We've described before how the current surplus of gas is impacting on our old friend Gazprom and its continental customers. Prices under the oil-indexed contracts they use have been just shy of twice as high as spot prices throughout 2009, and the wholesale buyers have been taking far less than the 'take-or-pay' amounts.
Accordingly - pacta sunt servanda - they must pay anyway! At the same time, if they are to be true to their shareholders (not to mention their own customers) they should be vigorously pursuing their contractual rights to re-open the contract and get the price and volume reduced.
Being realistic, however, they will be told by their governments (particularly in Germany and Italy) to suck it up - and use their market power to pass on the costs. Because, don't you know, keeping Russia sweet is a strategic relationship - and let's face it, despite the EC's best efforts you do still have market power, don't you, guys?
In the meantime, they'll be posting modest losses. This is not, though, because of the take-or-pay clauses per se - despite how it gets reported - because a payment for gas you haven't taken now, but will take in future, is just an advance payment: a cash-flow / balance-sheet matter, not P&L.
The real P&L accounting issue lies elsewhere: carefully hidden. If they had to mark these large contracts to market ... with prices nearly 100% out-of-the-money ... the losses would be, well, very much more than they are showing. In fact, astronomical.
No wonder E.ON hopes that estimates of the gas surplus are pessemistic. Oh, and don't expect to see them marking-to-market any time soon: they cunningly delisted from the NYSE last year. US standards of accounting and risk-management disclosure are just so-oo ... inconvenient.