21 Sep 2022, 13:02
Benjamin Wehrmann

Germany nationalises largest gas importer to avert market collapse following Russia’s gas cut

Workers at Uniper gas storage site: The company supplies more than 100 local utilities and several major companies in Germany with natural gas. Photo: Uniper
Workers at Uniper gas storage site: The company supplies more than 100 local utilities and several major companies in Germany with natural gas. Photo: Uniper

Gas importer Uniper will be put under control of the German state after the company has accrued crushing losses over the past months due to skyrocketing gas prices resulting from Russia’s war on Ukraine. The German government provides some eight billion euros in additional capital to the country’s largest gas supplier and will take over 99 percent of its shares, replacing Finnish company Fortum as the majority owner. Economy minister Robert Habeck said the controversial gas levy Germany plans to impose on gas customers to save struggling importers and avoid a market collapse due to bankruptcies would go forward as planned, even though it remains unclear whether Uniper would still be allowed to benefit from it.

After months of deteriorating business prospects, Germany’s largest natural gas importer Uniper will become nationalised in order to stabilise the company that covers about 40 percent of the country’s gas supply, said economy minister Robert Habeck. The government will take over nearly 99 percent of Uniper’s shares and increase the company’s capital stock by about eight billion euros, Habeck's  ministry (BMWK) said in a statement. “This will create a clear ownership structure that allows us to save Uniper and thereby also the energy supply for businesses, local utilities and consumers,” it argued. “This means Uniper will belong to the German state,” minister Habeck said, adding that legally completing the takeover would take roughly three months.

The move had become necessary after the stop of gas flows from Russia at the end of August let already high gas prices spike further and worsened the company’s financial situation. Long-term delivery contracts prevented it from passing on price increases to its customers. The Russian gas cut-off came after months of uncertainty regarding gas imports through the key offshore pipeline Nord Stream 1, which the Russian government has been accused of “weaponising” as part of its war effort to subdue Ukraine and undermining European solidarity with its smaller neighbour.

As part of the deal to save its largest gas supplier, Germany will buy shares worth about 500 million euros from Uniper’s current majority owner, Finnish energy company Fortum, for a share price of 1.70 euros. Moreover, the government agreed to take over a shareholder loan owed by Fortum and other debt worth some eight billion euros as well. The company’s nationalisation is carried out as an amendment to earlier stabilisation measures, which saw the German state acquire a large share in the company already in July. “The amended stabilisation package will enable Uniper to continue to fulfil its system-critical role for the energy supply in Germany,” the company said. The takeover will be financed by Germany’s national development bank KfW.

"Some of our strategic choices turned out to become liabilities" - Fortum

The new stabilisation measures still hinge on consent by the European Commission and by Uniper shareholders. The latter could be obtained at a special general meeting later this year. State-owned Finnish company Fortum still owns almost 80 percent of Uniper’s shares. Uniper, a spin-off of energy company E.ON, supplies gas to some 100 major local utilities and several large companies in Germany. It posted a loss of twelve billion euros in the first six months of 2022. CEO Klaus-Dieter Maubach earlier this month said the company makes “losses of significantly more than 100 million euros per day.” This was due to market prices for gas rising by 2,000 percent, Maubach told media outlet The Pioneer.

Fortum CEO Markus Rauramo said the role of gas in Europe “has fundamentally changed since Russia attacked Ukraine, and so has the outlook for a gas-heavy portfolio,” arguing there no longer was a business case for the group. “In hindsight, some of our strategic choices turned out to become liabilities. We now have to face and mitigate the impact of those decisions,” Rauramo said, adding that Fortum is now “able to look to the future and will focus on its core Nordic business of CO2-free electricity.” 

Labour union Verdi said it welcomes the takeover, arguing that “it is necessary to guarantee supply security in line with the best interest of employees.” Uniper employs some 11,500 people across 40 countries and about 5,000 in Germany. Verdi said an insolvency of the largest gas importer would pose “an incalculable risk for the gas market in Germany and the entire energy and heating supply.” Verdi head Christoph Schmitz said Uniper’s nationalisation now gave the government “a chance to use it for the climate-neutral energy transition” by enforcing rapid decarbonisation as well as ramping-up the hydrogen industry.

Government still plans to introduce gas levy

Despite the planned takeover of the country’s biggest gas supplier, economy minister Habeck said he would stick to his plan of imposing a controversial levy on gas customers to provide additional funds to suppliers struggling with skyrocketing market prices. Analysts had called the levy justified, as an insolvency could trigger a domino effect that would shake up the country’s entire gas industry. The levy of 2.4 cents per kilowatt hour would be introduced on 1 October as planned, the Green Party minister said, arguing this was necessary to guarantee Uniper’s financial solidity without interruption.

Habeck added the government would make sure the levy will only be benefitting companies truly in need of assistance. However, he said it was yet unclear whether the funds raised through the levy could be legally transferred to a state-owned company. “This is a very relevant question,” he said, adding the government would soon find an answer to it. However, the levy would still be needed to stabilise other gas importers that cover a significant share of Germany’s demand, Habeck added.

Matthias Miersch, deputy parliamentary group leader for the Green Party’s coalition partner Social Democrats (SPD), said the nationalisation had “enormously increased doubts about the gas levy.” He said the “legally highly precarious” levy, which had been criticised for adding further financial pressure on struggling gas customers, could be replaced by taxing windfall profits elsewhere in the energy sector, providing more funds from the state budget and possibly imposing “energy solidarity” taxation in line with individual financial capabilities.

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