On Wednesday, the German government announced that it had reached an agreement to nationalize the Uniper generator set to prevent the company from collapsing.
The German state will increase its stake in the company to 98.5%, at a price of €1.70 ($1.68) per share. The deal will also see 8 billion euros ($7.9 billion) of public funds invested in Uniper. Of Uniper’s assets, 4 billion euros will repay a loan from parent company Fortum, which is headquartered in Finland.
State-owned bank KfW will provide bridge financing for the deal, which the parties expect to complete before the end of 2022.
Markus Rauramo, CEO of Fortum, said: “In the current circumstances of European energy markets and given the seriousness of Uniper’s situation, the sale 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, as has the outlook for a gas-intensive portfolio. Consequently, the business case of an integrated group is no longer viable.
The company has about 33 GW of generating capacity and posted losses of 12 billion euros ($11.9 billion) in August. It had significant assets in Russia, including about 8,215 MWe of electricity from three service stations, as well as mining projects.
Uniper had also taken out a loan to finance the now canceled Nord Stream 2 gas pipeline. The company struck off these investments following the economic sanctions of Western countries following the invasion of Ukraine by Russia.
Following the announcement, Uniper shares fell around 35% in German markets, before recovering around 10% before the close of trading.
Uniper CEO Klaus-Dieter Maubach also supported the move, saying the deal “clarifies the ownership structure, allows us to continue our operations and fulfill our role as a system-critical energy provider.”
Nationalization should be the first of several
In a press conferenceGerman Economy Minister Robert Habeck said: “Since September 1, no gas has passed through Nord Stream 1. As a country, we have handled this situation exceptionally well so far.
“Storage levels exceeded 90% and, after a brief spike, the price of gas fell below €200/MWh. Half of Uniper’s portfolio resides in Russian gas, which accounts for 40% of German gas supply. Together, these factors compelled action.
In July, the German government purchased 30% of the company, with negotiations over long-term measures continuing ever since. Fortum’s recent statement said that “since July, the European energy crisis has further escalated and the gravity of the situation has shown that previously agreed stabilization measures are insufficient and difficult to implement.”
Earlier this year, Germany changed its laws to allow the nationalization of energy companies to avoid any disruption to the country’s electricity supply. Under similar arrangements, it seized the assets of three Russian-owned oil refineries earlier this month.
This also follows the complete nationalization of EDF in France. Although the French government has a majority stake in EDF, the government bought the remaining shares to allow the company to go into debt and keep energy prices low.
On Tuesday, European Investment Bank President Werner Hoyer said Bloomberg: “There could be more of this because, given the incredibly high energy prices that cannot be passed on to consumers, states need to step in. This is probably something we will see for some time .”