As Europe’s energy crisis worsens, Uniper, Germany’s biggest importer of natural gas, asked the government for help on Friday, hours after parliament passed a law to keep the energy supplier flow.
The company’s finances have been hit hard by the Russian gas cuts. More recently, Gazprom, the state-controlled giant in Russia, cut supplies through the Nord Stream 1 gas pipeline to Germany.
Uniper, which functions as a sort of intermediary between Gazprom and German factories and municipalities, is forced to fill the shortage of Russian fuel ordered under long-term contracts by purchasing more expensive supplies, such as liquefied natural gas. But for now, the company is largely unable to pass on these higher costs to its customers.
Uniper is absorbing “the lion’s share of the costs emanating from these cuts and has thus found itself in a very precarious situation,” chief executive Klaus-Dieter Maubach told a press conference on Friday.
He said that over the past three weeks, Uniper had seen gas supply cuts from Gazprom equivalent to what the company’s home town of Dusseldorf consumes in a year.
The company’s daily losses are in the eurozone “in the double-digit million”, he said, “which we cannot tolerate for long”.
Mr Maubach said Uniper had been talking to the German government for weeks but was making an urgent request for help now, less than 24 hours after Germany’s parliament passed an energy security law designed to bolster Berlin’s capacity to implement rescue measures for businesses. deemed essential to keep homes warm and industries running.
The law also includes a measure that allows power companies to bring coal-fired power plants – recently mothballed in a bid to reduce carbon emissions – back online to produce more electricity and release more gas.
But the law sets a high bar for energy providers to pass on high gas prices to consumers and ration supplies. And the country’s regulator should first determine that there has been a gas crisis.
Uniper now appears to be counting on government intervention, as the collapse of a company with such a large and varied presence in gas markets could further complicate the already difficult energy situation in Germany and Europe.
Uniper is playing a part in the government’s efforts to reduce its reliance on Russian fuel by building what is expected to be the country’s first terminal to receive liquefied natural gas from the United States and beyond, at Wilhelmshaven on the northwest coast . But this installation should not be commissioned before the end of December.
Mr Maubach warned that if current trends continue, the government’s aim of building up high levels of gas storage to avoid shortages and potential rationing in winter would be undermined. He said Uniper could be forced to start draining its own large gas storage facilities as early as next week.
The government seems to be responsive to requests.
“We will not allow a systemically important company to go bankrupt and therefore cause turbulence in the global energy market,” Robert Habeck, Minister of Economy, said on Friday. “With the new Energy Security Act legislation, we have various options for action, and we will act.”
Mr Habeck is also trying to get the Canadian government to return a turbine that Gazprom says is the reason for reduced flows through Nord Stream 1. Adding to concerns, Gazprom plans on Monday to shut down the pipeline completely for scheduled maintenance during 10 days. . The fear is that the conduit may remain closed.
The German grid operator said it had not been able to determine how the absence of a turbine could lead to such a significant reduction in gas flows, a point to which Mr Maubach complained. echo, saying it was “not plausible”. He said Uniper had made it clear in conversations with the Russian company that “we expect them to pay compensation for the damages we suffer.”
Mr Maubach has asked the government to compensate Uniper for the higher costs, possibly passing on price increases to customers.
Mr. Maubach also wants the government to strengthen the 2 billion euro line of credit it already has with KfW, the German public investment bank. Finally, he proposes that the government take a substantial stake – more than 10% – in Uniper, partly to give more certainty to financial markets and rating agencies.
Investor confidence in the company is waning. Uniper’s share price has fallen about 75% since January, and on Tuesday, S&P Global, the securities rating agency, said it was putting the company’s debt on watch for a possible downgrade. Uniper is now “dependent on external factors, including government support”, he said.
To complicate the situation, Uniper is majority owned by Fortum, a Finnish company, which is expected to agree to the bailout terms.
Although it is not yet clear what action the government will take, what seems certain is that a combination of consumers and taxpayers will end up paying to maintain the functions performed by Uniper and bear the rising costs of the gas.
Customers are now receiving gas on agreed terms in 2020 and 2021, when gas was selling for a tenth or even less of the current price. “The big wave of price increases will only be ahead,” Maubach said.