The Business Times

Germany to inject 8 billion euros in Uniper nationalisation plan

Published Tue, Sep 20, 2022 · 10:21 PM

THE German government is planning to inject about 8 billion euros (S$11.3 billion) into Uniper as part of a historic agreement to nationalise the gas giant in a push to stave off a collapse of the country’s energy sector.

A provisional deal between Chancellor Olaf Scholz’s administration, Uniper and its main shareholder, Finland’s Fortum Oyj, has been reached and could be announced as soon as Wednesday (Sep 21), according to people familiar with the situation.

As part of the deal, Germany will buy Fortum’s 78 per cent stake in Uniper and the money injected in the Dusseldorf-based utility will allow it to repay a Fortum loan.

“All parties involved are working at full speed to find a sustainable stabilisation solution for Uniper,” a company spokesman said. “Talks on this are ongoing” and include a capital increase that could lead to a “significant majority stake” for the German government.

Uniper, the biggest German buyer of Russian gas, is at the epicentre of the crisis sparked by Russia’s moves to cut energy supplies in retaliation for war-related sanctions. The government was under pressure to act as the company’s failure could ripple through Europe’s largest economy.

The new agreement would replace a bailout plan from July that would have seen the government take a 30 per cent stake in Uniper. That deal became insufficient as the crisis intensified and spread.

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Uniper shares fell as much as 6.4 per cent. The company has lost about 90 per cent of its value and is worth about 1.5 billion euros. Fortum, which is controlled by the Finnish government, jumped 9.5 per cent, before trading in its shares was halted by the exchange.

Surging gas prices and Moscow’s moves to slash gas supplies to Europe have already prompted a series of bailouts and rescue loans. But those measures are increasingly dwarfed by the scale of the crisis, and there’s a risk that systemic energy providers collapse without more robust government support.

Germany will buy Fortum’s controlling stake in Uniper at a relatively low price, while the capital injection would allow Uniper to repay a Fortum loan and other guarantees, people familiar with the talks said.

A Fortum spokeswoman declined to comment while negotiations are ongoing. The German government also declined to comment.

“We do not accept nationalisation without compensation,” Finland’s Europe Minister Tytti Tuppurainen, who oversees government-owned companies, told reporters in Brussels on Tuesday. “It’s clear that we must be compensated for this.”

Finland’s government has come under heavy pressure from opposition parties over its handling of the rescue. It now faces 2 motions of no-confidence filed on Tuesday, with lawmakers berating the Cabinet for failed negotiations with Germany and a waste of taxpayer money.

The total size of the German government’s exposure would well exceed 20 billion euros. On top of the 8 billion-euro capital injection, state-owned lender KfW has extended Uniper a credit line of 13 billion euros. Business Insider reported that the whole package could be worth 30 billion euros.

With Russia’s main pipeline to Germany cut off, Uniper is having to source alternative supplies from the spot market to serve its clients, which include manufacturers and local utilities. The price surge is causing the company to rack up losses of as much as 100 million euros a day.

The German government is also in talks about taking over at least 2 other companies, in what could be a coordinated swoop.

Politically, the move will be highly sensitive for Scholz and his 2 coalition partners, the Greens and the liberal Free Democrats.

German Economy Minister Robert Habeck, a former co-leader of the Greens, might have to delay or abandon a plan to introduce a gas levy on consumers that was designed to help offset the costs of the crisis.

The levy was expected to generate about 34 billion euros and most of the revenue would have gone to Uniper. Abandoning the measures could raise questions over financing the bailout.

Finance Minister Christian Lindner, who is also FDP party leader, could be forced to abandon his plan to return to constitution debt limits next year, as the government seeks to contain spill over from surging energy costs. BLOOMBERG

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