Russian supply failures are exacerbating the economic situation of German gas importers. After Uniper, the energy supplier VNG has now also applied for state aid from the Federal Ministry of Economics. The Leipzig-based company announced that Germany’s third-largest gas importer needed the stabilization aid in order to be able to continue its business and to comply with existing supply contracts.
Verbundnetz Gas AG (VNG) is almost three quarters owned by the Baden-Württemberg energy supplier EnBW, the remaining 25 percent belong to local authorities, mostly in eastern Germany. VNG supplies around 400 municipal utilities and industrial companies with gas, primarily in Saxony and other parts of eastern Germany, and is considered “systemically important”. VNG has existing supply contracts with its customers. In order to meet these, VNG Gas has to make expensive purchases on the energy markets due to the loss of supplies from Russia.
VNG has already applied for help from the gas levy, which is to be levied from October 1st. However, according to the company, this is not enough. Therefore, one is now asking for further state aid in order to “avert further damage from VNG and to ensure the overall ability of the VNG Group to act,” as the company announced on Friday. The majority shareholder EnBW had already supported VNG with loans in the hundreds of millions. But the situation is getting worse and worse. Gas prices have been rising since August due to stopped and reduced delivery volumes, resulting in further losses at VNG.
The people of Leipzig have two contracts that are affected by Russian delivery failures. The direct contract with Gazprom Export is currently and foreseeably no longer served, it expires at the end of the year anyway. From this alone, VNG expects a loss of one billion euros for 2022 – despite the gas levy. “As a direct importer, VNG would be able to bear this on its own and together with further stabilization measures by its shareholders”.
However, VNG obtains almost twice as much gas as from the Russian gas giant Gazprom from a German upstream supplier. VNG does not say who that is. The supplier has not consistently fulfilled the contract since May. Contrary to expectations, VNG had to bear the costs in August that are incurred because Leipziger has to buy gas at high prices on the energy markets. In recent weeks, VNG has tried to reach an agreement with the upstream supplier with the federal government. “However, this does not appear to be achievable in the short term and for VNG in an economically viable manner. The foreseeable financial burden would not be bearable for VNG,” says the company. It is not yet possible to reliably assess the exact effects that the requested state aid and the unfulfilled delivery obligations will have on the financial position of the parent company EnBW. When it came to the aid from the gas levy, EnBW was criticized because the group made high profits.
Like VNG at the end of June, Uniper, as the largest German gas importer, had already called for state aid. Uniper even recorded a net loss of more than 12.4 billion euros in the first half of the year, half of which was due to the Russian supply disruptions. Uniper is Gazprom’s largest foreign customer. Like the Leipzig VNG Group, the Düsseldorf-based company is both an importer and a gas storage operator. Uniper was formed in 2016 when the electricity producer spun off from the energy group Eon. Since March 2020, Uniper has been majority owned by the Finnish energy group Fortum. However, Uniper is currently making negative headlines as a “platinum sponsor” of the “Gastech” trade fair in Milan. Uniper subsidized the trade fair and a gala dinner last Sunday evening with around 175,000 euros.
Uniper is deeply in debt to the German state. Uniper has already exhausted grants of nine billion euros and applied for further loans from the state at the end of August. Uniper will now receive an additional four billion, which the state development bank KfW approved on Wednesday.
The Kreditanstalt für Wiederaufbau also supports the gas company Gazprom Germania with several billion euros to prevent its bankruptcy. Since the Russian invasion of Ukraine and especially since Russia stopped delivering gas through the Nord Stream 1 pipeline, the German government has been trying to ensure security of supply. The Federal Ministry of Economics is not planning to shut down two of the three remaining nuclear power plants for the winter. Robert Habeck’s ministry was criticized for this. His authority is now still in focus when it comes to processing VNG’s application for stabilization aid quickly.