The German government has drafted a law that allows it to take stakes in companies crippled by the soaring cost of imported gas as tensions with Russia threaten to plunge the country’s power sector into crisis.
The law, which could be passed by the German parliament as early as this week, would clear a path for the government to bail out Uniper, the largest importer of Russian gas into Germany.
The amended energy law would also allow importers to pass on the higher costs of the gas they are procuring on spot markets to all their customers, and so avoid insolvency.
“Gas has become a scarce commodity and in the current situation we have to make all options available in case of an emergency, and to once again expand our toolbox,” an official said, explaining the measures.
The aim, officials say, is to avoid a repeat of 2008 when the collapse of Lehman Brothers cascaded through the whole financial market, helping to trigger a global crisis.
Germany’s energy sector has been in turmoil since mid-June when Russia’s state-controlled gas exporter Gazprom reduced flows of gas through the Nord Stream 1 pipeline under the Baltic Sea by 60 per cent.
NS1 will undergo scheduled maintenance between July 11 and July 21, and many in the government fear that gas flows might not resume after the repairs are completed as the economic war between Russia and Germany escalates.
Officials have already warned that gas might have to be rationed to industrial customers this winter if Germany fails to fill gas storage facilities quickly enough ahead of the cold season.
Deprived of Gazprom supplies, importers have been forced to procure gas on the spot market at much higher prices. However, they have been unable to pass on these higher costs to their customers, most of whom receive their gas under long-term contracts that are not open to renegotiation.
“If energy companies can’t pay the high prices or fulfil their contracts, they face financial difficulties up to and including insolvency,” the official said. “But if [they] collapse, that could trigger a serious breakdown of the whole market, right along the supply chain to the end consumer.”
Uniper, which issued a profit warning last week and said it was in talks with the government about a bailout, is so far the highest-profile casualty of the crisis.
It said the talks concerned “stabilisation measures” which could include guarantees, an increase in the current credit facility it was granted at the start of the year by the state-owned bank KfW, or the state taking a stake in the company.
Most analysts believe Berlin will bail out Uniper, with a package expected to amount to around €9bn. The rescue deal could be modelled on the relief provided to airline Lufthansa during the pandemic.
Under the proposed amendments to the energy law, the German state would be able to take stakes in troubled companies “of critical infrastructure in the energy sector”, just as it did in banks affected by the global financial crisis and during the Covid-19 pandemic. As part of the Lufthansa bailout the state took a 20 per cent stake in the airline.
The amended law also includes a new “price adjustment” mechanism designed to “maintain supply chains as long as possible and prevent cascade effects”, the official said. It would essentially allow companies to pass on the additional costs of procuring gas on spot markets by imposing a levy on all their gas customers.