Germany has nationalized Uniper, its biggest gas importer, as it expands intervention in the energy markets to lessen the crisis emanating from the supply shortages in the face of the Russian pipeline shutdown.
Under the deal, the German government takes near total ownership of Uniper, which is controlled by Finnish state-owned energy company Fortum.
A little over a week ago, Uniper had sought more government aid as it faced an insurmountable cash crisis. Uniper, whose losses have been climbing, 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.
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.
Under the rescue deal announced on Wednesday, the German government will get a 99 percent stake in the energy supplier in return for a capital increase of $8 billion. The government had taken a 30 percent stake in the company in July after a capital infusion.
"Under the current circumstances in the European energy markets and recognising the severity of Uniper's situation, the divestment of Uniper is the right step to take, not only for Uniper but also for Fortum ... The role of gas in Europe has fundamentally changed since Russia attacked Ukraine, and so has the outlook for a gas-heavy portfolio. As a result, the business case for an integrated group is no longer viable," its chief executive Markus Rauramo said, according to The Guardian.
Rauramo added that it was the Russian supply cut that precipitated the crisis. As supplies through the Nord Stream 1 pipeline thinned, Uniper was forced to buy gas from expensive open markets, while still going by a price cap domestically.
Germany Says It's Necessary Action
Uniper, which serves some 40 percent of gas customers in Germany, used to source more than 50 percent of supplies from Russia. The German economy minister, Robert Habeck, said it was necessary to take control of Uniper to "ensure security of supply for Germany."
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, Oilprice.com said in a report.
According to Helge Haugane, refining company 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. With prices rising and the market remaining volatile, this scenario is termed as the 'Lehman Brothers' moment for the European energy companies.