Germany will nationalize the massive Uniper gas company to ensure continued energy supply during the Ukraine conflict.
In exchange for paying €8.5 billion (£7.4 billion), the German government would purchase a 98.5% interest in the company.
Russia’s recent supply cuts have notably impacted Germany as the largest importer of Russian gas in Europe.
Chief Executive Klaus-Dieter Maubach said the deal will support Uniper’s position as “a system-critical energy supplier.”
About 40% of Europe’s natural gas came from Russia before the Russian invasion of Ukraine, and in response to Western sanctions, it gradually stopped supplying the continent.
Russia cut off supplies through the Nord Stream 1 pipeline at the beginning of this month, claiming repairs were necessary, but later declared flow would not resume unless sanctions were repealed.
Germany’s largest importer of Russian gas is Uniper, which manages gas, coal, and hydroelectric plants all throughout Europe and is presently under the management of Fortum, the state-owned energy firm of Finland.
In recent months, it has been forced to swap out Russian supplies with replacements bought on the free market, where prices have skyrocketed.
Fortum said Uniper had accumulated close to €8.5bn (£7.4bn) in gas-related losses “and cannot continue to fulfill its role as a critical provider of security of supply as a privately-owned company.”
Since Russia’s invasion of Ukraine, “the role of gas in Europe has fundamentally changed, and so has the prospects for a gas-heavy portfolio,” according to Markus Rauramo, chief executive of Fortum.
“As a result, the business case for an integrated group is no longer viable.”
Shares of Uniper, which also owns the coal-fired Ratcliffe-on-Soar power station in Nottinghamshire, have decreased in value by more than 90% during the previous 12 months.
In accordance with the terms of the agreement, the German government will pay €500 million (£437 million) for Fortum’s interests in Uniper and infuse €8 billion (£7 billion) in cash into the company.
A government official stated that some Russian assets would also come into German authority, adding that what would be done with them was still up in the air.
As part of a bailout agreement in July, the government had already agreed to acquire a 30% interest in Uniper.
Earlier this month, it also started talking to VNG, a significant gas supplier, about a potential rescue plan.
Nationalizing Uniper, according to Economy Minister Robert Habeck, is an “essential” action that will assist “guarantee the security of supply for Germany.”
He said that Germany has managed to fill its gas storage tanks to over 90% of their capacity in time for the upcoming winter, despite the loss of Russian supplies.
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On October 1 and until April 2024, there will also be a 2.4 euro per kilowatt-hour gas cost.
According to Mr. Habeck, the tax on consumers would guarantee the sustainability of the nation’s energy providers.
The state “will… do all possible to maintain enterprises stable on the market at all times,” he declared.
Energy use reduction by Germany
Germany began implementing a number of steps at the beginning of September to reduce energy consumption and prevent shortages in the upcoming months.
Businesses can no longer leave their doors open all day to save money on heating, and lit signs must be turned off after 10 p.m.
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Most public buildings will stop heating their hallways and corridors, and offices can only be heated to a maximum of 19C.
In July, European energy ministers also cut their natural gas use by 15%.