Germany nationalizes largest gas importer Uniper to avoid collapse of energy sector

On September 21st, Germany nationalized Uniper, its largest utility and natural gas importer, in an attempt to keep the country’s energy industry alive and avoid a collapse of the energy sector.

Berlin’s government bailed out its largest gas importer with a $14.95 billion bailout loan in July amid a global energy crisis sparked by the war in Ukraine.

The German government will buy the 56% stake already held by Finland’s Fortum for $501 million.

The transaction will result in a capital increase of $1.68 per share, injecting approximately $7.9 billion into the company. According to Uniper’s website.

“Uniper’s situation has deteriorated rapidly and significantly since the Uniper Stabilization Package was agreed in July. Therefore, new measures have been agreed to resolve the situation,” Fortum said in a statement. Did.

Germany’s state-owned bank KfW, which has already provided S$12.84 billion of credit, will provide additional funding to Uniper depending on its liquidity needs until the transaction closes.

The entire relief package will cost the government about $29 billion, Bloomberg reported.

This will result in state control of 98.5% of the German utility company’s shares.

“Modified Stability Package Agreement: Federal Government to Acquire Approximately 99% Stake in Uniper” Tweet.

“The Federal Government, Uniper and Fortum today agreed to amend the set of measures announced on July 22, 2022.”

Energy dependent results

The utility was already facing financial troubles when it took out a $9.8 billion loan to cover a margin call in January, months before the conflict between Russia and Ukraine.

The Düsseldorf-based utility amassed $8.4 billion in gas-related losses, out of a total loss of $11.8 billion this year, after soaring prices for alternative energy sources.

Klaus-Dieter Maubach, CEO of Uniper, said on September 21: Companies, local governments, consumers. ”

Uniper’s losses this year could exceed $17.7 billion. According to Bloomberg.

Uniper will hold an emergency shareholder meeting in the fourth quarter to finalize the transaction. After that, regulatory approval from the European Commission is required to proceed with the transaction.

The German utilities will hold Swedish hydro and nuclear assets for the time being and give Fortum a first veto power until the end of 2026 if those items are put up for sale.

Fortum will withdraw its control of Uniper this quarter, releasing it from its $3.95 billion guarantee line. Meanwhile, his $3.95 billion shareholder loan to a German power company will be fully repaid by Berlin after the deal closes by the end of 2019. Year.

Fortum CEO Markus Rauramo said:

“Since Russia attacked Ukraine, the role of gas in Europe has fundamentally changed, as has the outlook for gas-intensive portfolios. As a result, the business case for a combined group is no longer viable. No,” said Rauromo.

Russian gas and Western sanctions

Uniper was facing financial bankruptcy after Russia slashed gas flows to Europe due to Western sanctions, sending energy prices skyrocketing.

“The prices we see on the wholesale market are 20 times higher than the prices we saw two years ago,” says Maubach. told CNBC Early September.

The loss of Russian gas supplies to Europe during the heating and cooling season has led to energy shortages and rising prices across the continent, sending European Union leaders into panic.

Russian energy company Gazprom cut the flow of gas to Europe via the Nord Stream 1 pipeline earlier this month, leaving Germany’s power companies in dire straits.

The Russian energy giant has warned that sanctions have hampered the efficient operation of its pipelines and that they will be closed indefinitely for maintenance.

Like many European countries, Germany is now making an attempt since the Ukrainian crisis began to reverse a decade-long energy policy that led to Russia’s reliance on gas.

Gazprom’s decision to halt gas shipments comes shortly after G7 countries, including Germany, backed plans to propose a 15% cap on Russian oil prices to reduce dependence.

German Chancellor Olaf Scholz’s cabinet has decided to ensure the survival of the utility company over the winter, as energy shortages could worsen as temperatures drop, leaving the two remaining gas suppliers now are negotiating to take control of

Entire blocs, especially German homes and businesses, are already facing financial collapse well before winter.

European governments have spent hundreds of billions of dollars in public spending to mitigate the crisis.

Following the announcement, Uniper’s share price plummeted by 23%, while Fortum’s share price rose by 20%.