JPM says NS1 halt might increase replacement gas losses, liquidity needs and bad debts

VERBUND AG

05/09/2022 07:53

** J.P.Morgan says that while European utilities are
"reasonably well" insulated from the energy crisis, the Nord
Stream 1 halt could increase replacement gas losses, liquidity
needs and bad debts, and make windfall taxes more likely
    ** Russia cancelled the restart of the pipeline, which had
been due to resume operating after a three-day halt for
maintenance, on Saturday  urn:newsml:reuters.com:*:nL8N3085SR
    ** The brokerage keeps its "underweight" view on the sector
but prefers regulated/energy network companies at this stage in
the energy crisis
    ** "With the NS1 halt making the supply-demand balance even
worse, wholesale gas prices will likely increase further, making
losses from buying replacement gas more severe," JPM says
    ** This primarily affects Uniper  UN01.DE  (Fortum
 FORTUM.HE ) and EnBW  EBKG.DE , and to a lesser extent Naturgy
 NTGY.MC , Nederlandse Gasunie and HERIM, JPM says
    ** Another spike in gas prices in very likely, JPM adds, as
it sees TTF returning to recent peak levels or going even higher
(>€300/MWh)
    ** "The complete halt in Nord Stream flows will make an
already very tight gas market even tighter, and marks a material
worsening of the European energy crisis," JPM says
    ** It says Austria, France, Germany, Czech Republic and
Britain could follow Spain and Italy in introducing windfall
taxes, which would be a headwind for Verbund  VERB.VI , EDF
 EDF.PA , Engie  ENGIE.PA , EnBW, EWE, Energie AG
Oberoesterreich, RWE  RWEG.DE , Cez  CEZP.PR , Centrica  CNA.L 
and SSE  SSE.L 
    ** It adds that removing the Nord Stream contribution to
ongoing gas flows over winter increases the likelihood of gas
rationing, and associated economic pressures for Europe
    ** However, with European gas storage at 81%, JPM sees no
immediate risk of gasouts or blackouts

 (Reporting by Anna Pruchnicka)
 ((anna.pruchnicka@tr.com))