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7 Sep, 2022 22:12

German gas giant pleads for state funding amid energy crisis

Uniper has asked for extra government aid amid mounting losses stemming from its attempts to replace Russian gas
German gas giant pleads for state funding amid energy crisis

Germany’s largest gas importer – Uniper – is struggling to replace Russian gas supplies and the company’s losses are mounting, its CEO, Klaus-Dieter Maubach, admitted this week. The company could also run out of cash Berlin granted as aid later this month, he warned.

Uniper has had to substitute missing gas volumes (which Moscow blames on technical issues and Western sanctions) by buying gas at high prices on the spot market and selling it to its customers at cheaper, long-term prices. As a result, the company reported a loss of more than €12 billion ($12 billion) – the biggest in German corporate history – as early as July, prompting Berlin to intervene. 

The government covered the company’s losses by acquiring a 30% stake in Uniper and provided it with an additional €7.7 billion ($7.7 billion) aid package designed to help it hold out until the fourth quarter of 2022. Now, Uniper admits the aid will not be enough.

The company will hit the financial aid limit “definitely … earlier,” Maubach told journalists on the sidelines of the Gastech conference in Milan. “Most likely we will reach that ceiling in September already,” he added.

The agreement with the government might see the gas giant receiving up to €20 billion to prevent its collapse and a potential domino effect in the national energy sector, according to Bloomberg. In addition, the company had an additional €4 billion loan from the German state bank KfW approved this week on top of the €9 billion credit line it has already used, Germany’s Handelsblatt business daily reported. 

The future does not appear bright for the German gas giant despite all the financial assistance, according to Maubach. “I have said this a number of times now over this year and I’m educating also policymakers. Look, the worst is still to come,” he told CNBC in Milan, adding that “what we see on the wholesale market is 20 times the price that we have seen two years ago.”

Natural gas prices in Europe rose 30% on Monday after the announcement that Russia’s Nord Stream 1 pipeline would not resume pumping due to sanctions-related maintenance issues. Russian energy giant Gazprom, which operates the pipeline, said the gas route would remain shut indefinitely. Moscow added that pipeline operations will be hampered as long as Western sanctions remain in place.

The news came amid an ongoing energy crunch in the EU. Since the start of Russia’s military offensive in Ukraine in late February, gas prices have climbed to record highs in Europe. In late July, EU members agreed on a plan to reduce their gas consumption by 15% over the coming months to increase the bloc’s energy security at a time when it seeks to rid itself of its dependence on Russian energy.