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EnBW Takes $561 Million Hit Due to Russian Gas Supply Cuts

FRANKFURT, Aug 12 (Reuters) - German utility EnBW said reduced Russian gas flows dealt a 545 million euro ($561 million) hit to its first-half core profit, as it was forced to buy gas at much higher prices from alternative sources.

EnBW, which mainly supplies power and gas to the German state of Baden-Wuerttemberg, home to major carmakers Mercedes-Benz and Porsche AG, reported a 3.7% decline in first-half adjusted EBITDA to 1.42 billion euros.

The company, which is de facto state-owned, blamed higher costs for the decline, partly offset by higher renewables earnings, and said it had to rely on reserve power plants much more than anticipated in order to guarantee supply.

The group's gas division VNG (VNG.UL) has two long-term Russian gas contracts with a volume of 100 Terawatt hours (TWh), one with the Nord Stream 1 pipeline, which is majority-owned by Gazprom, and one with Gazprom Germania, which has been under German trusteeship since April.

EnBW said the total potential damage from these two contracts "lies in the low single-digit billion euro range".

Nord Stream 1 is running at just 20% of its capacity, forcing German importers to buy volumes at sky-rocketing prices on the spot market - and which has triggered a bailout of VNG's larger peer Uniper.

EnBW, which in April agreed a 660 million euro credit line with state lender KfW (KFW.UL), said one of VNG's two Russian contracts would run out by the end of the year, leaving the group with just one contract covering 65 TWh as of next year.

The group also said it had cancelled a liquefied natural gas supply contract with Russia's Novatek by "mutual agreement", as the German utility continues to reduce its exposure to Russia as an energy supplier.

EnBW in June announced two long-term sale and purchase agreements (SPAs) with U.S. firm Venture Global LNG for 1.5 million tonnes per annum.

With regard to coal, EnBW said it had already fully cut its reliance on Russia and had enough stockpiles to fuel its coal-fired power plants this winter.

($1 = 0.9713 euros)

Reporting by Christoph Steitz, Vera Eckert and Tom Kaeckenhoff; Editing by Maria Sheahan and David Holmes

Source: Reuters

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