Germany has nationalized major gas importer and utility provider Uniper, as Europe’s largest economy struggles with an energy crisis.
The measure by the German government was announced on Wednesday. Berlin would now inject another 8 billion euros (8 billion dollars) into the Dusseldort-based company.
It had already accepted back in July to bail out Uniper with a 15-billion-euro rescue deal, agreeing to buy out the 56-percent stake of Finland’s state-owned energy corporation, Fortum, for 0.5 billion euros. Berlin will then own nearly 98.5 percent of Uniper.
“Since the stabilization package for Uniper was agreed in July, Uniper’s situation has further deteriorated rapidly and significantly; as such, new measures to resolve the situation have been agreed,” Fortum said in a statement on Wednesday morning.
The Finnish company further added that it will de-consolidate Uniper as of the third quarter of 2022, while Fortum’s 4-billion-euro loan to its German subsidiary will be repaid and it will then be released from the parent company guarantee of the same amount.
“Under the current circumstances in the European energy markets and recognizing the severity of Uniper’s situation, the divestment of Uniper is the right step to take, not only for Uniper but also for Fortum,” Fortum CEO Markus Rauramo said on Wednesday.
Blaming Russia for the energy crisis in Europe, Rauramo said, “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 is Germany’s largest importer of gas, and has been severely impacted by the vastly reduced gas flows from Russia, leading to surging prices.
The development came after Russia’s state-owned energy giant Gazprom indefinitely shut off gas flows to Europe via the Nord Stream 1 pipeline earlier this month, a move the Uniper CEO Klaus-Dieter Mauback said would further deepen the company’s troubles.
Europe’s stand-off with key energy supplier Russia over the Ukraine conflict has hit Germany’s energy sector hard. The German government has already had to put Gazprom Germania and a subsidiary of Russian oil company Rosneft under trusteeship — a de facto nationalization.
Uniper’s smaller peer VNG — also an importer of Russian gas — had to request state aid as well in order to stay afloat.
A leading think tank warned earlier this month that Germany would be heading toward recession next year as Europe’s largest economy faced skyrocketing inflation as a result of Russian energy supply cuts.
Soaring energy prices coupled with runaway inflation have imperiled the livelihood of many Europeans since the war in Ukraine started. The West has imposed tough sanctions on Russia, especially its energy sector, eliciting Russian retaliation.
In addition to the Ukraine war, drought and rising temperatures in several parts of Europe have also aggravated the crisis in the continent.
Europe is enforcing measures to cut down on gas usage and, as an alternate source, has also started focusing on nuclear energy.