The CEO of the German energy group Uniper, Klaus-Dieter Maubach, this Friday during a press conference at the company’s headquarters in Düsseldorf. INA FASSBENDER (AFP)
The gas war that followed the Russian invasion of Ukraine is taking its toll on German energy companies, most notably the giant Uniper, the world’s largest buyer of Russian gas. The company has become the first victim of the Moscow-ordered gas blockade by officially requesting the federal government’s bailout due to the threat of bankruptcy. According to Uniper, it is unable to cope with rising oil prices on the world markets after the state-owned gas company Gazprom cut deliveries by two-thirds in mid-June. Berlin is planning drastic measures to protect the economy.
The company is “under extreme financial pressure”, which has forced it to submit an application for “stabilization measures”, which now have to be specified, but due to the possibility of higher loans and the state’s participation, price increases can be immediate to pass on to customers. Or a combination of several of these measures. The board of directors led by the Social Democrat Olaf Scholz indicated a few days ago that he was ready to help the energy company move into the capital. She will “do whatever is necessary,” he assured, to help the affected companies.
With 12,000 employees, Uniper, based in Düsseldorf, plays a very important role in the German energy supply. Among other things, it supplies many public administrations with energy and manages 8,000 million cubic meters of storage. The drop in supplies from Russia has forced it to shop at much higher prices on the international market to meet its customers’ demands.
The energy company’s proposal first refers to the cost allocation that the recently reformed German energy security law allows. Second, it envisages injecting additional debt by increasing the credit line it already had from public bank KfW, around 2,000 million euros that has not yet been utilised. The company also proposes that the federal government participate “appropriately” in the property.
Uniper’s main shareholder, the Finnish group Fortum, is negotiating with the Scholz board about the implementation of the intervention. The government has yet to decide whether to allow Uniper to shift all costs and increase the prices it charges its customers, which will likely require it to craft new aid packages to cushion the blow to struggling homes and businesses.
“Danger of collapse”
Berlin fears a “Lehman brothers effect” on the energy market, as Economics and Climate Minister Robert Habeck called it when he announced the activation of the second alert level of the national energy emergency plan in response to cutbacks in Russian gas flow. The whole system “is in danger of collapsing,” he said. Uniper is the only energy company that has asked for help, but there are more in trouble. According to the business newspaper Handelsblatt, the board is also talking to VGN, another gas importer based in Leipzig, about possible help.
“The situation is no longer acceptable for us, which is why we have made the official application for state aid,” confirmed Uniper CEO Klaus-Dieter Maubach at a press conference this Friday. “The federal government has created the necessary instruments and we now expect a quick solution,” he added, referring to the changes in the law that will allow the additional energy costs to be passed on to consumers. Maubach warned that at current gas prices on international markets, the company could accumulate losses of up to 10,000 million euros in the coming months and advised consumers to brace themselves for “a huge wave of price increases”.
Habeck avoided details about the rescue operation, but said at a press conference this Friday: “It is clear from politics: We will not allow a systemically important company to go bankrupt and thereby throw the global energy market into turmoil.” Germany is in the process of filling up its petrol tanks for the cold season. The minister revealed that plants are receiving between 0.3% and 0.4% more gas every day, so the process is slow. The government’s priority is to fill up the tanks, which is why it has resorted to coal-fired power plants to avoid generating electricity with gas.
“We have enough gas, the supply is secured,” stressed Habeck, but reminded that the price for it was “immensely high” and that financial problems for companies are therefore normal. The government will choose the option that is “best and cheapest for Germany, for German consumers, for German taxpayers and for the German state, and most secure for security of supply,” Habeck added.
As of mid-June, Germany only gets 40% of its contracted gas through the Nord Stream 1 pipeline. The Baltic Sea pipeline is currently the main source of Russian gas supplies after Moscow shut down the Yamal-Europe and reduced supplies through Ukraine. Nord Stream 2, a second pipeline designed to double the amount of hydrocarbon flowing through the Baltic Sea bed, was shut down by the Scholz government days before the invasion.
Russia says it had to reduce the volume in the gas pipeline’s main compression station because it did not receive a turbine made by German manufacturer Siemens, which it sent to Canada for repairs. Habeck claims this is an excuse to “destabilize and raise prices”. For days, the federal government has been negotiating with Canada about the shipment of the turbine, which, in order not to circumvent the sanctions imposed by Executive Justin Trudeau on Russian oil and gas, could reach Germany and be transferred from there to Russia. Once the state-owned gas company Gazprom has the turbine, it would no longer have an excuse to further limit the amount of gas it sends to Europe, Berlin says.