Lawyers assessed the chances of Uniper to recover losses from Gazprom

The German energy company Uniper has filed a lawsuit with the Arbitration Tribunal in Stockholm demanding to recover from “Gazprom export” (“subsidiary” of “Gazprom”) losses in the amount of 11.6 billion euros for gas not supplied since June. This was announced on November 30 by Uniper CEO Klaus-Dieter Maubach.

“We demand compensation for our significant financial damage. We are talking about the volumes of gas that were agreed with Gazprom under the contract, but were not delivered, and for which we had to purchase replacements at extremely high market prices, ”said Maubakh, quoted by the company.

Uniper explains that it is forced to buy gas at a higher price in order to fulfill its obligations to deliver to customers “based on previously agreed prices and volumes.” Gas replacement costs have now reached 11.6 billion euros and will continue to rise until the end of 2024, the company indicates.

Uniper also announced that it had decided to “distance itself as much as possible” from its Russian division, Unipro. The release also says that the energy company has been trying to sell Unipro since the summer of 2021, but cannot because the deal has not yet received the approval of Russian regulators.

Unipro – former OGK-4, bought out by a German company during the division of RAO UES. Owns 5 thermal power plants with a total capacity of 11.2 GW, including one of the largest in Russia, Surgutskaya GRES-2 (5.7 GW)

“Unipro management did not participate in the information processes of the parent company for some time, and financial flows and IT systems were separated. As a next step, the board of directors of Uniper yesterday launched the process of further unbundling the two companies to the extent possible. According to Maubach, Uniper intends to “completely separate the business in Russia and the risks associated with it” from the parent company “even without a sale.”

The press service of Gazprom Export confirmed that Uniper had initiated arbitration proceedings against the company. Gazprom Export is studying the claim, while the company does not recognize the violation of contracts and the legitimacy of Uniper’s claims for damages, the Russian company said in a statement.

The reduction in gas supplies to the EU in June was due to problems with the repair of gas turbines Siemens, which were installed at the Portovaya compressor station of the Nord Stream 1 gas pipeline. At the end of August, Gazprom announced a complete halt in gas pipeline pumping, as all imported turbines needed repairs, but they could not be done due to sanctions. And on September 26, both lines of Nord Stream 1 and one line of the never launched Nord Stream 2 were damaged as a result of sabotage in the exclusive economic zones of Denmark and Sweden.

Also this year, the volume of gas supplies through Ukraine has decreased: now gas is pumped through only one of the two compressor stations in the amount of 42-43 million cubic meters. m per day. It also continues along a branch from the Turkish Stream (as of November 30, it amounted to 35.4 million cubic meters). Gas via the Yamal-Europe pipeline has not been exported since last year.

Against the backdrop of the energy crisis in Europe, which received a new round this year against the backdrop of a jump in gas prices (in March they reached a peak approaching $ 3,900 per 1,000 cubic meters), the German government provided financial assistance to Uniper, and in September agreed on its nationalization with the main shareholder of the company – the Finnish Fortum. The German authorities will buy out a 99% stake in Uniper at a price of 1.7 euros per share and invest more than 8 billion euros in the company.

In January-September 2022, Uniper received a net loss of 40 billion euros against a loss of 4.8 billion euros in January-September 2021 (Vedomosti wrote about this on November 3). Uniper’s revenue for the nine months of 2022 grew 2.7 times yoy to 213.3 billion euros, while operating expenses increased by about 2.4 times to 462 billion euros. The company noted that the loss includes approximately €10bn of realized costs to replace Russian gas volumes and approximately €31bn of “expected future losses from the impact of derivatives valuation and reserve build-up associated with reduced Russian gas supplies.”

According to Uniper reporting, the energy company has entered into long-term contracts for the supply of about 37 billion cubic meters. m of gas, of which about 20 billion cubic meters. m falls on Russia. Contracts with Russia played a significant role in providing gas to Europe and especially Germany, which is 90% dependent on imported gas, explains Uniper. According to the ICE exchange, gas at the TTF hub in the Netherlands on November 30 cost more than $1,600 per 1,000 cubic meters. m.

On September 13, Reuters sources reported that Uniper was exploring the possibility of filing a lawsuit against Gazprom due to losses of 12.4 billion euros in the first half of the year.

Georgy Shashero, a lawyer at the A1 Bar Association, recalled that Gazprom announced a force majeure in the form of the inability to supply gas through Nord Stream 1 due to technical problems in a letter to the German company on July 14, 2022. The company, according to him, announced about the “retroactive impossibility to fulfill their obligations to supply gas.” “At the same time, it is not completely clear why Gazprom did not send the contractual volumes of gas through other pipelines,” the lawyer notes. In his opinion, Uniper has a chance to recover losses from Gazprom if the Russian company cannot prove that the nature of the technical problems with Nord Stream 1 that arose in June was completely beyond its control.

Forward Legal lawyer Lyudmila Lukyanova believes that it will not be easy to recover damages from Gazprom Uniper. “Most of the problems with the volume of supplies from Gazprom are caused by sanctions and technical problems with the gas pipeline,” she explains. In addition, losses are a rather complex legal category, since the plaintiff will have to convince the court that it was the actions of the defendant that led to negative financial consequences. Lukyanova adds that if the court takes the side of the German company, Uniper will be able to recover both actual damages and lost profits.

Shashero notes that such proceedings in Stockholm usually drag on from 9 months to a year and a half. But, according to Lukyanova, the consideration of the case can be “quite fast” and take 6-12 months, as in the case of the Finnish Gasum (the arbitration decision on the May lawsuit of this company against Gazprom appeared on November 14. – Vedomosti). If the arbitrators plunge into the technical details of force majeure, appoint an examination on the case, most likely a longer consideration – from 1 to 3 years. “Such a scenario is more likely, since force majeure circumstances are one of the key issues for this case,” Lukyanova believes.

Stockholm’s arbitration rules allow Gazprom to file counterclaims against Uniper in the same proceeding, Shashero adds.