Germany has agreed to buy a stake in Uniper and also provide multi-billion euro in various instruments.
Uniper said the agreement covered the German government and its 80% owner Finland’s Fortum.
Germany will acquire a 30% stake in Uniper through the payment of 267 million euros ($271mn).
It will also provide a convertible instrument worth up to 7.7bn euros ($7.8bn) and KfW will increase its credit facility to Uniper to 9bn euros ($9.2bn). KfW had previously agreed to a 2bn euro ($2bn) credit line.
In a sign of improved outlook for Uniper, which has been squeezed as a result of gas price problems linked to Russia’s invasion of Ukraine, Germany plans to raise prices. The statement said gas importers would be able to pass on costs of higher gas as of October 1.
The German move will cover 90% of losses stemming from higher costs for alternative gas supplies.
Should profits from other of Uniper’s units not be able to offset the losses, “the German government stands ready for further support”.
Fortum also has an option to participate in the 7.7bn convertible, which can acquire Uniper stock at a discount of 25-50%. The Finnish company provided a 4bn euro ($4.1bn) to Uniper in the past and the deal allows for this to be converted into Uniper stock.
The KfW loan ranks as senior to Fortum’s.
The deal is subject to Uniper withdrawing a lawsuit against the Netherlands in connection with the Energy Charter Treaty (ECT) and approval from the European Union. Uniper filed a case against the Netherlands in protest at the early phase out of coal power plans.
It also requires the confirmation of an investment grade rating from S&P Global Ratings. The agency placed Uniper’s BBB- rating on CreditWatch Negative in July.
Uniper will hold an EGM to seek shareholder approval for the measures.
In June, Russian supplies of gas to Uniper fell. The company has had to seek alternative sources, which come at higher prices. Uniper has around 370 TWh of long-term gas supply contracts, of which Russia accounts for around 200 TWh.
Fortum described Uniper as “critical for Germany’s energy supply”. The deal announced today would dilute Fortum’s stake to 56% on the initial equity injection.
Fortum’s President and CEO Markus Rauramo welcomed the deal. “For us it is also important that the solution now reached doesn’t require additional capital from Fortum beyond the already provided 8 billion euros [$8.14bn] of financial support.”
Uniper accounts for around 50% of Fortum’s EBITDA, according to S&P. As a result, problems at Uniper represent a major drag on Fortum.