Germany to bail out its largest importer of Russian gas

The German government has agreed to bail out the country’s biggest importer of Russian natural gas, in a 15 billion euro ($15.3 billion) deal aimed at keeping the struggling energy supplier afloat.

Germany will be taking a 30 percent equity stake in Uniper SE, a subsidiary of the Finnish corporation Fortum, according to a Friday announcement from Fortum.

The country has offered Uniper up to 7.7 billion euros ($7.9 billion) in equity and is expanding its credit line by 7 billion euros ($7.2 billion) — from an existing 2 billion euros ($2 billion) to 9 billion euros ($9.2 billion), the announcement said.

The deal was welcome news to a company that has been experiencing significant losses following Russia’s recent reductions in gas deliveries. Uniper had become what CNBC described as “the first major casualty of Russia’s natural gas squeeze.”

After Russian state-controlled energy giant Gazprom had already reduced exports through the Nord Stream 1 pipeline to 40 percent capacity last month, the company shuttered the conduit entirely for 10 days of maintenance on July 11.

Gas flow through Nord Stream 1 resumed on Thursday, but is flowing at only 40 percent capacity. 

“It was necessary to stabilize Uniper now,” German Chancellor Olaf Scholz said at a Friday press conference, according to The Associated Press.

“About 60 percent of gas imports in Germany are ultimately organized in a certain way via this distributor,” Scholz continued. “That is a very, very big chunk, so it’s clear you can imagine that there would have been practically no company at the end of these supply chain that wouldn’t be affected.”

The German government indicated that it was ready to provide further support if Uniper’s operating losses due to ongoing gas cuts end up exceeding an agreed total amount of 7 billion euros ($7.2 billion), according the Fortum announcement. 

Per the agreement, Fortum’s approximately 80 percent stake in Uniper will be diluted to 56 percent on the initial equity injection, according to Fortum, whose largest shareholder is the Finnish government.

Tytti Tuppurainen, Finland’s minister for European affairs and ownership steering, described the deal as “the best possible compromise under these circumstances and within this timeframe.”

Fortum’s president and CEO, Markus Rauramo, likewise praised the parties involved for finding a solution that “met the interest of all parties involved.”

“We are living through an unprecedented energy crisis that requires robust measures,” Rauramo said in a statement.

“We were driven by urgency and the need to protect Europe’s security of supply in a time of war,” he added.