Energy giant Uniper is stumbling – who are we saving with the gas surcharge?

Created: 08/28/2022, 06:27

By: Matthew Schneider

Of the approximately 90 percent of the gas levy to replace Russian supplies, 65 percent is attributable to Uniper.

We explain who is behind the group.

Düsseldorf/Munich - Uniper is an artificial word - created from the terms "unique" and "performance", which means something like unique performance.

A resourceful employee came up with the name.

Alongside Fortum and EDF, Uniper is now one of the largest European electricity producers, represented in Great Britain, the Netherlands, Sweden, Germany, Hungary and Russia.

The group relies almost exclusively on base load capable - and thus mostly fossil - power plants.

Uniper: The business areas of the group at a glance

Of the around 109 terawatt hours of electricity generated in 2021, around twelve percent came from hydropower (including the Walchensee power plant), hardly less from a Swedish nuclear power plant, around 22 percent from lignite and hard coal and - with almost 54 percent the lion's share - from natural gas.

Uniper has a good third of its generation capacity in Russia – where it is listed on the Moscow stock exchange under the name Junipro and accounts for around four percent of the national electricity supply.

However, the Russia division is to be sold.

Power generation accounts for around half of Uniper's business.

By 2025, 1.5 to two gigawatts of wind and solar power are to be added - which would correspond to between 4.5 and six percent of the already installed capacity.

The importance for the German electricity market is considerable: With almost ten gigawatts, Uniper operates around ten percent of the base load capacity in Germany.

This is the electricity that is needed when wind and sun are not available.

Uniper should benefit from the gas surcharge.

© Roberto Pfeil/dpa

The second – and currently more relevant – pillar of the group is global trade – primarily with gas, but also with coal and CO₂ certificates.

According to Uniper, it bought and sold around 370 terawatt hours of natural gas in 2021.

To put this into perspective: This corresponds to around 37 percent of German natural gas consumption in 2021. The largest national importer supplies around 100 German municipal utilities and various industrial customers.

Their deliveries – and the prices for them – depend on the Düsseldorf group.

If Uniper cannot deliver under the old conditions due to insolvency, the customers would have to conclude new, expensive contracts with other providers.

Uniper also represented in the logistics sector

Logistics is also one of Uniper's services: in 2021, the group shipped over 350 loads of liquefied natural gas (LNG).

According to their own statements, one of the more modern tankers can supply 65,000 households for a year.

In the LNG terminals, 47 terawatt hours of liquid gas can be regasified and fed into the grid every year.

Uniper can store 74 terawatt hours of gas in its caverns.

To put this into perspective: That corresponds to about seven percent of Germany's annual requirement.

Given the moon prices -- some fifteen times pre-crisis levels -- being paid for gas right now, the company, like other traders, could make a lot.

But Uniper in particular is missing the gas because Russia is not delivering the agreed quantities.

Nevertheless, Uniper has to fulfill the contracts with its customers and buy the gas at high cost.

In the first half of the year, the group made a loss of 12.4 billion euros.

This is how the rescue of Uniper should work

The gas surcharge, through which all consumers bear 90 percent of the replacement procurement costs, is intended to remedy the situation from October.

The surcharge will initially apply until April 2024. By then, many old contracts that caused Uniper the enormous losses could expire.

With the gas surcharge, the expensive replacement procurement is passed on to the shoulders of all gas customers.

There are additional loans from the KfW development bank.

The – already exhausted – framework of two billion euros was increased to nine billion.

The parent company Fortum had previously granted a loan of around four billion euros.

In addition, the federal government is to grant up to 7.7 billion euros in the form of a mandatory conversion instrument – ​​more on this later.

The condition for the federal aid: no dividend payments or board bonuses.

Ownership of Uniper: the federal government wants to get involved with 30 percent – ​​as part of the rescue

The help is not for free: the German state wants to get involved with Uniper.

The young group already has an eventful history: Uniper was founded in 2016 as a spin-off from Eon's conventional and hydroelectric power plant park and its energy trading.

In 2018, the parent company left as a major shareholder.

In 2020, the Fortum group became the majority shareholder, which now owns almost 80 percent of Uniper and is half controlled by the Finnish state.

The purchase has so far been a bad deal for Fortum: partly because of Uniper, the group reported net losses of 7.4 billion euros for the second quarter.

Part of the rescue package is now a large entry by the federal government: 30 percent of the common shares were bought for 1.7 euros each - at a market value of around ten euros.

This brought Uniper a meager 267 million euros in capital.

The titles are currently worth just under six euros.

If they don't fall any further, it's a good deal for the federal government.

Fortum's stake is thus diluted to 56 percent.

Energy price flat rate: who gets it?

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The federal government provides Uniper with a billion-euro bond

Of course, the sum is not enough to support the group.

The federal government will therefore provide Uniper with an additional EUR 7.7 billion in the form of a mandatory convertible bond.

This means that the federal government gives Uniper a loan that will be paid in shares at the end of the term.

That's a bet that can go either way for the taxpayer.

Because with around 360 million ordinary shares and a current price of around 5.5 euros, the entire company is worth just two billion euros.

The strategic value of the infrastructure is an additional factor for the federal government.

How many shares the federal government will ultimately get - and after what term - is currently still being negotiated, our newspaper learned from the Federal Ministry of Economics.

Among other things, it depends on how Uniper's stock price develops - and whether Fortum converts its loan of four billion euros into part of the mandatory conversion instrument.

So it remains to be seen whether the state can benefit, as it did with the Lufthansa rescue.

Continuation: 25 percent of the gas surcharge will go to the trader Sefe – formerly Gazprom Germania.

In the second part, we analyze why a Russian group is being supported with German funds.