A major European energy company faces a substantial financial adjustment after an international arbitration ruling related to a long term LNG supply contract. The decision from an arbitration forum has ordered a payment by the company of about 570 million dollars (roughly 530 million euros) to the LNG supplier. This follows a review of the price terms under the contract at stake. The aim is to align long term gas pricing with market conditions as interpreted by the International Chamber of Commerce in its arbitration proceedings.
In a filing to the national supervisor, the company disclosed that the arbitration outcome will have an accounting impact of roughly 530 million euros on pre tax earnings within the group’s consolidated results. Management indicates that this adjustment will be reflected in the upcoming updates to the strategic plan covering the years through 2026, which are set to be detailed in the current week. The disclosure highlights how one arbitration decision can ripple through earnings and dividend planning alike, even as profitability targets remain the focus of corporate communication.
The board is scheduled to meet midweek to consider revisions to the existing dividend policy for 2023 to 2026. The group is controlled by a global energy group with a history of cross border ownership. It assures shareholders that the award will not alter the total dividends planned for 2023, while signaling that similar financial effects could recur in the following years. The board will consider how to align the dividend framework with the updated strategic outlook and any implications from the decision.
Under the remuneration framework approved alongside the latest strategic plan update, the company had outlined a path to distribute a first each year of one euro per share, rising to 1.2 euros in 2024 and 1.4 euros in 2025. The plan originally projected that the group would maintain a dividend policy that targets distributing 70 percent of ordinary net profit each year, with expected aggregate distributions around 5.4 billion euros across 2022 to 2025.
Before the arbitration ruling, the company anticipated meeting its full year financial targets, including an EBITDA band of 4.4 to 4.7 billion euros and a normal net profit range of about 1.4 to 1.5 billion euros. The group had signaled a dividend of around 1 euro per share for investors.
Reduced compensation
The company had already flagged the arbitration as part of prior financial reporting. In this case two major claims were pursued with international gas suppliers, focusing on price review mechanisms. The first decision, issued earlier this week, amounted to about 1.27 billion dollars (roughly 1.16 billion euros), allowing the company to reduce potential compensation through arbitration. A second separate action seeks compensation of about 557 million dollars (around 510 million euros).
In the first arbitration, the company contested the claim as unfounded and untimely and suggested that approval of the request was unlikely. The organization indicated that it expected a ruling on the smaller claim later in the year, with a further decision anticipated in the latter half of 2024.
Litigation over price revisions of major natural gas supply contracts has intensified in recent years as suppliers seek adjustments that adjust to evolving market conditions. The backdrop includes fluctuations in gas prices following the Ukraine conflict, with records seen in 2022 peaking well above traditional levels and contrasted by lower price environments during other periods. This volatility underscores the financial planning challenge for energy groups that rely on long term gas arrangements.