Uniper secures $11 bln credit lines to address energy market volatility

The logo of German energy utility company Uniper SE is pictured in the company’s headquarters in Duesseldorf, Germany, March 10, 2020. REUTERS/Thilo Schmuelgen

FRANKFURT, Jan 4 (Reuters) – German utility Uniper (UN01.DE) on Tuesday said it has secured credit facilities worth up to 10 billion euros ($11.3 billion) from parent Fortum (FORTUM.HE) and state bank KfW (KFW.UL) in a precautionary move to address high volatility in energy markets.

Uniper, in which Finland’s Fortum owns more than 76%, said as part of the measures it had also drawn 1.8 billion euros of credit facilities from its core banks, which it said was the full volume.

“The reason for these additional financial instruments is the unprecedented price increases of – in some cases – several hundred percent within a few months in a highly volatile market environment,” Uniper finance chief Tiina Tuomela said.

“To give our customers security, we deposit liquid funds in forward transactions. The sharp rise in market prices has led to a corresponding need for liquid funds. Recently, energy prices have eased again, but we want to remain cautious.”

Uniper said that while the credit facility provided by Fortum had been partly used, the KfW loan had not, adding overall these steps would give it financial flexibility in “potentially extreme” market conditions.

Gas and power markets have seen prices skyrocketing over the past months for several reasons, including higher overall demand and speculation around supplies from Russia – Europe’s biggest supplier of natural gas.

Fortum, in a separate statement, said European gas prices had risen up to 1,000% to unprecedented levels in December.

While the high volatility increases the need for security payments, it also raises the value of Uniper’s gas and power assets, the company said, adding its earnings prospects were not adversely impacted.

“Economically, Uniper is a very healthy company,” Tuomela said. “Nevertheless, we consider the agreements announced today to be useful as precautionary measures to increase our liquidity headroom.”

($1 = 0.8859 euros)

Reporting by Christoph Steitz; Editing by Chris Reese and Alex Richardson

Our Standards: The Thomson Reuters Trust Principles.