(Bloomberg) -- Uniper SE reported a loss of more than 12 billion euros ($12.2 billion), ranking among the biggest in German corporate history and laying bare the unprecedented crisis engulfing Europe's energy markets.
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Earnings from the utility, which last month received a government bailout, show just how severe the situation is as the European Union braces for winter.
Russia has curbed gas supplies to the EU amid heightened tensions over its invasion of Ukraine, with the effect rippling across the continent, fanning inflation and threatening to push some of the continent's largest economies into recession.
"Uniper has for months been playing a crucial role in stabilizing Germany's gas supply -- at the cost of billions in losses resulting from the sharp drop in gas deliveries from Russia," Chief Executive Officer Klaus-Dieter Maubach said in the firm's earnings statement.
The loss, on an IFRS basis, includes a 6.5 billion-euro hit from future gas shortages and reflects impairments of 2.7 billion euros related to its Nord Stream 2 loan and goodwills from the Global Commodities and the Russian Power Generation unit, the firm said.
Supply curtailments forced Uniper to buy gas in the spot market to fulfill contracts, pushing it to the edge of insolvency. That led to a 17 billion-euro rescue package from the German government to prevent the company's collapse, which could have had a domino effect on the country's energy system.
'Eye of the Storm'
"Uniper remains in the eye of the storm of the European energy crisis," John Musk, an analyst at RBC Europe Ltd., said in a note. "Uniper remains one only for the very brave."
The utility posted an adjusted loss before interest and taxes of 564 million in the first half, after earnings of 580 million in the same period last year.
The company's net debt jumped to 2 billion euros from 324 million euros amid negative cash flow, along with measures to improve liquidity in the gas and carbon emissions-allowance businesses.
The forecast for this year still cannot be issued "within an adequate range because of the volatile environment," the company said, expecting a "substantial negative result." Its previous forecast for this year was in the range of 1 billion and 1.3 billion euros.
"The war in Ukraine has significantly negatively impacted the risk and chances profile of the Uniper Group" the company said in the interim report. The conflict exposes the company "to several new material risks and increases the potential worst-case impact and probability of occurrence of multiple existing risks."
Germany, still heavily dependent on Russian supplies despite efforts to diversify, is racing to build sufficient stockpiles to avoid severe rationing when the weather turns cold.
The government has urged lower consumption, seeks to revive coal power plants and is rethinking the phaseout of its remaining nuclear power plants. This week, it also slapped a levy on gas use, leaving households bracing for higher energy bills and exacerbating the Europe-wide cost-of-living crisis.
Moscow and Berlin are in a standoff over the return of a key turbine for the Nord Stream gas pipeline, with the machine stranded in Germany after repairs in Canada. Gazprom PJSC has slashed flows via Nord Stream to just 20% of capacity, prompting the German government to repeatedly voice concerns supply could be cut off completely.
Uniper will have to deal with the full economic loss of replacing Russian gas until Sept. 30, when the government will introduce a mechanism to allow utilities to pass on 90% of costs to customers.
The government stands ready to further support the company, if replacement cost losses that can't be offset by operating profits from other businesses exceed 7 billion euros, according to the financial report.
"Given the recent sharp increase in gas prices, we expect the gas shortfall cost to October is likely to prove from 2-3 billion euros higher than the 6.2 billion euros presented at the time of the bailout a few weeks back," analysts at J.P. Morgan said in a note. "We expect material downgrades to reflect increases in the Russian gas curtailment costs."
Uniper expects earnings improvement in 2023 and aims to leave the loss zone beginning in 2024, said CFO Tiina Tuomela in the company's statement.
(Updates with analyst, company comments from seventh paragraph.)
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