German government takes control of Uniper to secure energy supply

The German government has signed an agreement in principle with energy companies Fortum and Uniper for a long-term solution that will allow the German State to take full control of Uniper and secure energy supply in the country.

The parties have agreed on an amendment to the package of measures announced on 22 July 2022 that will ensure the long-term stabilization of Uniper in light of the further deteriorating situation in the energy markets.

Under the agreement, the German government will acquire shares held by Fortum and replace Fortum’s credit line, increasing its stake thereby to a total of approximately 99%.

Upon completion of the deal, Fortum will divest Uniper and refocus on clean Nordic power generation as its core business.

To date, Uniper has accumulated close to €8.5 billion in gas-related losses and cannot continue to fulfil its role as a critical provider of security of supply as a privately-owned company and this calls for the involvement of the German State control, Fortum said.

The stabilization package contains three core elements: capital increase, gas surcharge and credit line from the state-owned bank KfW.

In order to achieve Uniper’s financial stability, a capital increase of €8 billion at an issue price of €1.70 per share is planned, excluding shareholders’ subscription rights. The shares issued as part of the capital increase will be subscribed to exclusively by the Federal Government.

KfW will provide financing to Uniper according to its liquidity needs. The potential need for additional financing will essentially depend on when the payment of the gas surcharge is made to Uniper, which is intended to cover costs for the replacement procurement of gas, and how Uniper’s margining situation develops given the volatility in the commodity markets, the company informed.

Uniper already extended KfW Bank credit lines to €13 billion at the end of August. The credit line provided by Fortum, consisting of a €4 billion shareholder loan and a €4 billion guarantee line, will be replaced by the Federal Government following the acquisition of the Fortum stake.

As an additional part of the deal, the parties have agreed that Fortum will have a right of the first offer in case Uniper intends to divest all or parts of its Swedish hydro and nuclear assets until the end of 2026.

The stabilization measures remain subject, inter alia, to the withdrawal of Uniper’s lawsuit against the Netherlands in connection with the Energy Charter Treaty (ECT), as well as regulatory approvals in various jurisdictions, including state-aid and merger control approvals from the EU Commission.

Uniper plans to hold an extraordinary general meeting in the fourth quarter of 2022 to obtain shareholder approval for the stabilization measures.

Commenting on the agreement, Markus Rauramo, CEO and president of Fortum, said: “We made choices in the past that we were truly convinced of at the time, based on the available information, market environment and outlook. In hindsight, some of our strategic choices turned out to become liabilities.

“We now have to face and mitigate the impact of those decisions. While divesting Uniper will be a painful step for the company, its employees and investors, Fortum will be able to look to the future and will focus on its core Nordic business of CO2-free electricity and heat as well as sustainable customer solutions.”

Uniper’s CEO Klaus-Dieter Maubach stated: “Today’s agreement provides clarity on the ownership structure, allows us to continue our business and to fulfil our role as a system-critical energy supplier. This secures the energy supply for companies, municipal utilities, and consumers.

“The amendment of the stabilization package announced in July was necessary against the backdrop of the further intensification of the energy crisis. At Uniper, we are aware of our responsibility for Germany and Europe. We are committed to doing our part to overcome this crisis and to restructure the energy supply in this country.”

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