Germany Swallows the Uniper Berry

Image source: Valentina Razumova – Shutterstock

What's going on?

Germany’s poised to nationalize utility firm Uniper, once Europe’s biggest importer of Russian gas.

What does this mean?

Germany’s energy sector is struggling – and the cost of sustaining it is (h)eating the German taxpayer out of house and home. Back in July, the government agreed to a €15 billion ($15 billion) rescue package for Uniper, a firm it says is of “paramount importance” to the country’s economy. But as the energy crisis has deepened, the damage to Uniper has spread – and now, nine weeks later, the company finds itself on the cusp of full-blown nationalization. This new deal will see Finnish energy firm Fortum sell its stake – a real thorn in its side – to the German government, bringing the total Uniper bailout bill to €29 billion ($29 billion).

Why should I care?

Zooming in: This ain’t our first (or last) rodeo.
Seasoned investors who served in the trenches during the global financial crisis might be feeling a sense of déjà vu right now: after all, the spectacle of once-mighty institutions withering into public ownership or running into the arms of competitors has a distinct late-noughties flavor to it. Back then, it was banks and other financial institutions that were considered “too big to fail” – but today’s suppliers of vital energy to companies and homes might arguably deserve that label too. Watch this space, then: Uniper’s nationalization could be a sign of more to come.

The bigger picture: There might be a slim silver lining.
As bailout bills mount, governments will be asking themselves one key question: “How do we stop this happening again?” The likely answer: reliable, home-grown, renewable energy. In the past, critics of this approach liked to tout the cost of ditching fossil fuels – but the current energy crisis has made the cost of depending on them all too obvious too. So if there’s any silver lining to this predicament, it could be that it’s pushing western countries to speed up their transition to renewable sources of energy.

Originally posted as part of the Finimize daily email.

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