After around two weeks of negotiations, it is now clear: the federal government is helping Uniper with a rescue package worth billions. Overall, the German state is supporting the struggling energy company with 15 billion euros.
In addition to getting into the Düsseldorf company, this involves a so-called mandatory convertible bond and additional loans from the state development bank KfW. What do the individual measures mean and what is their purpose?
The state takes over 30 percent of the shares
The first point in the stabilization package: the federal government takes over about 30 percent of the shares in the gas importer. The government, Uniper and majority shareholder Fortum agreed to take over the shares at the issue price of EUR 1.70 per share, excluding shareholders' subscription rights.
For Uniper, this means a capital increase of EUR 267 million. Fortum emphasized that the group would remain the majority shareholder even after the federal government got involved. Fortum's stake in Uniper, currently 80 percent, will be diluted to 56 percent with the first capital injection. "Fortum remains the majority shareholder and will continue to consolidate Uniper as a subsidiary," emphasized the group, which is majority-controlled by the Finnish state.
At the time of the press conference at which Chancellor Scholz announced the stabilization measures, Uniper's share price was around ten euros. The shareholders reacted with drastic sales: the papers fell by more than percent in the afternoon to less than eight euros. In the morning, the course had increased by up to 11.4 percent. "Of course, if the state steps in, that's not carte blanche for shareholders, along the lines of: Well, now we're going to make huge profits at the expense of taxpayers," explained Stefan Riss, capital market strategist at Acatis, the ARD stock exchange studio. On the contrary: the shareholders are the last to stand in line and still get money. "In this respect, the nervousness about Uniper's course is of course correct."
Most of the money goes into hybrid capital
Secondly, because the almost 267 million euros from the capital increase are far from sufficient, a so-called mandatory convertible instrument of up to 7.7 billion euros should be issued to the federal government, it said. These papers are interest-bearing papers that must be converted into shares by the end of the term at the latest. They are therefore considered by rating agencies to be similar to equity and ensure better creditworthiness. The credit rating is crucial for the future of the company. A downgrade of Uniper's creditworthiness by the major rating agencies would make it more expensive to raise new funds on the capital market.
The bonds are issued in tranches as required by Uniper's liquidity needs. When converting into shares, the state finally gets a discount of between 25 and up to 50 percent on the stock market price per share. According to Chancellor Scholz, the billion-euro rescue can therefore be a success story for the taxpayer. He referred to the discounted purchase of Uniper shares and the example of the Lufthansa rescue.
The majority shareholder Fortum is given the option to acquire parts of the mandatory convertible instrument from the federal government at any time in exchange for the right to repayment. Fortum had granted Uniper a loan of four billion euros, which has already been paid out.
State does not want to become an entrepreneur
Further loans from the state-owned KfW bank are to bridge the gap until Uniper has collected enough fresh capital via the mandatory convertible bond. Most recently, the previously granted credit lines had already been completely exhausted. Now the existing framework is to be increased from two billion to nine billion euros and the purpose of use expanded.
The agreement also stipulates that the federal government is ready to provide further support if losses due to replacement purchases that cannot be compensated for by operating profits from other business areas exceed an amount of seven billion euros. The stabilization measures are subject, among other things, to the approval of the EU Commission under state aid law and the approval of the Uniper shareholders. The group will convene an extraordinary general meeting.
In addition, dividend payments will be suspended as long as the stabilization measures take effect. The remuneration of the Management Board will also be limited. The federal government will also have seats on the supervisory board. Despite the entry, Scholz does not want to get into the operative business. "We don't want to become entrepreneurs as a state," he says. But care will be taken to ensure that the money is used wisely. He also promised that the federal government should not be involved permanently.
Price increases are coming to consumers
The federal government also explained to Uniper during the negotiations that from October 1, 2022, a general mechanism for passing on 90 percent of the replacement procurement costs for all importers as a result of Russian gas cuts should be introduced, the group announced. This means that the gas suppliers can pass on a large part of the price difference that results from the partial absence of cheaper Russian gas and the expensive replacement deliveries through purchase on the international gas market. This should give suppliers some breathing room financially, while at the same time continuing to give them an incentive to shop as cheaply as possible on the world market.
The measure will entail additional costs for consumers in the form of a levy – Scholz quoted a rate of two cents per kilowatt hour. Accordingly, the levy burdens a family of four with around 200 to 300 euros per year. At the same time, however, the chancellor promised citizens support in dealing with the gas price increases.
It should be prevented that someone is faced with an unsolvable situation, he said. In any case, the citizens' allowance anchored in the coalition agreement and a comprehensive reform of tenancy law, which also includes a heating cost component, are planned as concrete relief steps at the beginning of the coming year. There should also be relief for students. Details will be discussed as part of the concerted action, which will be held again in mid-September.
Scholz promises help for other providers
Meanwhile, Scholz does not see the billion-euro rescue of the gas importer Uniper as a blueprint for the rescue of other energy suppliers. "Each case is an individual case," said the Chancellor. However, the federal government will do everything to stabilize the industry despite the sharp rise in purchase prices. To do this, you can also use the instrument of equity participation, as with Uniper.
The Chancellor emphasized: "You'll never walk alone" – nobody will be left alone. According to a report in the "Handelsblatt", the state could also help the gas trader VNG from Leipzig financially. For the Verbundnetz Gas, a subsidiary of the energy group EnBW, there is a sum of up to two billion euros in the room. Combined with a loan that has already been applied for from the KfW development bank, the total amount of possible aid would add up to three billion euros.
The coal-fired power plant operator Leag from Lusatia had to be supported with a KfW loan of 5.5 billion euros in March due to the turbulence on the energy market. The energy group Steag from Essen, which is one of the largest power producers in Germany, also secured a KfW credit line of 400 million euros at the beginning of the year. The company operates several large power plants.