The gas crisis is getting worse and worse. The largest German importer Uniper has come under heavy pressure. A change in the law now allows relief measures.
Germany’s struggling gas importer Uniper is facing a federal bailout worth billions. After the Federal Council approved the amendment to the Energy Security Act on Friday, Uniper submitted an application for government stabilization measures.
“Uniper is experiencing daily outflows of funds in the mid double-digit million range – a situation that we can no longer sustain,” said company boss Klaus-Dieter Maubach to journalists in Düsseldorf. Negotiations between the federal government, Uniper and the Finnish major shareholder Fortum are continuing. Chancellor Olaf Scholz (SPD) promised Uniper help.
Uniper plays a central role in Germany’s energy supply and supplies more than a hundred municipal utilities and industrial companies. The largest German gas importer is under severe pressure after the severe throttling of Russian gas supplies through the Nord Stream 1 pipeline. The company has to buy expensive gas to be able to service contracts with its customers. So far, Uniper has not been able to pass on the additional costs to its customers, but this will most likely change soon based on the change in the law.
However, it is still unclear whether the importer is allowed to pass on the additional costs to his customers or whether he gets more money and can fill his tight coffers a little via a pay-as-you-go system that the general public pays.
Gas prices could rise faster
Gas prices for consumers have been rising for a long time. However, this development should soon accelerate if the importers can pass on their costs and, in the final step, the consumers are also asked to pay a lot. Uniper boss Maubach said with a view to the general development on the gas market: “German consumers are facing a very, very large, high price wave.”
With a view to price trends for end customers, the Federation of Consumer Organizations warned of skyrocketing prices and called for further relief packages for citizens.
Uniper’s main shareholder Fortum, which holds around 80 percent of the share capital, proposed restructuring Uniper – with the aim of founding a security of supply company owned by the federal government. Details on this were not known.
Scholz and Habeck pledge support
Chancellor Scholz and Economics and Climate Protection Minister Robert Habeck (Greens) have meanwhile assured Uniper of state support. “In any case, we have made a political decision that we will help Uniper. The company can rely on that, the workforce can rely on that, but everyone in Germany who knows that this is a company that is of great importance for the supply of large parts of the economy and many consumers can also rely on it”, Scholz said in Munich after a meeting with the leading business associations.
Habeck emphasized: “We will not allow a systemically important company to go bankrupt and as a result cause turbulence in the global energy market.” The federal government will choose the option that is the best and cheapest for the German taxpayer and the safest for security of supply.
Uniper boss optimistic
“We are not on the verge of bankruptcy,” said Uniper boss Maubach in Düsseldorf and was optimistic that the company would overcome the current imbalance thanks to the new legal options.
As the German Press Agency learned from government circles, there has not yet been a decision on concrete measures by the federal government at Uniper. A multi-billion dollar entry by the Uniper federal government through a stake in equity is possible. However, a mix with the possibility of Uniper passing on high gas price increases to customers is also conceivable.
The problems in the gas market could get worse. Annual maintenance work on Nord Stream 1, which usually lasts ten days, begins on July 11. The big concern is that Russia won’t turn on the gas tap again after the maintenance.
In order to save gas, based on the amendment to the law, less gas is to be used to produce electricity. Instead, coal-fired power plants are to be used, which are currently only available to a limited extent, are about to be shut down or are in reserve. The top priority for the federal government is that the gas storage facilities are full by winter. According to the network agency, the current level of storage in Germany is 63.2 percent.
Draw «sharp sword» carefully
Habeck said the amended Energy Security Act gives the federal government far-reaching opportunities to intervene in market mechanisms, but also in people’s habits. He spoke of a “sharp sword” that should only be drawn with care. As a result of the legal changes that have now been passed, the federal government can also – if necessary – prescribe measures to save energy.
Chancellor Olaf Scholz (SPD) does not currently see a gas shortage in Germany, as he said on Thursday evening on the ZDF program “Maybrit Illner”. It was also “not certain” that it would come to that. “It would just be completely irresponsible not to consider them as a possibility and to prepare for them,” emphasized the SPD politician. In the event that it occurs, prepare for a prioritized energy distribution, for example. Scholz promised citizens further relief, but at the same time said: “We will not be able to subsidize all prices.” No country in the world can do that.
In the Federal Council, Habeck said that the possibility of pushing gas-fired power plants out of the market so that more coal-fired power plants could be used was a step backwards in terms of climate policy. However, this is necessary in order to reduce gas consumption. The Baden-Württemberg Prime Minister Winfried Kretschmann (Greens) said with regard to climate-damaging coal-fired power plants: “Of course, this point hurts a lot, but we are in an emergency situation. When there’s a fire, you don’t ask where the extinguishing water comes from, you just put it out.”
The Ministry of Economics had already made it clear that it wanted to stick to an earlier phase-out of coal. The traffic light coalition is aiming for this by 2030 instead of the current 2038 at the latest.
