By Geoffrey Smith
Investing.com -- The German government has agreed to nationalize struggling utility Uniper (ETR:UN01), in an effort to guarantee the security of supplies of natural gas this winter.
Berlin, which had already taken a 30% stake in the country’s largest gas importer in an earlier rescue package, will inject 8 billion euros through a capital increase priced at 1.70 euros a share. It will also buy out Uniper’s majority shareholder, Finnish energy group Fortum (HE:FORTUM), at the same price, costing a further 480 million euros.
Fortum stock rose 15% in Helsinki to a two-month high in response to the news, which effectively ends the Finnish group's liabilities toward its German unit. Under the deal, Berlin will take over some 8 billion euros of financing and guarantees from Fortum.
Uniper had effectively bankrupted itself by buying gas at record high prices on the spot market to cover for the shortfall in Russian supplies after these were cut by Russian gas monopoly Gazprom (MCX:GAZP).
The move will ensure that Uniper will be able to buy and supply natural gas throughout the coming winter, having the immense financial resources of the German state behind it. However, it marks a decisive state intervention into the economy that Germany - like other European countries - has traditionally shied away from. As such, the move underlines the profound impact of Russia's war in Ukraine on the German and broader European economy.
The federal government has unveiled plans for a "gas surcharge" to be levied on businesses and households, which would effectively allow Uniper to defray its extra purchasing costs onto customers. However, the plans were drafted when Berlin still hoped to preserve Uniper's independence as a private company. With the company now passing into state hands, various voices have called for the "Gasumlage" to be scrapped, arguing that it will add to an inflation rate that is already at its highest in over 30 years.
"The potential need for additional financing will essentially depend on when the payment of the gas surcharge is made to Uniper, which is intended to cover costs for the replacement procurement of gas, and how Uniper's margining situation develops given the volatility in the commodity markets," the company said.
A statement issued by Uniper indicated that the company will continue to tap state-owned development bank Kreditanstalt fuer Wiederaufbau "according to its liquidity needs" for the foreseeable future.
The news coincided with the announcement in Moscow earlier Wednesday that Russia will mobilize 300,000 reservists to shore up its faltering campaign in Ukraine. That announcement, delivered in bellicose language by President Vladimir Putin, pushed benchmark European gas prices up by over 8% by 03:55 ET (07:55 GMT) to 210 euros a megawatt hour, their highest level in a week.