Status: 07/11/2022 1:57 p.m
Germany’s largest gas trader Uniper has gotten into trouble because of the massive increase in energy prices and is calling for state aid. What are the company’s business areas?
The energy supplier Uniper is deep in a crisis and last Friday submitted an application to the federal government for stabilization measures. The company has to buy gas on the market because of the reduced Russian gas supplies. The rating agency S&P estimates that this leads to daily losses in the low to mid double-digit million range. However, the group has not yet been able to pass the costs on to its customers, which is leading to massive liquidity problems. What kind of corporation is this that has stumbled?
“Unique Performance”
Uniper was created in 2016 by splitting off from the energy supplier E.ON. While E.ON still had business with the grids, energy services and green energies that were considered promising, the fossil fuel business ended up at Uniper. E.ON’s strategy to survive in the market was to focus on the booming renewable energy sector while slimming down.
With regard to Uniper, however, critics spoke of a “rest ramp” or a “bad bank”, i.e. a liquidation institution that E.ON wanted to get rid of through the spin-off. The name Uniper points in the opposite direction: Uniper is a combination of the words “unique” and “performance”, which means something like unique performance.
Gas importer and gas storage facility
Uniper is the largest German gas importer, and the company also operates gas and coal-fired power plants and gas storage facilities. In Germany and abroad, the power plants together generate 33 gigawatts of electricity. That corresponds to about 33 nuclear power plants. The group also trades energy commodities and related products such as coal, oil, gas, freight, carbon credits and liquefied natural gas (LNG) worldwide. Recently, Uniper has been trying to establish new business areas with renewable energy and hydrogen. In early 2022, the utility started building two wind farms together with its main shareholder Fortum.
The gas storage facilities in Germany, Austria and Great Britain have a capacity of 7.8 billion cubic meters, 5.9 billion of which are in Germany. For comparison: the annual consumption of natural gas in Germany has averaged around 100 billion cubic meters per year for years. The gas portfolio comprised around 400 terawatt hours. According to the company, based on the average consumption in Germany, this is mathematically enough to heat 22 million households.
More than 1000 customers
The ailing utility has around 11,500 employees in 40 countries, around 5,000 of whom work in Germany. The main markets are Germany, Great Britain, Sweden and, until the war in Ukraine, Russia. The corporate headquarters are in Düsseldorf. According to Uniper, it has more than 1,000 customers, including numerous municipal utilities, other utilities and larger industrial companies.
Last year, the group made sales of around 164 billion euros, with a loss of 4.1 billion euros. In the first quarter, which ended at the end of March 2022, the figures were also worrying: the net loss was around three billion euros.
Depreciation in the billions
A major reason for the high loss in the first quarter was depreciation of around two billion euros. On the one hand, they are related to the failure of the Nord Stream 2 Baltic Sea pipeline. Uniper is one of the largest customers of the Russian gas group Gazprom and one of five western financial partners in the Baltic Sea gas pipeline, which is not currently operational.
Further depreciation was due to the Russian power plant subsidiary Unipro. Uniper holds 83.73 percent of Unipro. With more than 4,000 employees, Unipro operates five power plants in Russia and most recently generated around a fifth of Uniper’s operating profit. How serious the Uniper crisis is can currently be seen from the share price. In the past six months, the stock market value has fallen by around 75 percent.
What is Fortum up to?
Uniper’s main owner does not like the current development. The Finnish utility Fortum holds a stake of around 78 percent in the struggling utility. Fortum is the third largest energy company in Scandinavia and is 53 percent owned by the Finnish state. The parent company now reports on its own group results with Uniper as the fifth business area.
Fortum wants to hand over Uniper’s ailing German gas business to the federal government. “From our point of view, it must now be a matter of merging the endangered and systemically important areas of Uniper and securing them permanently,” explained Fortum boss Markus Rauramo. “We have to assume that the problems with obtaining gas will continue in the medium term and that prices will remain high or continue to rise.” “Therefore, the system-critical German parts of the company should come under the control of the state that has the necessary creditworthiness.”
No new bailouts
Unlike the federal government, the Finnish government gives no hope that Uniper’s majority shareholder Fortum will continue to participate in the rescue measures for the struggling German energy company.
As Fortum’s majority shareholder, the Finnish government does not see it as possible for the group to invest more in Uniper, said Europe Minister Tytti Tuppurainen, who also oversees Finnish state holdings. Fortum has already provided its German subsidiary with around four billion euros in cash and the same amount as guarantees.