For years, the electricity company Uniper made a fortune with cheap Russian gas. But the Ukraine war changed everything – the company is on the verge of collapse. And the traffic light government wants to help quickly. Why is Uniper so important?

Klaus-Dieter Maubach could not fully understand the question. In an interview on January 4, the head of the energy company Uniper was asked whether Russia was up to something because the state-owned company Gazprom hardly ever fills its gas storage facilities in Germany. “One thing is clear: Russia has always fulfilled its delivery obligations for more than 50 years,” Maubach replied in the “Rheinische Post” at the time. The country is “the most important gas supplier for Europe and is also becoming increasingly important because local production is declining.”

However, a potential development is risky, said Maubach: “If the Ukraine-Russia conflict intensifies.” However, the Uniper boss was not primarily concerned about Russia, but about the USA. Maubach warned that they could impose sanctions on the Nord Stream 2 gas pipeline.

Exactly 58 days later, the Russian army invaded Ukraine, and four and a half months later Uniper is now in existential difficulties. On Friday, the company officially applied for state aid from the federal government. Uniper is currently making a daily minus in the mid double-digit million range, Maubach told journalists in Düsseldorf on Friday. This is “a situation that is no longer sustainable for us”.

The hitherto lucrative business with cheap Russian gas is now falling on the group’s feet. In 2016, energy giant Eon divested its fossil power generation division and bundled it into a new, independent company: Uniper. Analysts described the unloved stepchild as “Resterampe” and as “Bad Bank” split off from Eon.

But the new player in the energy market was quickly profitable – and continued to do business with Russia. Uniper posted a profit of EUR 1.36 billion (before taxes) in its very first financial year, 2016; in the past year, 2021, the plus was EUR 1.19 billion. Balance sheet catastrophes such as the Nord Stream 2 pipeline, which was stopped in the last few meters, can also be overcome: the group has wasted almost one billion euros there.

But since hardly any gas was flowing through the predecessor pipeline Nord Stream 1, Uniper was on the brink of collapse. In mid-June, the Russian state-owned company Gazprom reduced its deliveries, and since then, according to the company, Uniper has only received 40 percent of the agreed quantity. Gazprom justified the throttling with a missing turbine that had been serviced in Canada and is now stuck there because of Western sanctions. The federal government is putting pressure on Canada on the issue, but hardly anyone in Berlin wants to believe the Russian story.

Either way: Russia, the reliable supplier according to CEO Maubach, suddenly breaks the contract – and Uniper has to bleed for it. The Düsseldorf group now has to buy up the missing gas on the stock exchanges in the short term. However, the prices there are now going crazy. A megawatt hour of gas cost EUR 166.60 on the so-called spot market on Thursday, compared to EUR 72.80 at the beginning of the year.

However, Uniper is not allowed to pass on the increased purchasing costs to its customers because the sales price is contractually fixed. The so-called “margins”, a kind of deposit that has to be deposited when purchasing, are an additional burden for the group – the amount of the deposit is based on the purchase price. Uniper gets the “margins” back, but in the short term the money is simply not there.

If Uniper has a problem, then Germany also has a problem. Because the group’s customers include hundreds of municipal utilities in the Federal Republic. According to the company, Uniper imports enough gas every year to heat 22 million households in Germany. The concern: If Uniper goes under, many municipal utilities will no longer have gas – and may collapse next. Kerstin Andrae, Managing Director of the Federal Association of Energy and Water Industries (BDEW), warns of a “domino effect in the energy market”. “If Uniper falls, the entire German supply system will fall apart,” says a municipal utility representative.

How much time the company has left is difficult to say. “We are not on the verge of bankruptcy,” said Maubach on Friday. The group has been able to build up reserves in recent years, and according to its own statements, Uniper has not yet touched an existing credit line from the state bank KfW of over two billion euros. Nevertheless, Maubach hopes to “receive the necessary assistance in the short term”. For him, short-term means within a few weeks.

The traffic light government has already promised quick help. “We will not allow a systemically important company to go bankrupt and the global energy market to experience turbulence as a result,” said Economics Minister Robert Habeck (Greens) on Friday. “In any case, we have made the political decision that we will help Uniper,” affirmed Chancellor Olaf Scholz (SPD).

What form this help will take is still unclear. The Finnish energy group Fortum, a major shareholder of Uniper, spoke in a press release of a “restructuring of Uniper with the aim of establishing a security of supply company owned by the federal government”. In other words: the federal government is getting on board with Uniper, filling seats on the supervisory board and contributing billions in the state’s equity. The traffic light coalition has just created the legal basis for this with an amendment to the so-called Energy Security Act, which passed the Bundestag on Thursday.

This model is known from Lufthansa, where the federal government got involved with a 20 percent stake at the beginning of the corona pandemic. It was worth it for the taxpayers: According to estimates by Lufthansa boss Carsten Spohr, the sale of the shares should bring a profit of around one billion euros by 2023, plus an additional 92 million euros from the interest on the loans.

However, circles in the Ministry of Economic Affairs say that other options for help are being debated than the Lufthansa method. A smaller participation is also conceivable, combined with the possibility that Uniper can pass on the price increases to customers when shopping. This option is also anchored in the new version of the Energy Security Act, the Federal Network Agency only has to identify a deficiency. But then the problem of price explosions would only have shifted, from Uniper to public utilities and private households. Many people could no longer pay their bills.

It is therefore more likely that the price increases will be passed on to all gas customers in Germany – not just to those who are unlucky enough to have their municipal utilities supplied by Uniper. That would minimize the maximum price jumps for individual households because they would then be borne by the general public. However, then everyone would have to pay. The amended Energy Security Act gives the federal government far-reaching opportunities to intervene in the market in emergencies, said Habeck.

The days around July 21st are considered the next fateful date. Around then, the routine maintenance work on Nord Stream 1, which is carried out every year, should end, so from July 11th gas will no longer flow for the time being. The big concern: that once the work is finished, no more gas will come from Russia.

In any case, Uniper boss Maubach was personally disappointed with the Russian trading partner. Business relationships have existed for more than 50 years, the German side has always paid on time, the Russian partner has always delivered gas, he said on Friday. The fact that Gazprom has now broken the contract with the reduced delivery quantities is “one of the great disappointments”.