Uniper Sticks With U.K. Energy Even as Brexit Clouds Outlook

  • CEO Schaefer makes case for utility to remain independent
  • Stock more than doubles since IPO in September last year

Uniper SE remains committed to the U.K. as long as Brexit doesn’t alter the way the energy market works.

There are no clear proposals yet on how Britain will interact with the rest of the European Union after it leaves the bloc in 2019. But the utility’s Chief Executive Officer Klaus Schaefer says the nation’s retreat from coal-fired generation will create opportunities for the German company, whose U.K. business spans power plants to natural gas storage and pipelines.

“We are happy with our business in the U.K. as long as the rules and the market design and everything that we value and see as attractive stays that way,” Schaefer said Friday in an interview at the company’s office in Dusseldorf, Germany. Brexit “is the political reality and something that has to happen.”

Brexit is overshadowing Britain’s economic future and that’s posing questions about energy demand in its shift toward greener power. The nation plans to exit coal by 2025, which led the margin of spare generating capacity to plunge to the lowest in a decade. The buffer is recovering as the government and National Grid Plc put in place mechanisms that can pay power plants millions of pounds to be ready to supply power when most needed.

“I hope that the capacity in the market will continue to be rewarded properly,” Schaefer said. “The market is attractive because the market design is good.”

Coal Exit

The U.K. plans to shut its last coal-fired plant in 2025, but has already had at least one day when the fuel didn’t generate power. At times, gas-burning plants meet more than half the nation’s electricity needs, according to grid data.

A future focus on gas may benefit Uniper’s U.K. business, although a 13 percent slide in the pound versus the euro since the referendum has cut the value of those assets.

Britain is currently a member of the EU’s single energy market, where electricity and gas can flow freely across the bloc’s borders. Owners of power cables and gas pipelines linking Britain with the EU may face the imposition of tariffs under Brexit.

Uniper was born out of the split of EON SE in 2016. The former parent still owns 47 percent, but plans to sell its stake as soon as next year and is considering all options.

Read an interview with EON’s CFO on Uniper’s future

Along with a recovery in power prices, its shares have more than doubled since they began trading in Frankfurt in September last year. The stock was little changed at 21.065 euros at 9:11 a.m. The company is the second-best performer in the 30-member Stoxx Europe 600 Utilities this year.

That’s given Schaefer support for his case that Uniper should remain independent, but it’s all down to his old colleagues at EON, where he worked for more than a decade. He has also worked as a merger & acquisitions analyst at Morgan Stanley in London.

“EON and Uniper have however also said that this whole spinoff and the split of EON should result in two strong, independent companies on the stock market,” he said. “That’s simply the story that I’m reminding my former colleagues of, that this is what we said a year ago that the future of this company should be.”

Schaefer also said:

  • Uniper is on course to deliver 300 million euros ($359 million) in cost cuts by the end of this year from 2015 and on target to reach 400 million euros by the end of 2018
  • He doesn’t see much scope for consolidation among utilities, but doesn’t rule out strategic acquisitions of smaller assets including gas plants and storage sites
  • It’s unlikely Uniper would invest in renewable technologies in mature markets since there are others who have been doing that for a long time
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