(Bloomberg) — The German government is planning to inject about 8 billion euros ($8 billion) into Uniper SE as part of a historic agreement to nationalize the gas giant and stave off a collapse of the country’s energy sector.
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Uniper confirmed on Tuesday it is in final discussions with the government over a package that would include an 8 billion-euro capital increase, subscribed entirely by the government. Berlin will also buy the shares of its main shareholder, Finland’s Fortum Oyj.
Uniper, the biggest German buyer of Russian gas, is at the epicenter of the crisis sparked by Moscow’s moves to cut energy flows in retaliation for war-related sanctions. The government was under pressure to act as the company’s failure could ripple through Europe’s largest economy — and also threaten fuel supplies.
Uniper shares jumped 3%. Fortum shares rose 9.5% before trading was halted by the exchange.
The new agreement would replace a bailout plan from July that would have seen the government take a 30% stake in Uniper.
Surging gas prices and Russia’s squeeze on supplies to Europe have already prompted a series of bailouts and rescue loans. But those measures are increasingly dwarfed by the scale of the crisis, and there was a risk that systemic energy providers collapse without more robust government support.
With Russia’s main pipeline to Germany cut off, Uniper is having to source alternative supplies from the spot market to serve its clients, which include manufacturers and local utilities. The price surge is causing the company to rack up losses of as much as 100 million euros a day.
The German government is also in talks about taking over at least two other companies, in what could become a coordinated swoop.
Read: Scholz Puts Full Muscle of German State Into Securing Energy
Politically, the move will be highly sensitive for Scholz and his two coalition partners, the Greens and the liberal Free Democrats.
German Economy Minister Robert Habeck, a former co-leader of the Greens, might have to delay or abandon a plan to introduce a gas levy on consumers that was designed to help offset the costs of the crisis.
The levy was expected to generate about 34 billion euros and most of the revenue would have gone to Uniper. Abandoning the measures could raise questions over financing the bailout.
Finance Minister Christian Lindner, who is also FDP party leader, could be forced to abandon his plan to return to constitution debt limits next year, as the government seeks to contain spill over from surging energy costs.
Read: Uniper Woes Trigger Confidence Motions for Finnish Government
Finland’s government has also come under heavy pressure from opposition parties over its handling of the rescue. It now faces two motions of no-confidence filed on Tuesday, with lawmakers berating the cabinet for failed negotiations with Germany and a waste of taxpayer money.
Separately, Fortum confirmed the negotiations are in the final stages and that the elements being discussed include a sale of Fortum’s Uniper shares to the German state, return of the financing Fortum granted to Uniper as well as a planned capital injection by the German state to Uniper.
(Updates with confirmation)
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