Europe’s Energy Crunch Pushes Germany To Nationalize Top Gas Firm

Topline

Germany on Wednesday announced a deal to nationalize Uniper—the country’s biggest gas importer—in a move that comes months after neighboring France nationalized its biggest utility company EDF, as countries across Europe scramble to respond to an ongoing energy crisis sparked by Russia’s decision to completely cut off the supply of natural gas to the region via the critical Nord Stream 1 pipeline.

The logo of energy supplier Uniper is seen before a press conference about the government’s rescue … [+] plan at their headquarters in Duesseldorf.

AFP via Getty Images

Key Facts

In a press release, Uniper said the German government had taken the decision to ensure its “long-term stabilization…in light of the further deteriorating situation in the energy markets.”

As part of the deal, the German government has agreed to acquire Finnish state-energy firm Fortum’s 78% stake in Uniper for nearly half a billion euros (nearly $480 million) raising its total stake in the company to 99%.

Uniper’s shares have cratered by more than 30% since the announcement.

German Economics Minister Robert Habeck also said the federal government will follow through with its plans to implement a surcharge on gas consumption for homes and businesses starting October 1, refuting reports of potential backpedaling on the issue.

Habeck said nationalization will take at least three months and a surcharge was necessary for the meantime to ensure Uniper’s financial stability.

With the Nord Stream 1 pipeline being out of action, Russian gas supplies to Europe are now primarily flowing through Ukraine, but Moscow has threatened to shut this supply route as the G7, led by the U.S., moves to impose a global price cap on Russian oil.

What To Watch For

Germany is not the first European country to nationalize a major utility provider in recent months. In July, the French government agreed to pay nearly €10 billion ($9.9 billion) to fully nationalize the electricity giant EDF, by acquiring the remaining 16% of the company’s shares that it did not already own. European Investment Bank President Werner Hoyer told Bloomberg that more acquisitions may be on the way as the “incredibly high energy prices” triggered by the Russian-induced supply crunch “cannot be passed on to the consumers.”

Tangent

The European Union’s total gas storage level presently stands at 86.24% while Germany’s gas storage levels have now crossed 90%, according to the EU’s official tracker. The EU has set a target of having 80% of its gas reserves filled by November 1 to ensure adequate supply during the winter in the event Russia fully cuts off supplies. Germany’s official target is to have its storage 90% filled by December. While both appear to have surpassed their targets it’s unclear if they will have to tap into these reserves before the start of winter if Russia immediately suspends supply.

Key Background

Earlier this month, Russia warned that supplies through the key Nord Stream 1 pipeline will not resume until the West lifts all sanctions against it. Moscow argues the sanctions have prevented it from carrying out needed maintenance on the critical pipeline—an argument that European officials have dismissed. The throttling of supplies ahead of winter—when gas use is highest—has raised concerns across the EU, which relies on natural gas to generate power and in industrial operations. Germany has plans in place for gas rationing in the event the crisis worsens. European gas prices have risen more than 7% on Wednesday to €208 ($206.50) per megawatt hour.

Big Number

2.4 euro cents. That’s the amount of surcharge that would be levied on households and businesses in Germany per kilowatt hour of gas consumed. The levy has faced opposition in Germany as it could increase annual household utility costs by several hundreds of euros, according to the Associated Press.

Europe’s Energy Crunch Pushes Germany To Nationalize Top Gas Firm—Months After France Makes Similar Move