Germany Ready to Up Uniper Aid to €60 Billion in Worst Case
(Bloomberg) -- Germany is preparing for a worst-case scenario in which it needs to double financial aid to Uniper SE, the nation’s biggest gas supplier, to €60 billion.
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Uniper’s financial situation is worsening with an expected adjusted net loss of €3.2 billion ($3.2 billion) for the first nine months of the year as it buys more expensive wholesale gas to meet supply contracts after Moscow cut flows. Prices would have to stay high for two years for the shortfall to hit the government’s maximum projection, according to people familiar with the matter.
The staggering figure assumes gas prices remain at highs seen during the summer months. The fuel has eased in recent weeks but is expected to surge again as soon as the weather gets cold and heating demand rises. Uniper urgently needs money to fund replacements for its supply contracts with hundreds of local German utilities.
As things stand, Uniper will receive around €31 billion from the state from a €200 billion aid package. The bailout will result in the full nationalization of the utility by the end of the year. If the law is confirmed by the German Senate on Friday, the funds could be transferred as soon as next week, according to the people who declined to be identified because the matter is private.
German Deputy Finance Minister Florian Toncar said the government will ensure that Uniper can be operative and have the necessary funding.
“Uniper is a crucial company for the gas supply in Germany, otherwise we wouldn’t jump to such high stakes,” he said in an interview with Bloomberg Television. He didn’t comment on the size of any potential additional aid.
A spokesperson for the Economy Ministry declined to confirm the figure. Uniper declined to comment. Bloomberg Intelligence analyst Patricio Alvarez said €60 billion would only be conceivable in case of extremely high gas prices of about €200 for at least two years.
Germany is paying the price for building up a reliance on Russia, which supplied more than half of the country’s gas before President Vladimir Putin ordered the invasion of Ukraine. Nationalizing Uniper is Germany’s biggest step to date to protect the country from blackouts and rationing this winter and beyond, and more will likely follow.
European benchmark gas futures have dropped about 70% from the highs of August with cargoes of liquefied natural gas arriving and almost full storage sites, but prices remain three times higher than the average of the last five years. The Dusseldorf-based Uniper has to buy the fuel at levels beyond what it was paying for supplies piped from Russia.
Russian gas cuts could lead to quarterly losses of as much as €5 billion with spot prices of €80-100 a megawatt-hour, according to estimates from Bloomberg Intelligence. Day-ahead gas was trading at €48.75 a megawatt-hour on Thursday.
Rising energy prices have put other energy companies under financial strain, with margin calls -- the collateral required to back trades -- surging to unsustainable levels. Uniper was expecting to be able to pass along some of the extra costs to consumers via a levy planned by the German government, which has been scrapped and replaced with a price cap for consumers which doesn’t help suppliers at all.
The government has promised a “tailor-made solution” for other gas importers, such as VNG AG and Securing Energy for Europe GmbH. About €50 billion from the fund will go to gas importers, according to Germany’s bailout law proposal.
Read More: Germany Set to Borrow €200 Billion to Tackle Gas-Price Surge
--With assistance from Eyk Henning.
(Adds deputy finance minister’s comment in fifth paragraph)
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