Uniper in trouble: fear of “Lehman moment” on the gas market

The largest German gas importer Uniper is negotiating with the government about state aid. Experts warn: If the company slides into bankruptcy, the consequences for the energy industry would be devastating.

It only took two weeks for the first energy company in Germany to get into trouble. Two weeks after Russia cut its gas supplies significantly. Uniper, the country’s largest gas importer, is particularly hard hit. Because the group is highly dependent on Russian gas.

“The problem that is now arising is that gas imports have become more expensive,” explains Felix Huefner, chief economist at UBS Bank. “The suppliers now have to buy this missing gas on the market – at very, very high prices. And there are costs.” The gas price on the stock exchange has doubled since the beginning of the year alone.

Take care of the public works

However, utilities like Uniper cannot pass these higher prices directly on to customers. The reason for this is a legal regulation intended to protect consumers. Uniper is now talking about “significant financial burdens” and has dropped its earnings forecast for the current year. Investors on the stock exchange reacted clearly to this: yesterday the share price fell by more than 20 percent at times. Today, the Uniper share can recover at least a little bit.

There is great uncertainty that municipal suppliers would also be in trouble if Uniper went bankrupt, says Jens Südekum, an economist at the University of Düsseldorf. “Then that would of course be a kind of Lehman moment for the German gas market. Then the question would immediately arise: Where should many municipal utilities get their gas from? Then we would really have a cascade effect,” says Südekum. “It is therefore essential that the gas supply is secured, and that will not be possible without Uniper.”

Uniper hopes for state aid

Uniper is now hoping for help from the state. Guarantees and additional loans from the state development bank KfW, even a direct participation of the federal government in Uniper are discussed in talks with the federal government. Time is of the essence. Because on July 11 there will be maintenance work on the Baltic Sea pipeline Nord Stream 1. Experts fear that Russia will not be able to turn on the gas tap again afterwards.

But what about other energy suppliers? RWE, for example, says that it has sufficient liquidity and is not talking to the federal government about possible state aid. “There are certainly some who acted a bit better and with more foresight and kept their Russian share of gas purchases low from the start,” says Südekum. “But structurally it is a problem that affects the entire German gas supply.”

It is a problem for which, in the end, not the German state alone, but above all the consumers will have to pay for it. It seems only a matter of time before suppliers like Uniper are allowed to pass on the high costs directly to municipal companies, which in turn can pass them on to end customers. It is still questionable how politicians will legally justify such a step – and how high the price increases will ultimately be for consumers.