Germany Working on Historic Takeover of Three Gas Companies

Eyk Henning, Vanessa Dezem, Dinesh Nair and Todd Gillespie
·3 min read
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(Bloomberg) -- Germany is in advanced talks to take over Uniper SE and two other large gas importers in a historic step to avoid a collapse of its energy market, according to people familiar with the matter.

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State ownership of Uniper, VNG AG and Securing Energy for Europe GmbH, formerly Gazprom Germania GmbH, is the main solution under discussion, the people said. The government is considering buying Fortum Oyj’s controlling stake in Uniper for a nominal price and would then inject billions of euros into the company through a capital increase, according to some of the people.

That move would dilute the stakes of Uniper’s remaining outside shareholders. The exact specifics have yet to be agreed but a conclusion could be reached in the coming days, the people said, asking not to be identified because the information is private.

Surging gas prices and Moscow’s move to squeeze supplies to Europe have already prompted a series of government bailouts and rescue loans. But those measures are increasingly dwarfed by the scale of the crisis and there’s a risk that systemic energy providers collapse without more robust government support. A coordinated swoop on the three firms would mark a clear escalation in Europe’s response to the energy war being waged by Russia.

With Russia’s main pipeline to Germany cut off, Uniper is having to source alternative supplies and it’s racking up losses of as much as 100 million euros ($100 million) a day, according to its CEO.

SEFE didn’t immediately respond to requests for comment. Fortum, Uniper’s largest shareholder with a 78% stake, said it couldn’t comment while negotiations are underway. Spokespeople for the German economy ministry, Uniper and VNG declined to comment.

The three companies are central pillars of Germany’s energy infrastructure, bringing gas from all over the world to fire Europe’s power stations, run factories and heat homes. Their physical assets help store and transport energy, while their teams of traders buy and sell billions of euros of contracts each year to keep the continent’s economy afloat and societies stable.

Asked about nationalization plans, German Economy Minister Robert Habeck said: “Things are complex, we are working it through very carefully.”

One of those complications is the Finnish utility Fortum. It has already granted loans to its unit but made clear earlier this year it didn’t want to keep extending credit. The government has already agreed to take a 30% stake in Uniper.

VNG, which supplies gas to approximately 400 municipal utilities and industrial operators, submitted an application for state aid last week. The extra cost for it to replace Russian flows to fulfill its own contracts is projected to balloon to 1 billion euros ($1 billion) this year, its parent company EnBW said.

Taking ownership of SEFE is also tricky as there’s a risk of channeling funds to Moscow. In July, German officials opened the door to nationalizing SEFE, passing a law that allows the government to take a stake in companies in its trusteeship against the will of their owner.

In SEFE’s case, which has been in trusteeship since April, the owner is an unclear Russian entity called Joint Stock Company Palmary, to which Gazprom gave the subsidiary in April. However, the law may require the German government to provide compensation to the former owner.

(Updates with details of potential Uniper deal structure from second paragraph)

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