Uniper in Bailout Talks to Plug $9.4 Billion Hole; Shares Jump

Uniper in Bailout Talks to Plug $9.4 Billion Hole; Shares Jump

  • Government drafts law to let it take stakes in energy firms
  • Uniper shares jump after news of bailout discussions

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Germany’s Scholz Signals Bailout for UniperUnmuteWATCH: Scholz said his government is continuing talks on aid for gas giant Uniper. Vanessa Dezem reports.Source: Bloomber

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German gas giant Uniper SE is in talks with the government over a potential bailout package of as much as 9 billion euros, ($9.4 billion) according to a person familiar with the situation. 

The government is looking at applying a set of measures, including loans, taking an equity stake and also passing part of the surge in costs onto customers, said two people familiar with the talks. 

The shares rose as much as 9.5%, after sinking almost a third on Monday in a move that took the company’s market value to about 4 billion euros.

Uniper declined to comment. The company, which is one of the biggest importers of Russian gas, said last week it was in talks with the government to secure liquidity. 

Germany, which has built its economic model on cheap Russian gas, is wrestling with a squeeze in supplies and surging fuel prices as Moscow punishes Europe for its support for Ukraine. German Economy Minister Robert Habeck has warned the gas crunch risks triggering a collapse in the market, similar to the role of Lehman Brothers in the financial crisis.

Gas Shock

Potential German GDP losses due to production cutbacks in the case of natural gas rationing*

Source: Bundesbank

Note: Calculations based on the 2018 German input-output table produced by the Federal statistics office. * Shocks to non-prioritized industrial sectors and to services depending on the natural gas intensity of their activities.

As part of its plan, the government is preparing legislation that would enable the state to take stakes in struggling energy companies, according to two senior officials. It will also allow for at least part of the cost of rising gas prices to be passed on to consumers. Analysts estimate that curbed Russian flows are costing Uniper 30 million euros a day.

The cabinet is set to approve the bill on Tuesday, followed by the upper and lower houses of parliament on Friday. 

Officials are moving fast ahead of the next milestone: the key Nord Stream pipeline is due to shut for maintenance on July 11, adding pressure to already fraught markets. German officials have raised the prospect that Moscow may never reopen the pipe after the maintenance, leaving the country without its main source of gas. 

Read: Germany Fears Russia Could Permanently Close Main Gas Pipeline

While Uniper represents the most urgent concern, the broader economy is also in peril as the government is trying to contain the fallout for consumers and industry. Plans have been drafted for rationing, with Germany’s vast industry poised to suffer shortages. Habeck has warned that worse is to come.

“We aren’t dealing with erratic decisions but with economic warfare, completely rational and very clear,” Habeck said on Saturday. “After a 60% reduction, the next one logically follows.”

Chancellor Olaf Scholz signaled at the weekend the government could use bailout tools created during the pandemic to rescue Lufthansa in the current crisis. Germany issued loans to the airline and took a 20% stake. It came with a ban on dividends and management bonuses.

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