Wednesday, January 05, 2022
Energy prices are exploding
Electricity giant Uniper is pumping billions
The energy company Uniper is arming itself for troubled times on the raw material markets. In view of the sometimes extreme price jumps, he is obtaining additional liquidity from his parent company Fortum and also from the state development bank KfW.
Because of the explosion in electricity and gas prices, the energy company Uniper has agreed credit lines of up to ten billion euros to secure its business with the parent company Fortum and KfW Bank. The Uniper share price fell by almost three percent at times. Dealers were surprised by the amount of money. “Economically, Uniper is a very healthy company,” emphasized Chief Financial Officer Tiina Tuomela. The group recently raised its earnings forecast for 2021.
Meanwhile, the rival RWE sees itself armed against price jumps in electricity and gas. “We have made provisions for this through our credit lines and other financing instruments,” said an RWE spokeswoman.
Uniper had informed about its procedure in a mandatory announcement on Tuesday evening. On January 4, the utility agreed a credit facility of up to two billion euros with the state-owned KfW, the term of which ends on April 30, 2022. The possibility has not yet been drawn. It is a security measure in the event of extreme market developments in the future. At Fortum, Uniper has partially drawn a credit line agreement for up to eight billion euros, reported the Düsseldorf-based company, but gave no details. With its core banks, the company has completely called up an existing credit facility of 1.8 billion euros.
“Uniper is obliged to provide security services for commodity transactions that result from Uniper’s normal business activities to secure the portfolio,” explained the group. The amount of these temporary security payments would depend on the general commodity price level. “The reason for the additional financial security measures are the unprecedented price increases of sometimes several hundred percent within a few months in a highly volatile market environment,” said CFO Tuomela.
Prices rise sharply
The gas prices in Europe had shot up by up to 1000 percent and thus in December to an unprecedented level, said Fortum. According to the latest information, the Finns hold around 76 percent of Uniper’s shares. They had promised not to strive for a profit transfer and control agreement by the end of 2021. It looks like Fortum is not in a particularly hurry to squeeze out minority shareholders, said a trader. The Fortum share was at times more than three percent in the red.
The strong demand in the wake of the economic recovery has pushed prices up as well as low storage levels and speculation about Russia’s delivery behavior. Uniper is the financial partner of the controversial Baltic Sea gas pipeline Nord Stream 2, whose operation in Germany has not yet been approved.
Commodity and energy traders have to deposit additional funds – so-called margin calls – to secure the value of their open trading positions until delivery. The margin calls are used to cover credit and default risks in the event of rising and falling prices. “Strong price fluctuations naturally lead to a temporarily large need for liquidity,” explained the Essen-based RWE Group. Appropriate precautions have been taken for this.