RWE amends some loss-making gas contracts

Europe’s fifth-biggest utility RWE (Xetra: RWE.DE) said it has managed to change some expensive contracts, which run as long as 2036, with gas suppliers that have cost the company hundreds of billions of euros.

Long-term European contracts with suppliers including Russia’s Gazprom (Other OTC: OGZPY.PK) and Norway’s Statoil (Oslo: STL.OL) have for decades linked the gas price to that of oil, but prices at hubs such as Zeebrugge, Belgium, have risen less than the oil price. This has prompted utilities throughout Europe to sell gas from long-term contracts at a loss to retain customers.

Now RWE has managed to end or index-link some of these contracts to the oil price. “Renegotiations of the first few long-term contracts with major international oil and gas companies have had the outcomes we were seeking,” it said.

The renegotiations are good news for the company, which reported nine-month earnings at EUR4.3bn (US$5.8bn), 30% down YoY. RWE shut down two nuclear power stations after Fukushima and the nuclear fuel tax in line with government policy, resulting in a considerable fall in profits. In addition, output was sold at less favourable conditions than experienced the previous year.