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

Berlin (AFP) - Germany has reached a deal to nationalise 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 ($7.9 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.

The crisis intervention was needed to “secure our gas supply and to protect consumers from an uncontrollable situation”, Finance Minister Christian Lindner said.

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 from Russia 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 agreement, but will now own around 99 percent under the new bailout terms.

Uniper announced earlier this month that the two sides were exploring a possible nationalisation as the energy crisis showed no signs of abating.

Letting the company go bust could have had a chain reaction where “many other energy suppliers could have ended up in a very difficult situation” as they bore the brunt of higher prices, Uniper CEO Klaus-Dieter Maubach said at a press conference.

The pressure on the gas supplier was already felt in January when Fortum provided an eight-billion-euro loan to Uniper as prices began to climb amid tensions with Moscow before the invasion of Ukraine.

The Finnish company, which is itself majority owned by the government in Helsinki, held a near-80-percent stake in Uniper.

Fortum said Uniper has accumulated close to 8.5 billion euros in gas-related losses “and cannot continue to fulfil 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’ -

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.