Berlin bails out Uniper for €15 billion

The German government has announced that it will bail out Uniper, one of the world’s largest gas importers, who had been hung out to dry by Russian gas supplier Gazprom, for €15 billion.

Uniper, the fossil spin-off of E.ON, relied on Gazprom for an undisclosed but large share of its gas imports which it then sold to local utilities and industrial customers. With Russian flows significantly reduced, the German government has now acted to prevent a “Lehman Brothers”-like effect on the gas markets.

“Everything that counts, we will do, today and for as long as it takes,” explained Chancellor Olaf Scholz, who delayed his summer holiday to announce the move.

To that end, the government will almost quadruple a state-bank loan to Uniper, from €2 billion to €9 billion, while also allocating €8 billion for Uniper shares, leaving the government holding 30% of the company. Another €7.7 billion will be made optionally available in the form of a convertible bond (which will transform into shares as well).

Most of Uniper was owned by Finnish state company Fortum which held 78% of the shares. The Finnish government had said it would not inject additional funds into the ailing company.

Instead, Fortum is banned from taking back €4 billion in loans to Uniper, with the option to transfer the loan into shares, and it must offer another credit line worth €4 billion.

For Germany, Uniper is considered of systemic importance as it is a crucial intermediary between gas markets, local utilities, and industrial consumers.

“Uniper is a company of central importance; many municipal utilities and industrial companies depend on gas supplies from Uniper,” said Finance Minister Christian Lindner.

Additionally, Uniper likely owns valuable long-term contracts with Russia’s Gazprom, allowing gas purchases at low prices.

“We will not allow a systemically important company like Uniper to fall and thus endanger the security of supply in Germany,” explained Robert Habeck, minister of economy and climate action.

For Uniper, which is bleeding tens of millions of Euros daily as it is forced to buy expensive gas on spot markets to replace missing volumes it is contractually obligated to receive from Russia, adding extra cash is just a temporary solution.

Instead, the company will be further supported by a newly introduced change to the energy security act from the 1970s, allowing gas companies to mutualise their extra costs across all gas customers.

“In order to ensure the security of energy supply, we, therefore, want to use the reallocation mechanism under the Energy Security Act and will talk to parliament about this,” Habeck added.

Observers recognise the necessity of bailing out the ailing gas giant. “Saving Uniper is the next necessary evil,” said energy economics expert Claudia Kemfert on Twitter.

Still, like rescuing banks during the 2008 financial crisis, saving energy companies from the doom they walked into seems to leave a bad taste.

“Once again, taxpayers have to pay for misguided corporate energy decisions,” she added.


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