Germany on Wednesday announced a move to nationalize struggling natural gas supplier Uniper SE as it strives to keep the industry functioning in the wake of a global energy crisis, according to Reuters.
Uniper is Germany's largest importer of Russian NatGas and has suffered tremendous losses after Russian energy giant Gazprom slashed Nord Stream 1's pipeline capacity to zero, forcing the utility to purchase natgas outside contracts on the open market at record high prices.
Berlin agreed to purchase the remaining stake owned by Uniper's parent company, Finnish utility Fortum Oyj for $1.69 (1.70 euro) per share. Buying Fortum's stake means Germany will own 99% of Uniper. The cost of nationalization comes as Berlin is set to inject 8 billion euros, equivalent to around $8 billion, into the utility.
The move is to keep the lights on across German homes and businesses as the risk of power rationings increases.
"This step has become necessary because the situation has worsened significantly.
"The state will do everything necessary to keep systemically important companies in Germany stable at all times," Robert Habeck, Germany's economy minister, said Wednesday.
Uniper shares crashed by as much as 39% to 2.55 euros. Shares are down 93% on the year...
In July, Berlin injected a whooping 15 billion euros ($14.95 billion) to save the utility though the move to nationalize ahead of winter shows further deterioration in energy security for Europe's largest economy.
Here's what Markus Rauramo, CEO and President of Fortum, said about the deal:
"Under the current circumstances in the European energy markets and recognising the severity of Uniper's situation, the divestment of Uniper is the right step to take, not only for Uniper but also for Fortum.
"The role of gas in Europe has fundamentally changed since Russia attacked Ukraine, and so has the outlook for a gas-heavy portfolio. As a result, the business case for an integrated group is no longer viable."
Uniper CEO Klaus-Dieter Maubach also commented:
"This secures the energy supply for companies, municipal utilities, and consumers."
The bailouts and nationalization of utilities won't likely end with Uniper. Berlin plans to take control and shore up positions in other struggling utilities to avoid a 'Lehman-style' collapse.
The good news is Germany has managed to fill up its NatGas storage facilities ahead of winter to approximately 90%. These supplies only cover two months, and without increased imports of liquefied natural gas from afar, it could only suggest a dark winter for Europe.