Uniper’s chief vows to deliver a ‘good return’ for Berlin after state rescue

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Nationalised German gas importer Uniper has vowed to learn from its disastrous over-reliance on Russian gas as it unveiled an €8bn green overhaul aimed at putting it on a path to environmental and financial stability.

Chief executive Michael Lewis used his first interview since taking up his role in June to draw a line under its previous dependence on Gazprom, which led to a government bailout as the company wracked up €19bn in losses after Vladimir Putin, Russia’s president, cut gas supplies to Europe last year.

“Were we too reliant on Russian gas? It turned out yes,” Lewis told the Financial Times.

The 56-year-old Briton added: “It is important to have diversity. There’s no question about that. And that’s one thing the crisis has brought home to us loud and clear.” The company now imports a mixture of pipeline gas and LNG from suppliers in the Netherlands, the US, Norway, Australia and Azerbaijan.

After Putin’s full-scale invasion of Ukraine, Uniper became an ill-fated symbol of the over-reliance of Europe’s largest economy on Moscow, with the industrial nation importing more than half of its gas from Russia. As well as being pushed to the brink of collapse by Putin’s decision to cut gas supplies to Europe, Uniper lost control of its Russian subsidiary Unipro, which the Kremlin expropriated in April, in the first in a wave of seizures of western assets.

Lewis, who was previously chief executive of the utility Eon UK, promised to generate a “good return on investment” for the German government. Berlin injected €13.5bn in equity for a 99 per cent stake and granted the company €6bn in loans, in one of the biggest corporate bailouts in German history.

Uniper enjoyed what it called “exceptionally” good results in the first half of 2023, with earnings before interests and taxes of €3.7bn, compared with a €757mn loss in the same period last year, thanks to favourable gas market conditions and a successful hedging strategy.

The company stressed the record performance was unlikely to be repeated. But German government officials say their ultimate aim is to make a profit on the investment, akin to the €760mn gain it made last year on its rescue of Lufthansa during the coronavirus pandemic.

Lewis said he was “confident” the company could achieve that goal thanks to an €8bn plan to make the fossil fuel group greener.

The German government, which is required under EU state-aid rules to reduce its stake in Uniper to 25 per cent by 2028, is expected to set out a strategy for exiting the company by the end of the year.

Uniper, which operates power stations in Germany, the UK, Sweden and the Netherlands, on Tuesday brought forward its target date for carbon neutrality from 2050 to 2040.

It pledged to exit coal-fired power generation in 2029, eight years earlier than planned, as well as decarbonising other existing assets and building new ones.

Lewis he saw an opportunity for Uniper to provide a missing piece to the energy transition by generating “flexible green power” as a back up to wind and solar. As well as developing 1GW of hydrogen electrolysis capacity by 2030, it plans to import environmentally-friendly fuels such as green hydrogen and biomethane.

The plans were met with scepticism by environmental campaigners, who oppose the government’s plan to use gas as a “bridging” fuel towards carbon neutrality, which Berlin has set itself to achieve by 2045.

Sonja Meister, an energy campaigner at German NGO Urgewald, described the strategy as “a step in the right direction” by a company that had long been an environmental laggard. But she questioned its plans to continue to rely heavily on natural gas and said more detail was needed on how it would meet its new targets.

Analysts were also circumspect about the CEO’s claim that environmental and financial performance would go hand in hand. “There’s reason to be cautious,” said Ingo Becker, head of utilities sector research at the brokerage Kepler Cheuvreux. “The returns on such investments are unknown and you will not get proper state support schemes for every euro you invest so clearly there is some entrepreneurial risk.”

Lewis cautioned the company — as well as Germany and Europe more broadly — was undergoing a “transition” rather than a “revolution”.

Uniper is planning legal action against Moscow for the expropriation of its Russian subsidiary, he added, while admitting that the chances of recovering any of the lost value were slim. But he said it was “our duty to do everything we can to make sure that we try and get some compensation”.