Germany nationalizes gas giant Uniper as Russia cuts supply

Oliver Boehmer

As the screws tighten over the war in Ukraine, the ramifications for those involved are having profound impacts on their economies. Europe is on the frontlines as energy is weaponized on the battlefield, with Russia fully turning off the taps of the Nord Stream 1 pipeline to Germany and beyond. Prior to the invasion, Russia had supplied about 40% of the EU's natural gas needs, which is used for everything, like cooking and heating for consumers, as well as electricity and power generation for heavy industry.

The latest: Uniper (OTC:UNPPY), Germany's largest importer of gas, is being nationalized by the government as Berlin attempts to keep the industry afloat in the wake of an energy crisis. Shares of the utility collapsed 25% in Frankfurt on the news, following a 90% tumble since the beginning of the year. The drastic measure follows an earlier €15B bailout that failed to prop up Uniper (OTC:UNPPY), which has suffered heavy financial losses after being forced to buy gas in a market where prices have hit record highs.

The specifics of the deal will see the German government take a 99% stake in the energy giant - and inject in €8B - by acquiring the stake of Uniper's parent company, Finland's Fortum Oyj (OTCPK:FOJCY). "This step has become necessary because the situation has worsened significantly," German Economy Minister Robert Habeck announced. "The state will do everything necessary to keep systemically important companies in Germany stable at all times."

Outlook: While Germany gas storage facilities are currently over 90% full (meaning serious trouble would occur only after this winter), the government is likely to roll out further emergency support until more diversified supplies come online. There are plans to take control of two other large gas importers known as VNG and Securing Energy for Europe (formerly Gazprom Germania). Berlin has also said it would take over Rosneft's (OTC:RNFTF) German unit, including stakes in three crude refineries that account for 12% of the country's oil processing capacity.