Germany saves Uniper because of the consequences of the Russian gas bottleneck

Germany has put together a rescue package for Uniper SE to prevent a linchpin in the country’s energy grid from collapsing after Russia tried to cut its gas supplies.

The government will get about 30 percent of Uniper, a stake large enough to give it veto power over key strategic decisions, Uniper said in a statement on Friday. Fortum Oyj, Uniper’s main shareholder, retains the majority.

The package includes an expanded €9 billion (US$9.1 billion) credit line from state lender KfW and €7.7 billion in mandatory convertible bonds. The total package is worth more than four times the current market value of the company.

Uniper became the first major corporate casualty of Europe’s unfolding gas crisis when it asked Chancellor Olaf Scholz’s government for a bailout earlier this month. Germany’s biggest buyer of Russian gas was sidelined when President Vladimir Putin cut supplies in retaliation for European sanctions against Russia’s invasion of Ukraine.

The shares of the Düsseldorf-based company rose by up to 11 percent after the deal was announced. The stock is still down more than 70 percent this year, valuing the company at about $4 billion. Major owner Fortum gained up to 8.9 percent before trading halted.

Fortum agreed to reduce its stake in the rescue plan from about 80 percent to 56 percent. The Finland-based company now has the option to convert its existing €4 billion loan to Uniper for a share of up to 70 percent of the mandatory convertible instruments subscribed by the German state, to ensure it can retain its position as majority shareholder. it says in a statement.

Uniper – founded in 2016 from E.ON SE’s former fossil fuel assets – has emerged as the weakest link in the energy system powering Europe’s largest economy. Its extensive contracts with the state-owned Gazprom PJSC made the German energy company vulnerable to supply shortages and forced it to cover shortages at high prices on the spot market.

Since the liquidity was used up, Uniper already had a credit line of EUR 2 billion.

Germany could not afford to let Uniper fail as the consequences would scour the economy and hit industrial companies and local utilities served by Uniper. While flows on a key gas link with Russia have resumed after 10 days of maintenance, supplies remain significantly reduced and inventories are low.

On Thursday, Germany raised its gas storage targets, reflecting growing concerns about having enough energy to heat homes and keep factories running through the winter. The move increases the likelihood that the government will intervene in the management of the reserves.

Germany’s gas storage has not increased since Tuesday and is currently at about 65 percent. At the average fill rates in the week before the Nord Stream pipeline halted, it would take the country almost three months to reach the 95 percent target for Nov. 1.

Economy Secretary Robert Habeck has warned that Russia’s gas shortage poses a risk of contagion similar to that of Lehman Brothers, as Uniper’s failure could potentially spill over into the broader economy. The International Monetary Fund estimates that the country risks losing almost 5 percent of economic output if Russia shuts off gas supplies. Germany saves Uniper because of the consequences of the Russian gas bottleneck

Fry Electronics Team

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