European energy groups Equinor and Iberdrola report profits jump
Norway’s Equinor and Spain’s Iberdrola revealed bumper profits on Wednesday as the energy groups benefited from turmoil in commodity markets in the wake of Russia’s invasion of Ukraine.
State-controlled Equinor said it would return an additional $3bn to shareholders as it reported adjusted pre-tax earnings of $17.6bn in the three months to the end of June. The profit figure was up threefold on the same period last year on the back of higher gas prices and increased production that helped Norway displace Russia as Europe’s largest supplier.
Europe’s largest utility Iberdrola recorded a 36 per cent year-on-year rise in net profit to €2.08bn in the first six months of 2022 on revenues of €24.4bn, helped by strong performance in the US and Brazil even as it was unable to pass on higher costs to consumers in its home market Spain.
The earnings highlight how corners of the industry are experiencing an uplift from surging gas and power prices after Russia slashed supplies to Europe, causing a global squeeze in the availability of energy.
Gas prices in Europe are 10 times higher than their average over the 2010s, while benchmark power prices have hit record levels in Germany and France.
Equinor, formerly known as Statoil, said it had ramped up production of gas in Norway by 18 per cent to help meet European demand following the withdrawal of vast Russian volumes.
“Russia’s invasion of Ukraine impacted already tight energy markets and has created an energy crisis with high prices affecting people and all sectors of society,” said chief executive Anders Opedal.
“Equinor continues to provide high gas production from the Norwegian continental shelf.”
Equinor resumed LNG exports from Hammerfest last month after a 2020 fire at the site, which at full production can meet the annual gas demand of 6.5mn European homes.
Iberdrola’s fortunes contrast with those of other European utilities such as Germany’s Uniper and EDF of France, which their national governments are moving to nationalise and have suffered from their exposure to Russian gas.
Even so, the company faced difficulties in Spain where it suffered a 26 per cent fall in net profit after struggling to pass on costs to consumers from higher gas and power prices.
European utilities have been in a bind after Russia cut gas flows at a time when generation from hydro and wind sources dropped because of hot and dry weather. They must instead buy more costly gas and power from the market but receive fixed prices from customers on multiyear contracts.
Iberdrola’s UK subsidiary ScottishPower on Wednesday launched its biggest ever recruitment drive as it aims to hire more than 1,000 people in the next 12 months.
Fernando Garcia, an analyst at RBC, said that the current gas supply disruption was helping improve the economics for low-carbon power generation.
“Low marginal cost generation in Spain with hydro, nuclear or renewables is increasingly profitable in the current energy commodities scenario,” he said.