Germany to Pump $8 Billion to Nationalize Uniper

Germany to Pump $8 Billion to Nationalize Uniper

/ Financial News / Wednesday, 21 September 2022 11:28

As a drastic measure to save its economy amidst the energy crisis in the whole of Europe, the German government will be pumping about 8 billion euros ($8 billion) into Uniper SE, the biggest German buyer of Russian gas, to nationalize the gas giant.

The Federal Government of Germany, Uniper and Fortum – Uniper’s primary shareholder – have agreed on an amendment to the prior bailout package announced on July 22, 2022, whereby the government would have taken a 30% stake in Uniper.

The amended stabilization package will enable Uniper to continue its system-critical role for the energy supply in Germany, as per the company statement.

The stabilization package contains three core elements: capital increase, gas surcharge and KfW credit line.

The July bailout package provided for a capital increase of around €0.3 billion and a mandatory convertible instrument of €7.7 billion. Now, Uniper's financial stability is to be secured by a capital increase of €8 billion ($8 billion) at an issue price of €1.70 per share, excluding shareholders' subscription rights. The shares issued as part of the capital increase will be subscribed exclusively by the government. Additionally, the government will acquire the Uniper shares currently held by Fortum for €1.70 per share, resulting in the government’s stake of 99% in Uniper.

The state-owned bank KfW will provide financing to Uniper according to its liquidity needs. The potential need for additional financing will essentially depend on: 1) when the payment of the gas surcharge is made to Uniper, which is intended to cover costs for the replacement procurement of gas; and 2) how Uniper's margining situation develops given the volatility in the commodity markets. Uniper already extended KfW Bank credit lines to €13 billion at the end of August. The credit line, provided by Fortum and consisting of a €4 billion shareholder loan and a €4 billion guarantee line, will be replaced by the government following the acquisition of the Fortum stake, according to the company statement.

Uniper CEO Klaus-Dieter Maubach said, “The agreement provides clarity on the ownership structure, allows us to continue our business and to fulfil our role as a system-critical energy supplier. This secures the energy supply for companies, municipal utilities and consumers. The amendment of the stabilization package announced in July was necessary against the backdrop of the further intensification of the energy crisis. At Uniper, we are aware of our responsibility for Germany and Europe. We are committed to doing our part to overcome this crisis and to restructure the energy supply in this country.”

Since Russia cut off gas supplies to Germany, Uniper is sourcing alternative energy supplies from the spot market to cater to its clients, which include manufacturers and local utilities. The current energy price surge is reportedly causing the company to accumulate losses of as much as 100 million euros a day, risking the energy prospects of Germany. Germany is also in talks with the UAE for energy supplies.

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