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Germany Agrees Terms for Uniper Bailout; Will Take c. 30% Stake

By Geoffrey Smith

Investing.com -- Uniper (ETR:UN01) said on Friday it has agreed terms of a multibillion bailout that will see the German federal government take a stake of around 30% in the energy supplier.

The development is the second big government intervention this week in Europe's energy sector after the French government announced it would buy out private shareholders of Electricite de France SA (EPA:EDF) to ensure that it can build the next generation of nuclear reactors and guarantee France's long-term energy supply. The issue of supply security has trumped all others since Russia's invasion of Ukraine and its subsequent cut in deliveries of natural gas to its European customers.

Under the terms of the bailout, Berlin will inject 267 million euros ($272 million) in pure equity at a price of 1.70 euros a share, a discount of between 25% and 50% to its recent trading range. Uniper stock fell 20% in Frankfurt on the news to hit a record low of 8.48 before paring losses slightly.

The company will also issue up to 7.7 billion euros in mandatory convertible bonds, which will also be taken by the government. Fortum (HE:FORTUM), the Finnish energy concern that is Uniper's majority shareholder, will have the option to buy some of those convertible bonds from the government in due course.

Uniper's cash resources will also be bolstered by increasing a credit line with state development bank Kreditanstalt fuer Wiederaufbau from 2 billion euros to 9 billion.

In its statement, Uniper also said that the government intends to address the crucial issue of gas pricing, which had rapidly driven the company to the verge of bankruptcy after Russian gas monopoly cut supplies by 60% in June. That had forced it to replace the missing contracted supplies on the spot markets at a price around 10 times higher than the levels before the current crisis over Ukraine erupted in late 2021.

From October 1st, the government will allow importers to pass on 90% of the increase in their own gas sourcing costs to their own customers, a measure that will spread the pain of higher prices more broadly across the base of Germany's industrial consumers and local energy suppliers. That in turn will feed through into consumer prices. At a press conference in Berlin, Chancellor Olaf Scholz indicated that this would be offset in the new year with a new aid package.

The package, under which Uniper will also withdraw its suit against the Netherlands over restrictions to the operations of its coal-fired power plants there, will need the approval EU antitrust authorities and the confirmation of Uniper's investment grade credit rating by international rating companies.

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