BERLIN: Germany has reached a deal to nationalize troubled gas giant Uniper, the government said Wednesday, as the energy sector reels from the fallout of Russia's war in Ukraine. The deal will leave Germany with a 99 percent stake in the debt-laden gas company, the economy ministry said in a statement. "Uniper is a central pillar of German energy supplies," the ministry said. Under the agreement, Berlin will inject eight billion euros ($8 billion) in cash into Uniper and buy 500 million euros of shares from its majority shareholder, the Finnish state-owned energy company Fortum.

Fortum will also be repaid for an eight-billion-euro loan it gave Uniper. "The situation has become much more dramatic" for Uniper since the shutdown in late August of the Nord Stream 1 gas pipeline from Russia to Germany, Economy Minister Robert Habeck told a press conference. One of the biggest importers of Russian gas, Uniper has been squeezed as Moscow has reduced supplies to the continent in the wake of its invasion of Ukraine in February.

Gas crisis

Missing deliveries have had to be replaced with expensive supplies from the open market, where prices for gas have skyrocketed. The German state had already agreed in July to take a 30 percent stake in Uniper as part of an initial bailout agreement.

But Uniper announced earlier this month that the two sides were exploring a possible nationalization as the energy crisis showed no signs of abating. Fortum provided an eight-billion-euro loan to Uniper in January as the price of gas had already begun to climb amid tensions with Moscow before the invasion of Ukraine. The Finnish company held a near-80-percent stake in Uniper, which would have been cut to around 56 percent under the July bailout plan.

Fortum said Uniper has accumulated close to 8.5 billion euros in gas-related losses "and cannot continue to fulfill its role as a critical provider of security of supply as a privately-owned company". "New measures to resolve the situation were needed, as both Uniper and Fortum were exposed to significant risks," said Fortum chief executive Markus Rauramo at a press conference.

'No longer viable'

"The role of gas in Europe has fundamentally changed since Russia attacked Ukraine, and so has the outlook for a gas-heavy portfolio. As a result, the business case for an integrated group is no longer viable," Rauramo also said in a separate statement. Fortum had taken an "inevitable decision in exceptionally uncertain circumstances", said Tytti Tuppurainen, the Finnish minister responsible for state companies.

"The situation is a result of Russia's attack on Ukraine. Putin is using energy as a weapon," Tuppurainen said in a statement. Russia's war in Ukraine has triggered an earthquake on European energy markets, cranked up the pressure on suppliers and raised fears of possible shortages over the winter.

Germany has found itself particularly exposed due to its previous heavy reliance on Russian energy imports. Since the outbreak of the war, Berlin has worked to wean itself off Russian gas and secure alternative supplies.

Officials have seized key pieces of energy infrastructure which were in the hands of Russian energy companies and mandated gas stores to be filled. Earlier in September, the German government entered into discussions with another gas supplier, VNG, over a possible bailout package. - AFP