German Takeover Talks Expand As Energy Crisis Contagion Spreads Across More Distressed NatGas Utilities

Days after we reported, the German government is in talks to take over troubled natural gas importer Uniper SE. Takeover discussions are allegedly expanding to two other large NatGas importers in a move by the government to prevent a ‘Lehman-style’ collapse in Europe’s largest economy.

Uniper, VNG AG, and Securing Energy for Europe GmbH (formerly Gazprom Germania GmbH) are the three NatGas importers the German government is in advanced takeover talks, according to Bloomberg, citing people familiar with the matter. 

German officials are mulling over purchasing Fortum Oyj’s controlling stake in Uniper. If that occurs, Uniper would be injected with billions of euros through a capital increase, according to sources.

State ownership of Uniper would dilute the stakes of Uniper’s shareholders. Equity in the distressed utility plunged for a fourth day, down as much as 16% to a record low after the Bloomberg report. 

The people familiar with the talks said nothing concrete had been agreed upon, but a resolution could be reached in the coming days. 

Uniper was doomed when Russian energy giant Gazprom began decreasing NatGas flows on Nord Stream 1 into Europe, forcing it to purchase alternative supplies at record high prices. This caused the utility to achieve losses greater than 100 million euros per day. 

Meanwhile, any deal that Germany takes control of Uniper would mean Finnish state-owned Fortum would want its money back:

“It is very clear that Finland will not agree that Germany could nationalize Uniper without compensation,” Finland’s ownership steering minister Tytti Tuppurainen. “We also maintain that the 8 billion euro financing provided by Fortum to Uniper will still be available to us.”

Uniper, VNG, and SEFE are top NatGas importers critical to the German economy. The move to possibly nationalize shows Berlin’s willingness to provide further support to ensure that none of these utilities fail in the cold season, which could spark a financial crisis that might ripple through Europe. 

When asked about takeover talks of the three companies, German Economy Minister Robert Habeck said: 

“Things are complex, we are working it through very carefully.”

Here’s what Wall Street analysts are saying about the alleged takeover talks, focusing primarily on Uniper (list provided via Bloomberg):

RBC analyst John Musk struggles to see the benefit for Uniper, sees Fortum benefiting but adds management at the Finnish parent company may need to be held to account for the “disastrous nature of the investment”

• A coordinated government response would nationalize German energy imports and allow control at a time of crisis, he adds
• Expects the German government to press on with plans

Jens Zimmermann, Credit Suisse Wealth Management equity analyst, says Uniper shares are plunging “probably because nobody knows at what price it will be nationalized. Nationalization does not mean it has to go to zero,” he says, referring to EDF as a past example

• He adds Germany’s plans are consistent with its assessment from the start that the companies were not just “too big to fail” but rather “too important to fail”

Ipek Ozkardeskaya, senior analyst at Swissquote, says “it makes sense for the government to take the reins” given how much money it takes to keep them alive 

• She also questions whether companies like Uniper could ever pay dividends or reimburse the government for their debt

EU benchmark NatGas futures are trading around 206 euros per megawatt-hour. This week, trading has been on a rollercoaster as traders digest various EU plans to ease the energy crisis. For now, prices are flat on the week.