You know Europe’s energy crisis is rapidly worsening when Germany’s government prepares to nationalize the country’s largest gas importing company in order to avert a complete collapse of the region’s energy system before winter sets in.
With natural gas futures exploding three times higher compared to last year as Russia turns up the retaliation dial over western sanctions and curtails shipments into the EU, energy companies have no choice but to purchase gas at spot markets to fulfill contract obligations— an unsustainable move that is pushing many to the brink of bankruptcy. Dusseldorf-based Uniper already received more than $20 billion in support from Germany’s government to overcome the millions in daily financial losses as a result of surging gas prices, but that is still not enough.
According to Bloomberg which cited people familiar with the matter, Uniper needs a lot more help from the government in order to remain afloat, and now Chancellor Olaf Scholz is preparing to boost its stake in the company from a current 30% to over 50%, in addition to providing more capital. In fact, the government is even mulling a full nationalization of the company, and is conducting discussions with the Finnish government, which owns a majority stake in Uniper parent company Fortum Oyi.
In an interview with Bloomberg last week, Uniper CEO Klaus-Dieter Maubach conceded that Russia’s shortcomings in gas shipments are going to cost the company upwards of $7 billion this month alone, which will likely prompt additional government intervention. Scholz’s government already gave Uniper a 7 billion-euro backstop to keep the company afloat until at least the fourth quarter, but Maubach warned the company will likely reach the limit much sooner. The agreement was originally comprised of 7.7 billion euros in mandatory convertible securities, as well as a 9 billion-euro line of credit from German bank Kfw, which the company is attempting to raise to 13 billion euros.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.