Uniper Posts €40 Billion Loss as Russia Throttles Gas Supply

(Bloomberg) -- Uniper SE reported one of the biggest losses in German corporate history, with Russia's stranglehold on gas supplies leaving the giant utility struggling to survive.

Uniper reported a net loss of about €40 billion ($39.3 billion) in the first nine months of the year after being forced to buy gas at prices far beyond what it paid Russia under long-term contracts. It's been one of the energy firms hit hardest by Moscow's supply cuts, requiring a mammoth rescue package from the German government that will lead to its nationalization by the end of 2022.

Uniper posted "considerable losses because the replacement costs of procuring new gas aren't being passed through to consumers," said Chief Financial Officer Tiina Tuomela. "This has left massive scars in our financial results. Implementing the stabilization package therefore has the highest priority."

Uniper said the loss -- on an international financial reporting standards basis -- includes €10 billion of realized costs for gas replacement volumes and about €31 billion of anticipated future losses. It posted an adjusted net loss of €3.2 billion for the nine-month period, according to a statement on Thursday.

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Uniper shares were little changed as of 11:19 a.m. in Frankfurt trading, after declining 93% this year.

Russia has curbed gas supplies to Europe amid heightened tensions over its invasion of Ukraine, with the effects rippling across the continent, fanning inflation and threatening to push some of the region's largest economies into recession.

Uniper is set to receive a €30 billion aid package after losing millions of euros every day to procure more-expensive gas to fulfill customer contracts. As Germany's largest importer, its survival is considered essential for the country's energy system, with failure potentially having a domino effect on the sector.

"The size of the support package relative to Uniper's market cap before the war shows its unique exposure to Russian gas cuts and we don't expect to see other companies struggle nearly as much as Uniper as it struggles to replace these supplies with non-Russian sources," said Patricio Alvarez, an analyst at Bloomberg Intelligence.

Details of the support package are being finalized, the Dusseldorf-based company said Thursday. Analysts have said the planned bailout, including an €8 billion capital increase, may not be enough. Deputy Finance Minister Florian Toncar has insisted the government will ensure that Uniper can get the funding it needs to operate.

Benchmark European gas was trading at about 135 per megawatt-hour in Amsterdam on Thursday, down from a peak of more than 300 in August.

"In a price scenario of 80-100 per megawatt-hour, Uniper could lose 4-5 billion per quarter, which suggests a larger capital increase and additional liquidity may be necessary relatively soon," said Alvarez.

Credit Lines

The utility has become increasingly reliant on credit lines from state-owned bank KfW. It has used €14 billion out of a total facility of €18 billion, it said Thursday, adding that it's uncertain what financing amounts Uniper will need from KfW and for how long.

Economic net debt jumped to €10.9 billion in the first nine months of the year as cash flow was wiped out by record-high gas costs. European prices have eased since the summer amid ample imports of liquefied natural gas and a warm autumn, bringing some relief, but that may only be temporary.

"Our daily gas curtailment losses have come to zero last month," Tuomela said on a conference call with analysts. That compares with daily losses of more than €100 million when prices spiked in August. "This is positive, but we know it is only momentary."

Uniper reiterated that it expects significantly negative adjusted net income for the full year. The company said it couldn't provide a more detailed outlook given the high degree of uncertainty regarding gas volumes actually received in the future and the relevant price levels for purchases.

The multibillion-euro rescue package from the government requires regulatory consents in various jurisdictions, including state-aid and merger-control approvals from the European Commission. Shareholders are due to vote on the equity issuance in an extraordinary meeting planned for the second half of December.

--With assistance from .

(Updates with analyst comments from eighth paragraph)

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