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Eon/Nord Stream 1: writedown exhibits pipeline isn’t any lifeline

Eon/Nord Stream 1: writedown shows pipeline is no lifeline


Gasoline pipelines had been as soon as protected infrastructural investments. That was earlier than Russia invaded Ukraine, throwing the way forward for Nord Stream 1 into doubt. German utility Eon has written down the worth of its oblique 15.5 per cent stake by three-fifths. That means a €4.5bn plunge within the worth of the entire asset to €3.2bn.

The transfer means odds are lengthening towards a return to Europe’s prewar reliance on Russian power. Simply as properly. Russia has been attempting to blackmail the west utilizing the pipeline, which is managed by Gazprom. It ought to solely get one probability to do this.

Russian gasoline and crude oil pipelines have been Europe’s power lifeline. Provide squeezes are actually testing European political relations. The southern department of the Druzhba oil transport system, which passes by way of Ukraine, just lately stopped pumping. Russia refuses to pay transit charges. That causes critical issues for Hungary. Nationwide oil firm MOL has determined to pay Ukraine on behalf of Russia.

Russia has carried out probably the most injury to Europe with gasoline. German gasoline storage is barely greater than 72 per cent full this week, based on the Federal Community Company. With Nord Stream 1 operating at only a fifth of capability, the watchdog fears Germany will miss a goal of filling three-quarters of capability by September 1.

Eon’s impairment slashes the worth of its stake, held through its pension fund, by properly over half to €500mn. It’s not the one one giving up hope on Nord Stream 1. Its reduce roughly aligns with that of fellow minority shareholder Engie. The French power group, which holds 9 per cent, made a barely gentler impairment again in Could. As but, Nord Stream 1’s different German shareholder, Wintershall Dea, which additionally has 15.5 per cent, has not adjusted its personal valuation.

The German utility picked an excellent time to take this hit to its pension fund’s investments. Rising rates of interest have diminished pension liabilities by greater than €3.7bn.

Most of us know {that a} minority stake in a non-public firm not often quantities to a hill of beans. The controlling shareholder calls the photographs when it issues.

Within the case of state-owned Gazprom, that chain of command extends to the Kremlin. Its enthusiasm for consensual decision-making is hardly legendary. For German utilities, writing down stakes in Russian power property due to this fact represents the tip of a delusion, reasonably than of a good looking friendship.

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