The European Commission has approved billion-dollar German aid to ailing gas importer Uniper. Berlin can support the company with a maximum of 34.5 billion euros, the competition watchdog announced on Tuesday evening. The Commission had already approved the nationalization of the company on Friday under merger and antitrust aspects. This paves the way for nationalization.
The measure enables Uniper to continue to supply its customers and helps to avoid serious disruptions on the German gas market. According to the EU Commission, the German measure specifically concerns an immediate capital increase of eight billion euros. In addition, a further capital increase of up to EUR 26.5 billion is planned until 2024.
Difficulties due to gas supply interruption
Uniper has run into problems with Russian gas cuts as prices have multiplied. The company has to buy the missing gas from Russia more expensively on the market to fulfill old supply contracts, which leads to liquidity problems.
Insolvency would have caused a domino effect
The wholesaler, which was previously heavily dependent on Russia, supplies about 500 municipal utilities and about 500 other major industrial customers. Uniper’s bankruptcy would probably have created a domino effect that would have created difficulties for numerous customers as well.
If an energy supplier fails, the municipal utilities usually intervene. But since Uniper counts these basic regional suppliers among its customers, they would also drop out. They would have to source the natural gas elsewhere at higher prices. The passed-on costs would in turn burden millions of households and many businesses.
EU rules
State aid is subject to European rules. The EU Commission, as the guardian of fair competition, checks whether it discriminates in the market. For example, if Germany subsidized a particular company so heavily that it could force a competitor from another country out of the market, that would not be compatible with EU competition law. The competition rules are also designed to ensure that monopolies do not arise that can arbitrarily raise prices.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
