Uniper accelerates forward power hedges

German utility Uniper's forward power hedges accelerated year on year, while its European gas-fired output rose the fastest.

For its estimated power production in Germany, Uniper hedged 90pc of its front-year output at an average price of €49/MWh as of the end of June this year. This was an increase of 5 percentage points, compared with hedges realised in the first quarter of this year.

On a year-on-year comparison, the firm's year-ahead hedges were also 5 percentage points above Uniper's hedges for the then-year-ahead — 2021 — at the end of the first half of 2020. The average achieved price this time was also higher year on year.

The German front-year contract has continuously increased, supported by higher European fuels and EU emissions trading system allowances. The contract traded last at €80.20/MWh this morning in the over-the-counter (OTC) market, Argus data show. The same product traded at an average of €63.05/MWh in the April-June period this year, which was €25.32/MWh higher than the level at which the contract traded in the second quarter of last year.

The company hedged about 95pc of its estimated output for the second year ahead — 2023 — at an average price of €52/MWh as of the end of June. Hedges were unchanged quarter on quarter, but they were higher on a year-on-year basis as the firm hedged 70pc of estimated generation for the then-second year ahead — 2022 — during the same period last year. The average achieved price was €6/MWh lower at that time.

The German second year-ahead contract traded last at €69.65/MWh in the OTC market this morning, Argus data show. This compares with an average of €59.93/MWh in April-June this year and €41.38/MWh at the point at which the second front year traded in the second quarter of last year.

Uniper's European fossil fuel-fired generation increased year on year, supported by lower wind levels. Gas-fired generation rose the fastest, by 3TWh year on year to 9.8TWh, followed by coal-fired generation that increased by 2.9TWh to 8.6TWh. But Uniper's hydropower generation declined by 0.6TWh on the year to 6.6TWh.

The company won a contract to close its Scholven C coal-fired plant in the most recent coal phase-out tender. The firm is waiting for a final decision from transmission system operators (TSOs) on the system relevance of the unit.

The firm's Heyden 4 coal-fired plant has been unavailable to the wholesale power market since January this year, as it won a contract for the closure of the unit in the first tender, held in December last year. But the plant has not been decommissioned yet, as market regulator Bnetza confirmed the system relevance of the unit, meaning it remains available in the grid reserve for TSOs until September 2022. "Heyden has been requested several times by TSOs, which highlights the issue of security of supply and system stability," chief executive Klaus-Dieter Maubach said.

Its Wilhelmshaven coal-fired plant also won a contract in the second coal phase-out tender. The facility will shut down at the end of this year. The company is working on a hydrogen project at the site.

And earlier this month, the firm said it will close one unit with a capacity of 500MW at the Ratcliffe plant by September 2022, with the remaining three units to close in 2024.

The Nordics

Uniper also accelerated its forward hedges in the Nordics.

It hedged 85pc of its estimated output for the year ahead — 2022 — at an average price of €24/MWh. This was 5 percentage points above the levels hedged for the then-front year — 2021 — during the same period last year. But the achieved price this year was lower than the €27/MWh achieved then.

For the second year ahead — 2023 — Uniper hedged 45pc of estimated output at an average price of €22/MWh. In a year-on-year comparison, the firm hedged 40pc of the then-second year ahead — 2022 — at an average price of €24/MWh, as of the end of June last year.

Earlier this year, Uniper and Finnish utility Fortum agreed for the latter to take over operations at the German firm's Swedish hydropower plants from 2022, as part of new "one team" plans. The merge targets joint additional renewables capacity of 1.5-2.0GW until 2025.

Uniper's adjusted earnings before interest and tax totalled €580mn in the January-June period, below the €691mn of a year earlier, driven by a price and volume increase in provisions for EU carbon allowances relative to the previous year. "The provisions are mirrored by carbon hedging transactions that will be unwound in the fourth quarter of 2021," the firm said.

By Jacqueline Echevarria