard-coal units.

There was no update on the planned commissioning of its Datteln 4 coal plant, which it said in May was delayed to 2020.

Uniper, however, decided to convert its 700 MW coal-fired unit at Scholven to gas after extending a long-term contract with an industrial enterprise in the Ruhr area around Gelsenkirchen, it said.

The plant's two existing coal units will be supplemented and eventually completely replaced by gas-fired capacity with a combined-heat-and-power unit (CHP) consisting of two gas turbines and a steam boiler to be installed by the end of 2022 at the latest, it said.

--Andreas Franke, andreas.franke@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com