German government agrees on bailout for energy supplier
Associated Press (archive.ph)By Geir Moulson
2022-07-22 14:26:17 GMT
German Chancellor Olaf Scholz speaks during a press conference in Berlin, Friday, July 22, 2022. The German government will take a roughly 30 percent stake in energy supplier Uniper as part of a rescue package following surging prices for natural gas and reduced Russian deliveries, the company and Chancellor Olaf Scholz said Friday.
BERLIN (AP) — The German government will take a roughly 30% stake in energy supplier Uniper as part of a rescue package prompted by surging prices for natural gas and reduced Russian deliveries, the company and Chancellor Olaf Scholz said Friday.
Uniper, which has been Germany’s biggest importer of Russian gas used to fuel industry, generate electricity and heat homes, asked for a bailout two weeks ago. German officials quickly pledged that they would help, but thrashing out the details took time. One result will be higher prices for customers.
Uniper had previously downgraded its financial outlook for this year, pointing to a sharp reduction in gas deliveries by Russia’s state-owned Gazprom in recent weeks that has forced it to buy substitute supplies at significantly higher prices.
Scholz, who interrupted his summer vacation for the announcement, said Uniper is “of paramount significance for the economic development of our country and for energy supply to individual citizens, but also to many companies.”
“It was necessary to stabilize Uniper now,” he told reporters in Berlin. “If I remember rightly, about 60% of gas imports in Germany are ultimately organized in a certain way via this distributor. That is a very, very big chunk, so it’s clear you can imagine that there would have been practically no company at the end of these supply chain that wouldn’t be affected.”
Gazprom reduced the flow of gas through the Nord Stream 1 pipeline from Russia to Germany — the latter’s main source of Russian gas — by 60% in mid-June, pointing to technical issues that German officials dispute. Russian gas recently has accounted for about a third of Germany’s supply.
After a scheduled 10-day shutdown for maintenance, gas deliveries through the pipeline resumed as scheduled Thursday but still at only 40% capacity. The German government announced that it would step up its gas storage requirements and take further measures to save gas.
The package announced Friday will result in an increase in consumers’ gas prices, which have already been high and are driving inflation. Scholz said a levy for gas customers will start in September or October that could lead to an increase of 2 euro cents per kilowatt hour, which could add up to 200 to 300 euros per year to the bill for a family of four.
Scholz promised further efforts to shield Germany’s people and companies from the fallout of high energy prices, pledging that “you’ll never walk alone.”
“We will do everything necessary so that, together as a country, as companies and as citizens, we get through this situation so that no one is put in a situation that is insoluble for him or her,” he said.
The rescue package involves a roughly 267 million-euro ($272 million) capital increase signed by the German government alone, and a mandatory convertible instrument of up to 7.7 billion euros being issued to the government — in tranches and as Uniper’s liquidity needs require. An existing 2 billion-euro credit facility from Germany’s state-owned KfW development bank will be increased to 9 billion euros.
Uniper is majority-owned by Finland-based Fortum, in which the Finnish government holds a majority stake. Scholz said the owners will effectively be making a “substantial contribution” to the rescue by having the value of their holdings diluted. Fortum’s stake will go from about 80% to 56%.
Fortum CEO Markus Rauramo described talks with the German government as intense but “conducted in a good spirit.”
“Together, we saw that the undisturbed continuation of Uniper’s operations, securing security of energy supply, and cooperation and unity between EU countries were more important than getting stuck on a certain solution model,” he said in a statement on the company’s website.
Rauramo said Uniper is critical for energy security in Germany and Europe. The German energy company has become entangled in a situation where “Russia is using energy as a weapon against Europe as part of the war in Ukraine,” he said, adding that “no company has been able to fully prepare for such a business risk.”
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This story has been corrected to show that the potential cost of the gas levy for a family of four is 200 to 300 euros per year, not 300 to 400.
