The German government agreed Friday to take an approximately 30% stake in Uniper, one of the country’s largest suppliers of natural gas that was on the brink of financial ruin, to keep energy supplies flowing to hundreds of municipalities and fend off potential chaos in Europe’s energy market.
The German government also expanded the credit it granted the company to 9 billion euros and offered up to 7.7 billion euros in equity, for a total package worth the equivalent of $17 billion.
Uniper was the first company to benefit from a new law that allows the government to bail out companies deemed essential to the country’s gas supply. The government also announced that it would allow companies to pass on increased costs to private and business consumers to spread the burden as broadly as possible.
“We will do everything that is necessary so that together as a country, a company, as citizens get through this situation so that nobody feels that they are faced with an intractable situation,” Chancellor Olaf Scholz said at a news conference announcing the measures.
Uniper’s share price veered wildly after the announcement, jumping at first but later falling sharply as the details of the rescue sank in. The company has lost about 80% of its value this year, making it worth just over 3 billion euros, an amount far overshadowed by the money the government deemed necessary to bail it out.
Germany is facing its worst energy crisis in decades, after Russia invaded Ukraine in February, setting off an economic battle between Moscow and Europe, the United States and its allies. The resulting huge rise in energy prices upended the business model of Uniper, which imports more Russian natural gas than any other company in Germany.
For decades, Uniper bought most of its gas from Gazprom, Russia’s state-owned supplier, and sold it to German factories and municipalities. Since the start of the war in Ukraine, Gazprom has broken its long-term contracts and begun reducing the amount of gas it provides to Europe. To make up for the reduction in the Gazprom supply, Uniper has been forced to buy other gas at higher prices.
As Uniper’s costs were spiking, the German government has sought to prevent it and other energy firms from passing the higher costs on to customers. That will change as early as Sept. 1, when the government will activate legislation that was drafted earlier this year to help ease the bite of the energy crisis.
While Germany is leading the bailout, Uniper’s largest shareholder is Fortum, a Finnish company that itself is majority-owned by the government of Finland. Berlin and Helsinki were at odds over the terms of a bailout, leading to protracted talks between the two European partners.
This article originally appeared in The New York Times.
By Melissa Eddy
c.2022 The New York Times Company
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