Volkswagen’s natural gas pre-purchases will earn you huge profits in the near future. The energy crisis that Europe is going through once Russia has decided to interrupt the supply of gas can be an important ally in the car company’s income statement.
Europe’s biggest carmaker has started selling 2.5 terawatt-hours worth of gas contracts , according to a document seen by Bloomberg . This would feed the normal gas consumption of 200,000 households for a year.
Gas prices are currently trading well above the levels when Volkswagen bought the supply. At current values, the company could receive close to 400 million euros in profit from the sale.
The company had planned to use the gas next year at its two Wolfsburg power plants to replace coal. But rising gas prices, coupled with political and economic pressures to save fuel , have prompted the carmaker to sell the gas and stick with coal for the time being, according to people familiar with the matter.
Volkswagen made the advance purchases of gas through the supplier Wingas GmbH in 2020, when the market price was around 30 euros per megawatt hour. Currently, raw material futures are trading at about 200 euros per megawatt hour , and its fluctuation in the coming weeks will mark the final figure that the carmaker will pocket.
Proceeds from the sale will be used to offset costs associated with using coal or oil fuels and to replace or modernize machinery, a person familiar with the matter said.
The company has already made another big commodity-related gain this year, as its hedging positions in substances such as nickel added €3.5bn to its first-quarter profit.
Companies across the continent are facing skyrocketing gas costs following Russia’s drastic cut in supply. The European Union is implementing emergency measures to protect consumers and companies from the financial problems that this is causing and that are expected to increase in the face of winter.
The German government has urged energy-intensive industries to conserve gas to ensure reserves and supply to society, while burning coal to generate electricity remains a more profitable option.