Berlin negotiates a bailout for the largest German gas company while fears grow that Moscow will turn off the gas tap | Economy

The gas crisis is raging in Germany, where dependence on the hydrocarbon that arrives through gas pipelines controlled by Moscow leaves next winter’s supply in a very vulnerable situation. The government of Social Democrat Olaf Scholz is in talks with the energy giant Uniper, the largest buyer of Russian gas in the country, to agree on a possible rescue. The news that the company has had to request financial aid from the State to mitigate the consequences of Russian gas cuts has caused it to plummet almost 15% on the Frankfurt Stock Exchange. Meanwhile, fears are growing that Moscow will completely close the tap, taking advantage of the planned technical shutdown for the Nord Stream 1 gas pipeline on July 10.

Uniper is going through a very delicate situation. The reduction in shipments from Russia -since June 16, it has barely received 40% of what was contracted- has forced it to buy in the market at much higher prices in order to meet the demand of its customers. “If the federal government allows the costs to be transferred, industrial and domestic customers will pay extremely high prices for gas,” said to Die Zeit the head of the Uniper works council, Harald Seegatz, who described the company’s situation as “dramatic”.

The Executive is willing to come to the rescue of the energy company, even entering the capital. This Thursday the foreign minister, Olaf Scholz, assured at the press conference at the end of the NATO summit in Madrid that his government will do “whatever is necessary” to help the companies affected by the gas crisis. They asked him specifically about Uniper, but he limited himself to answering that each case will be analyzed individually.

high gas prices

Figures from the Federal Statistical Office (Destatis) show that natural gas import prices this May were three times higher than in May 2021. Little by little, consumers are noticing the consequences of the Russian war in Ukraine because more and more suppliers pass on the increase in purchase prices to their customers. Uniper assures that it is not yet passing on the additional costs, which translates into “significant financial charges”, it says in a statement. The company this week released a profit warning by revising downwards its profit forecasts for 2022.

The uncertainty due to the geopolitical situation and the duration and scope of the Russian restrictions on gas supply prevent the company from predicting how prices will evolve; hence, it is discussing “possible stabilization measures” with the government, such as guarantees, an increase in the credit line of the public bank KfW or even the taking of shares.

Last week the German Minister of Economy and Climate, Robert Habeck, announced the activation of the second of the three levels of the national energy emergency plan – alert level – in response to cuts in the flow of Russian gas. Habeck warned that the rise in prices could spread to the rest of the system and spoke of the risk of triggering a “Lehmans Brothers effect”. “The entire market is in danger of collapsing,” he said. The DAX 40, the benchmark benchmark in Frankfurt, closed this Thursday with a fall of 1.69% due to the gas crisis.

Technical stop as an excuse

This Wednesday Habeck has been very concerned about the possibility that Moscow will completely close the Nord Stream 1 gas pipeline, currently the main source of the gas with which Germany is trying to fill its deposits before the fall arrives, starting in mid-2019. this month. The gas pipeline, which transports the hydrocarbon through the bed of the Baltic Sea, has a technical stop scheduled between July 11 and 21. In a debate organized by the newspaper Süddeutsche Zeitungthe Greens minister pointed to fears that the Kremlin would use maintenance work as an excuse to cut off shipments altogether.

Storage facilities are currently at 60.9% capacity, according to data from the Federal Network Agency of this Wednesday. Habeck explained in the debate that, due to the reduction of almost two thirds of the gas flow, now only half is stored daily than before, between 0.3% and 0.5% of the total capacity. As the priority is to fill the deposits, the Government is preparing to increase the burning of coal to produce electricity and save the gas that is normally used in that process.

In this race against the clock to stockpile gas, Berlin hopes to reach 90% by December. Then at least one of the four floating regasification plants with which Germany wants to directly import liquefied natural gas (LNG) by sea should be connected to the system. Meanwhile, gas consumption in the country has fallen significantly, 14.3% between January and May compared to the same period last year, according to data from the Federal Association of Energy and Water Industries (BDEW, for its acronym in German). The association assures that an explanation lies in the milder temperatures this spring, but above all because the Germans are saving gas due to the spectacular increase in prices.

“We are increasingly concerned about the energy situation in Germany,” says George Saravelos, an analyst at Deutsche Bank, in his bulletin this Thursday: “Although the immediate availability of gas in Germany is not a problem, the energy market it is beginning to assess the risk of a complete interruption of the gas supply for the winter”. The expert anticipates that if the gas cut is not resolved in the coming weeks, he is concerned “that this will lead to an extension of the energy interruption with material effects on economic growth and, of course, much higher inflation.”