'Europe's Largest Energy Company' Uniper Discusses 12 Trillion KRW Bailout Plan

As Russian Gas Supplies Shut Off... Gas Purchase Costs Surge
Profitability Deteriorates as Rising Prices Prevent Passing Gas Fees to Consumers

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Bloomberg reported on the 4th (local time) that Uniper SE, one of Europe's largest energy companies based in Germany, is discussing a bailout package worth 9 billion euros (approximately 12.1853 trillion KRW) with the government.

The news agency cited two insiders familiar with the situation, stating that a potential bailout package, including government loans, equity acquisition, and gas price hikes, is under consideration.

Germany, which built its economic model based on cheap Russian gas, is struggling with soaring fuel prices after Western sanctions due to the Ukraine war have stopped gas imports from Russia. Robert Habeck, Germany's Minister for Economic Affairs, warned that the gas crisis could play a role similar to Lehman Brothers during the financial crisis, potentially triggering a market collapse.

Uniper, a purchaser of Russian gas, has been receiving only 40% of its ordered gas since mid-last month following Western economic sanctions, and is buying the shortfall on the spot market at prices much higher than usual. However, due to government policies responding to inflation, the company cannot pass these increased purchase costs onto gas fees, severely worsening its profitability. Uniper estimates it is incurring costs of 30 million euros per day.

According to officials, the government is preparing legislation to allow state governments to acquire shares in Uniper and is also considering measures to pass some of the gas price increases onto consumers. The related bill is expected to be approved by the cabinet on the 5th and then passed by the upper and lower houses on the 8th.

Earlier that weekend, German Chancellor Olaf Scholz hinted that bailout tools created during the pandemic could be used to rescue Lufthansa amid the current crisis. Germany provided loans to the airline, acquired a 20% stake, and has prohibited dividends and management bonuses.