Fortum says it is ready to consider all options as Germany taps gas reserves

Fortum, Finnish utility and the majority owner of German Uniper, on Thursday, July 14, said it is forced to consider all options to ensure the security of European energy markets.

Uniper, which asked the German government for a bailout last week, is the most high-profile casualty of an economic standoff between the West and Moscow that has sent gas energy prices soaring and raised fears of crippling shortages this winter.

“In this crisis, brought about by Russia alone, we all have to give something up to safeguard the future,” Fortum’s chief executive Markus Rauramo said in a statement.

In a statement published by Fortum late on Thursday, the company called for a long-term solution that would stop cash bleeding out of Uniper, secure Uniper’s credit rating, and adjust the company to unreliable Russian gas flows.

However the company repeated its previous stance that it would ultimately be Berlin’s responsibility to solve the problem because Uniper would need cost compensation mechanisms put in place to survive losses that could become even steeper if gas prices continue rising.

Finnish ownership steering minister Tytti Tuppurainen earlier on Thursday said talks with Germany to rescue Uniper were at a critical stage and could be resolved within days, but it was not immediately clear whether Helsinki would contribute more capital.

Germany expects Uniper’s Finnish parent company Fortum, majority-owned by the Finnish government, to contribute to the rescue, while Fortum has suggested ringfencing Uniper’s German business under German government ownership.

“The talks were good and constructive. There are several options on the table but a lot of work still remains to be done,” Finnish ownership steering minister Tytti Tuppurainen told reporters during a visit to Berlin.

“We have to find a solution very soon. We are talking about a few days, a few weeks at the most.”

She added negotiations would continue between Fortum and the German government with a Finnish government advisor at the table.

Asked whether Uniper needed more capital from Finland, she declined to go into details “at this very sensitive stage of the negotiations.”

Soaring energy prices and dwindling Russian supplies have sparked recession warnings in Germany and could force Europe’s largest economy to ration supplies.

Reduced Russian gas supplies obliged Uniper to buy gas at very high spot prices that it cannot for now pass on to its customers because of long-term contractual agreements.

Tuppurainen’s visit coincided with Germany’s energy regulator announcing that the country had been forced to tap its gas storages, lessening its chances of having enough gas in storage during the peak demand winter months.

Sources familiar with the talks, speaking on condition of anonymity because of the sensitivity of the matter, told Reuters that Uniper’s bailout could be staggered.

In the first instance, the company could be propped up with emergency financing and later be allowed to pass on higher costs to its consumers.

Ukraine and its allies have accused Russia of limiting the flow of energy to Europe through spurious pretexts in revenge for sanctions over Russia’s invasion of Ukraine, which began on February 24.

Moscow describes the conflict as a “special military operation.” It also says it is a reliable energy supplier that honors its contracts.

The West is anxiously waiting to see whether flows will resume after annual maintenance of the Nord Stream 1 gas pipeline from Russia to Germany is scheduled to end on July 21. – Rappler.com