Uniper CEO Interview

How Fossil Fuels Can Flourish

main 69121935 Reuters – Uniper coal power plant in Hanau energy electricity 2016
Uniper’s CEO is certain: The sun also rises. Source: Reuters

The chief executive of Uniper, Klaus Schäfer, has marked the first anniversary of the energy company’s bourse listing with a plea for independence, brushing aside takeover rumors. Former owner E.ON, which still owns a 47 percent stake, plans to sell the stake in early 2018 and CEO Johannes Teyssen hasn’t ruled out placing it with a strategic investor.

“My colleagues and I in the management are convinced that Uniper has a great future as an independent listed company. I don’t see any other constellation that would be better for us and our shareholders,” Mr. Schäfer told Handelsblatt. “We are of course aware that our biggest shareholder wants to sell its remaining shares in Uniper. But we have seen in the last 12 months that our hard work has been honored by the capital market and I’m sure that the capital market is ready to take up the shares at a good price.”

Uniper manages the legacy coal and gas power plants, wholesale trading and gas production activities of the former E.ON group, which last year separated into two companies to cope with the energy price slump and massive writedowns resulting from Germany’s switch to renewable power. E.ON was left with the group’s renewable energy operations, seen by analysts as an altogether more promising business model than Uniper’s aging conventional plants.

However, since the IPO 12 months ago, Uniper’s share price has more than doubled to €22 ($26), it decided to sell its 25 percent stake in the Yuzhno-Russkoye Siberian gas field to slash debt, and it has agreed a cost-cutting deal with employees. Uniper is Germany’s biggest utility in terms of revenue, which was €67.3 billion last year.

“I’m relying on what was formulated as the aim of the spin-off right from the start: to pave the way for two companies to have an independent future”

Klaus Schäfer, CEO, Uniper

Mr. Schäfer said he was convinced Uniper would remain independent, despite the statement by his former boss, Mr. Teyssen. “I’m relying on what was formulated as the aim of the spin-off right from the start: to pave the way for two companies to have an independent future. That’s what both of us, Johannes Teyssen and I, kept on emphasizing before the flotation. The path was clearly outlined and communicated at E.ON’s annual shareholders meeting a year ago at which the split from Uniper was sealed. And that’s what it said in the IPO prospectus. You can read those statements. From my point of view nothing has changed.”

When Handelsblatt pointed out that ultimately, Mr. Teyssen was only obliged to look after the interests of E.ON’s shareholders, he said: “I am very well aware that it’s the task of a chief executive to focus on the assets of his shareholders. But on the other hand his credibility also depends on public statements being enduring and reliable.”

He declined to comment on speculation that Finland’s Fortum group or German rival RWE maybe interested in acquiring Uniper. But he said consolidation in the power market made no sense right now.

“Each year so many wind and solar plants are being built that the supply would keep increasing even if coal and gas-fired power plants were taken out of the market on a large scale. That’s why the impact of consolidation among operators of coal and gas power plants would evaporate.”

12 Uniper – A Fossil Fuel Power House_ALT-01

Uniper, he said, had a bright future because it could help safeguard Germany’s power supply in an era when an ever greater proportion of its electricity output depended on the weather. That’s its business model.

“The issue of supply safety is becoming ever more prominent— and that’s what we stand for,” said Mr. Schäfer. “At the start of the year there were days when the 80,000 megawatts of capacity of wind and solar plants Germany has installed could only produce 4,000 megawatts of power. We couldn’t do without conventional power plants on those days, and we won’t be able to in the long term either.”

Uniper’s gas power plants and its position as one of Europe’s biggest gas traders put it in a perfect position to help offset the volatility of renewables, he said.

The problem of renewables crowding conventional power players out of the market could be addressed with a reform of the energy market to pay plants to remain on standby as a reserve to jump in when it’s cloudy and still.

That needn’t distort the market, he said. “These capacities too must be tradable. Only the lowest-cost provider would be used.”

He added: “Time is of the essence — and other countries like France, Britain or Russia are showing us the way.”

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Grischa Brower-Rabinowitsch leads Handelsblatt’s coverage of companies and markets. Jürgen Flauger is a Handelsblatt editor, covering electricity and gas providers, international market developments and energy policy. To contact the authors: brower@handelsblatt.com and flauger@handelsblatt.com

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