Agreement reached with Gazprom on price adjustments to long-term gas supply contracts
Non-recurring effect improves E.ON’s outlook for financial year 2016
Negotiations between Uniper, the fully-owned E.ON subsidiary, and Gazprom to adjust the prices of long-term gas supply contracts have led to an agreement earlier than anticipated. The agreement resolves a pending arbitration proceeding between the companies. Alexander Medvedev, Deputy Chairman of the Management Committee of OAO Gazprom, Elena Burmistrova, General Director of Gazprom export LLC, and Klaus Schäfer, Chairman of Management Board of Uniper AG, signed an agreement to this effect.
The agreement will enable E.ON to release some of the provisions recorded in prior years, resulting in a non-recurring positive EBITDA effect of about €380 million in the first quarter of 2016. The release of the remaining provisions, made in several years, will result in cash outflow of € 800 million, probably in the second quarter.
For E.ON the agreement will have the following effect: The non-recurring positive effect serves to increase E.ON’s forecast range for its 2016 EBITDA from between €6.0 and €6.5 billion to between €6.4 and 6.9 billion.1 Similarly, instead of underlying net income of €1.2 to €1.6 billion, E.ON now expects the range to be between €1.5 and €1.9 billion.
“Gazprom and Uniper have again demonstrated that long-term gas supply contracts are amenable to flexible solutions,” Uniper CEO Klaus Schäfer said. “Even in a difficult market environment characterized by significant declines in energy prices, our partnership has proved itself again. Long-term gas supply contracts will remain a mainstay of a stable supply of heat and electricity for Europe.”
With this agreement the prices are adjusted on the basis of our current market conditions. Uniper thereby derisked its long-term gas supply contracts for the upcoming years.1As already stated on March 9, 2016, in conjunction with its outlook, considering the vote at the E.ON SE Annual Shareholders Meeting on June 8, 2016, on the spinoff of a majority stake in Uniper and assuming that the spinoff will become effective in 2016, E.ON’s outlook for 2016 will have to be adjusted due to accounting effects resulting from the spinoff. E.ON then expects its outlook to be significantly lower. Further details will be communicated along with the publication of the spinoff documents for the Annual Shareholders Meeting. Due to accounting effects, this does not allow any conclusions on the expected EBITDA and underlying net income for Uniper in 2016. This press release may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group Management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development, or performance of the company and the estimates given here. E.ON SE does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments.