German Gas Giant Uniper Seeks More Funding to Prevent Collapse as Europe Gas Crisis Worsens

Germany's leading gas importer is seeking more government aid as it faces an insurmountable cash crisis in the face of the Russian supply cut.

Uniper, whose losses have been climbing, has warned that it could run out of cash sooner than expected. Ever since Russia squeezed gas supplies through the Nord Stream 1 pipeline to Germany in the aftermath of the Ukraine war and the Western sanctions, Uniper has had to buy gas at higher rates to meet domestic demand.

Uniper German gas giant
Uniper Germany Reuters

Mounting Losses

By July, Uniper's losses increased to more than $12 billion, making it necessary for the company to seek government intervention. Uniper ran up the losses by seeking to supplant lost supplies from Russia by buying at spot markets at steeper prices, while having to sell gas to customers at regular prices.

Germany stepped in to save the company from going belly up by buying as much as 30 percent in the company and providing an additional $7.7 billion in aid, according to Russia Today. The aid package was rolled out hoping that it would help the company stay sound until the end of 2022. However, Uniper CEO Klaus-Dieter Maubach said this week that the cash position was precarious.

'Worst is Still to Come'

Maubach said the company was slated to hit the financial aid limit earlier "Most likely we will reach that ceiling in September already," he added. Maubach drew the attention of the government to the fact that zooming gas prices will cause devastation no matter what interim assistance the government offers.

"I have said this a number of times now over this year and I'm educating also policymakers. Look, the worst is still to come ... what we see on the wholesale market is 20 times the price that we have seen two years ago," Maubach told CNBC in Milan, according to Bloomberg News.

Oil, Gas and Mineral Reserves in Europe
Oil, Gas and Mineral Reserves in Europe Flickr/ Hugo Ahlenius

Bloomberg added that as per the latest deal offered by the government, Uniper will get nearly $20 billion in order to stop it from collapsing. A potential collapse of Uniper, it is feared, will set off a destructive domino effect in the energy markets.

Major energy companies in the European Union are already facing a liquidity crisis and the situation could worsen to a point that these companies will need significant government support to prevent a collapse of the energy derivatives markets, said in a report earlier this week.

$1.5 Trillion in Margin Call

According to Helge Haugane, Equinor's senior vice president for gas and power, energy firms in the region are facing margin calls of a total of $1.5 trillion in the derivatives market.

Nord Stream gas pipeline
Nord Stream gas pipeline Wikipedia

The analyst warned that with prices rising and the market remaining volatile, this scenario is termed as the 'Lehman Brothers' moment for the European energy companies. "If the companies need to put up that much money, that means liquidity in the market dries up and this is not good for this part of the gas markets," Haugane told Bloomberg.