Uniper, the German utility almost brought down by the stoppage of pipeline natural gas supplies from Russia’s Gazprom and which is now importing LNG at Germany’s North Sea port of Wilhelmshaven, has suffered another setback by having to pay €550 ($602M) to a European LNG player after an arbitration ruling.
The Düsseldorf-based company, which had to receive a stabilization package from the German Federal government in 2022 to survive and reported net losses of €19 billion ($20.4Bln) in its most recent annual earnings, said the ruling came from an arbitration court over a contract concluded prior to the group’s spin-off in 2016.
Uniper said that the arbitration proceedings, under the rules of the International Chamber of Commerce, began in early 2021 and related to the pricing provisions of a long-term LNG supply agreement with an undisclosed counter-party.
Proceedings
“Uniper has been notified on 24 November 2023 of an award against a subsidiary in arbitration proceedings under the rules of the ICC which began in early 2021,” said the Uniper statement.
“The proceedings between the Uniper subsidiary and a European energy company relate, inter alia, to the pricing provisions of a long-term agreement for the supply of liquified natural gas (LNG), concluded prior to the spin-off of Uniper in 2016 and which has since expired,” Uniper explained.
“A payment to the opposing party of an estimated €550 million related to the retroactive re-pricing of the long-term agreement would be due under the terms of the award,” it added.
“The additional payment will have a full impact on the annual result of Uniper. Uniper is currently analyzing the reasoning of the decision and reviewing all possible avenues of legal recourse against the award,” stated the company.
The 2017 report of the International Group of LNG Importers (GIIGNL) showed a 15-year contract under which Italian energy company Eni agreed to supply Uniper with 650,000 tonnes of LNG per annum between 2007 and 2022.
However, Milan-based Eni has so far declined to comment on the issue.
Uniper said in October 2023 that it expected adjusted earnings before interest and tax of between €6 billion to €7Bln and adjusted net profit of €4Bln to €5Bln.
Gazprom issues
Uniper was spun from German utility E.ON in 2016 and has also been involved in lawsuits against Gazprom, the former supplier of pipeline natural gas to Germany. At the time Uniper was under the control of the new owner, the Finnish power company Fortum.
However, Uniper was then formally taken over from Fortum in December 2022 in a deal with the German State that had included clearances from the European Commission to save Uniper from collapse.
Uniper itself had launched legal proceedings in 2022 against Gazprom which first cut and later suspended deliveries, sending Uniper into crisis.
Uniper’s bad luck was compounded in 2022 as it was also a buyer of LNG cargoes from the US Freeport LNG plant in Texas closed for part of 2022 and early 2023 by the June 8 fire.
The Wilhelmshaven LNG terminal commenced regular operations in March 2023, using the floating storage and regasification unit, the “Höegh Esperanza”.
The facility was developed by Uniper in record time and became the first German LNG import terminal to start operations on December 21, 2022, initially in trials.
