Germany’s Largest Power Company, Uniper, Days to Default

German energy giant and distressed nat gas utility Uniper, which is among the companies most exposed to Russian natural gas, has started using gas it was storing for the winter after Russia cut deliveries to Europe, increasing pressure on Berlin as the German energy giant needs to be rescued “in a few days.”

The country’s top buyer of Russian gas started withdrawing fuel from storage sites to supply its customers, the company said in a statement to Bloomberg on Friday. The drawdowns, which began on Monday, will also help the company to save some cash as it has been forced to pay up for gas in the spot market. Meanwhile, flows through the Nord Stream 1 pipeline remain shut for maintenance.

To put this into perspective, Uniper is Germany’s largest gas importer and successor to Eon Ruhrgas, which has maintained supply relationships with Russia for decades. Uniper itself supplies redistributors such as public utilities and suppliers and industry. In good times, the business comprised around 400 terawatt hours – according to the company, it was enough to heat 22 million households.

More than half of Germany.

Making Uniper “ground zero” for the Russian gas squeeze. And with the company substantially owned by Finland, a potential “two-fer”.

CDS up more than 10x since January


Germany’s Uniper SE is just “days” away from insolvency, deputy chairman of Uniper’s supervisory board, Harold Seegatz, told Bloomberg on Friday.

Uniper is Germany’s largest purchaser of Russian natural gas, securing contracts with Gazprom. But as Gazprom cut flows of natural gas to Germany and Russia’s Nord Stream 1 pipeline undergoes maintenance, Uniper’s purchases of gas on the spot market have increased—a costlier scenario than its arrangement with Gazprom.

The high costs are creating an untenable situation for Uniper, and it is taken to withdrawing gas from storage—gas that was destined to help Germany make it through the coming winter as the country tries to wean itself off of Russian natural gas. Withdrawing gas from storage helps Uniper save on natural gas purchases, but this is merely a game of kicking the can into an inevitable insolvency oblivion.

“We are currently reducing our own gas volumes in our storage facilities in order to supply our customers with gas and to secure Uniper’s liquidity,” Uniper said, adding that it was clear “that Uniper cannot wait weeks, but needs help in a few days.”

Uniper is already negotiating with the German government a possible bailout that could give Germany a stake in the utility.

Uniper’s CEO Klaus-Dieter Maubach warned last Friday that the utility was unable to continue to refill storage ahead of winter, and could ultimately be forced to raise prices and even reduce supply.

Germany has a plan to fill its gas storage by 90% ahead of the winter season, with a deadline to achieve this set for November. But early withdrawals during summer—a relatively tame demand season for natural gas—this plan is now in serious jeopardy, and Germany could stare down winter heating season with precious little inventory.


Recall I said “two-fer”.

Uniper is 75% owned by Fortum Oyj, a Finnish state-owned energy company. Also recall Finland applied for membership in NATO.

Finally, recall Russia has said a NATO country abutting Russia is a “red line” — an “existential threat.”

Anyone surprised that Fortum’s 5-year CDS spread to 335bp on June 30 close?

Little prospect German energy giant Uniper SE gets any support from Finland — that’s the US, err, Germany’s problem.

Germany will likely take a stake in Uniper Germany is preparing for the possibility of taking a stake in Uniper.

S&P Global Ratings had assessed that western sanctions on Russia could cut earnings for Fortum as they struggle to transfer profits from units in Russia, and EBITDA could drop -20% if Fortum cannot transfer earnings outside Russia.

BTW, 2 heads of state have fallen since the Russian invasion of Ukraine. That leaves 2 heads remaining — Macron whose power was slashed in the recent election, and “ground zero” for the EU project – Olaf “I know nothing” Scholz.

A recent Bank of America research note outlined how an “ugly” scenario of supply disruptions could push NatGas over 200 euros this year and in 2023.

The energy situation in Germany is worsening, and more insight into Russia’s pipeline flows will be available after Thursday, when Nord Stream is expected to return to service. Suppose Gazprom throttles flows and or even halts after the scheduled maintenance period is over. In that case, it will result in a situation that would spark economic doom for Germany and the continent this winter. 

Even though Muller predicted Germany would be independent of Russian NatGas by the summer of 2024, Europe faces two years of tight supplies that will continue to feed into energy inflation and crush households and businesses. 

Finally, Deutsche Bank senior economist Eric Heymann told clients Friday that German households will be chopping a lot of wood this winter and using fireplaces for heating as a cheap alternative to expensive NatGas.

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