Germany’s E.ON AG said Wednesday it has reached an agreement with Norwegian natural gas producer Statoil ASA (STO) -0.42% to readjust the commercial terms of long-term, oil-indexed gas contracts that account for around 25% of the German utility’s gas portfolio.
The purchase prices of the gas it acquires from Statoil have been brought down to market level, said E.ON without further elaborating on the expected impact of that agreement on its earnings in 2012.
The company earlier Wednesday said it posted its first ever net loss in 2011 due partially to its loss-making wholesale gas business, where procurement prices that are linked to the price of oil far exceed selling prices in an oversupplied European market.
The disconnect between high procurement prices and low selling prices has been putting the company’s wholesale gas business under enormous pressure and its gas supply and sales business recorded a loss of around EUR 700 million, E.ON said.
The agreement with Statoil marks a major step forward for E.ON, which now has renegotiated some 65% of its gas procurement contracts with producers.
However, talks with Russia’s Gazprom OAO (GAZP.RS) — which supplies around 35% of E.ON’s gas portfolio–are ongoing, E.ON said.
Chief Executive Johannes Teyssen said that E.ON still expects to bring all of its long-term gas supply contracts to a “competitive level” by 2013
E•ON, is the holding company of the world’s largest investor-owned energy service provider based in Düsseldorf, North, Germany. The name comes from the Greek word aeon which means eternity.
It operates in over 30 countries and serves over 26 million customers. It is one of the 30 members of the DAX stock index of major German companies and a member of the Global Titans 50 index.