Image Source: Bloomberg
To safeguard the energy supply in the midst of the conflict in Ukraine, Germany will nationalize the massive Uniper gas company.
The German government will pay €8.5 billion (£7.4 billion) to acquire a 98.5% interest in the company as part of the deal.
The greatest consumer of Russian gas in Europe, Germany, has been particularly hard hit as a result of recent supply cuts by Russia.
CEO Klaus-Dieter Maubach stated that the agreement would support Uniper’s position as “a system-critical energy supplier.”
About 40% of Europe’s natural gas came from Russia before the Russian invasion of Ukraine, and the country progressively stopped supplying gas in response to Western sanctions.
Russian supplies through the Nord Stream 1 pipeline were stopped at the beginning of this month, ostensibly for repairs, but subsequently, Russia indicated flow would not resume unless sanctions were repealed.
Germany’s top consumer of Russian gas is Uniper, which runs gas, coal, and hydroelectric plants throughout Europe and is presently owned by the Finnish government’s Fortum energy firm.
It has recently been forced to swap out Russian supplies with replacements bought on the free market, where prices have skyrocketed.
Fortum said Uniper had accumulated close to €8.5bn (£7.4bn) in gas-related losses “and cannot continue to fulfill its role as a critical provider of security of supply as a privately-owned company.”
“The outlook for a gas-heavy portfolio has changed fundamentally since Russia attacked Ukraine,” Fortum Chief Executive Markus Rauramo said in a statement.
“As a result, an integrated group’s business case is no longer viable.”
Over the previous year, the share price of Uniper, which also owns the coal-fired Ratcliffe-on-Soar power station in Nottinghamshire, has decreased by more than 90%.
According to the agreement, the German government will invest €8 billion (£7 billion) in Uniper while purchasing Fortum’s shares for €500 million (£437 million).
According to a government spokeswoman, Germany will also gain authority over some assets in Russia, though it has not yet been decided what will be done with them.
As part of a bailout deal in July, the government had already committed to acquiring a 30% interest in Uniper.
It also started talking about a potential bailout plan earlier this month with VNG, a different significant gas provider.
In order to “secure the security of supply for Germany,” according to Economy Minister Robert Habeck, nationalizing Uniper was a “necessary” step.
Despite the loss of Russian supplies, he added, Germany has managed to fill its gas storage tanks to over 90% of their capacity in time for the coming winter.
On October 1 and lasting through April 2024, a 2.4 euro cent per kilowatt-hour gas surcharge will also be implemented.
The fee on consumers, according to Mr. Habeck, will guarantee the viability of the nation’s energy providers.
In his words, “the state will… do all required to maintain businesses stable on the market at all times.”
Germany wants to cut energy use
Germany unveiled a slew of policies at the beginning of September to reduce energy consumption and prevent shortages in the upcoming months.
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In order to save money on heating, businesses can no longer leave their doors open all day. Additionally, LED signs must be turned off after 10 p.m.
Offices can only be heated to a maximum of 19C, and most public buildings will no longer have heated halls and hallways.
In July, European energy ministers also reached a 15% reduction in the natural gas use agreement.