By Geoffrey Smith
Investing.com -- Uniper stock plunged at the opening in Frankfurt on Thursday after the German energy group said it's in talks with Berlin for a possible government bailout in response to the reduction of Russian gas supplies earlier this month.
Uniper said the "possible stabilization measures" included a direct injection of equity, which might significantly dilute existing shareholders. Other measures under discussion included increasing the size of a (still un-drawn) credit facility with state development bank KfW as well as state loan guarantees.
Uniper (F:UN01) stock immediately fell 12% to a new five-year low in response.
The power and gas utility said its profit for the first half of 2022 is likely to be well under its previous forecast and withdrew its guidance for the full year, as a result of the spiraling energy crisis, which has led to Europe's biggest gas supplier cutting shipments to Germany by 60% and to other countries completely.
The German government had last week declared a state of 'alarm' over its gas supply in an attempt to cut consumption and ensure that storage facilities can be filled by the start of the winter heating season. However, it chose not to activate a clause in its three-stage emergency plan that would have allowed German utilities to raise their prices immediately to cover the additional costs of sourcing gas from elsewhere. It added that even if that clause were triggered, it would still only be able to recoup a part of the additional costs it is incurring.
"Significant financial burdens are being generated since Uniper can't pass on these cost increases," the company said. "Moreover, there is great uncertainty over the geopolitical situation, and the duration and extent of the cut to Russia gas supplies. Against this background, it is hard to estimate future gas price developments."
Russia's war in Ukraine appears set to drag on indefinitely, with NATO declaring Russia a 'direct threat' to European security at a summit on Wednesday and ordering a massive increase in troop deployments in eastern Europe. The alliance also confirmed it will admit Sweden and Finland as members. Separately, an opinion poll indicated that nearly 90% of Ukrainians were against ceding territory to Russia in return for peace.