It’s bizarre: Germany is rescuing the energy company Uniper, which is majority owned by the Finnish state, through the gas levy, among other things. The protection given to Uniper owners is wrong, but that doesn’t change anything about the coming jump in costs for natural gas customers.
The Staudinger power plant operated by Uniper: Coal is mainly processed in the plant near Hanau in Hesse.
Michael Rasch, business correspondent for the “Neue Zürcher Zeitung”.
You are reading an excerpt from the newsletter “The Other View” from Michael Rasch, Business correspondent for the «Neue Zürcher Zeitung». Subscribe to the newsletter for free. Not resident in Germany? Benefit here.
The German energy giant Uniper, majority owned by the Finnish state and now one Reported deficit of more than 12 billion euros has failed miserably with its business strategy. Now 30 percent of it is partially nationalized and mostly saved from insolvency by German taxpayers and by the planned gas levy by German natural gas customers (companies and private individuals). Couldn’t there have been a better solution?
Profiteer from cheap Russian gas
The Düsseldorf-based company with its 11,500 employees is, among other things, a major energy trader, buying and selling natural gas and coal, for example. The former E.On subsidiary is now 78 percent owned by the Finnish energy group Fortum, which in turn is almost 51 percent owned by the Finnish state.
Germany’s largest gas importer has done lucrative business with Russia for years and maintained its connections to Moscow. The management praised Russia as a reliable supplier, was one of the largest Gazprom customers in Europe and played a key role in driving the construction of the Nord Stream 1 and 2 Baltic Sea pipelines.
Those shops are now in ruins. In addition to significant value adjustments, the massive gas supply cuts by Gazprom and Russia in the past few weeks and months have become an existential problem. Uniper now has to buy the missing cheap natural gas from Russia very expensively on the market at current prices in order to fulfill its contractual obligations to its own customers, who can still pay the prices contractually agreed before the war. This fact has plunged Uniper, whose customers include over a hundred municipal utilities and industrial companies, into an existential crisis.
A dozen companies in distress
Uniper is not the only one in need. Twelve companies are said to have applied for compensation of 34 billion euros with regard to the planned gas surcharge, but more than half of the sum goes back to Uniper. Due to the gas surcharge, private individuals and companies must from October on per kilowatt hour Pay 2.42 cents more, which will mean a borderline burden for many customers – regardless of the planned reduction in VAT on natural gas that the Chancellor has just announced.
The state-orchestrated emergency solution with the gas levy may be economically justifiable, but once again false incentives are being set. It is wrong to save the owners of Uniper, the shareholders, among whom there are hardly any private investors, from the total loss that they have caused themselves. The same is true for corporate bondholders. The state should have sent the group into bankruptcy, but then actually taken it over and at the same time ensured the smooth operational continuation. After the renovation, it could have been reprivatized.
Unfortunately, it is unavoidable to continue to serve creditors from the corporate world, because Uniper is too networked to fail completely. This networking would otherwise have sent shock waves through Europe, which would otherwise have been almost impossible to foresee, including in Switzerland, similar to what happened with the uncontrolled bankruptcy of the investment bank Lehman Brothers.
Price for dependence on Moscow
Furthermore, in an ideal world, only Uniper’s customers should have been held accountable for the now higher prices and not all natural gas consumers as a whole. The same applies to other distressed natural gas traders and in turn to their customers. In this way, customers would also learn painfully to visualize the risks of suppliers much better in the future.
Ultimately, however, there was probably no justifiable alternative for the operational rescue of Uniper. This also applies to the planned passing on of the enormously high natural gas prices to private individuals and companies. This is the price Germany has to pay for Russia’s attack on Ukraine, the West’s subsequent exchange of blows with Moscow, and, most importantly, for its self-inflicted dependence on once-cheap Russian natural gas.
SYou can the Frankfurt business editor Michael Rasch on the platforms Twitter, linkedin and Xing follow.