Uniper, EDF, Fortum: the crisis caused by the Russian invasion of Ukraine has prompted several European states to rescue energy companies deemed essential with aid or even nationalization. Exceptional interventions in an energy market that has been largely liberalized in recent years.
What interventions?
Germany on Wednesday initiated the nationalization of 99% of the energy giant Uniper, suffocated by Russian gas cuts, to avoid the bankruptcy of the largest German importer of gas, and thus a possible earthquake on the energy market.
Berlin had also previously placed Gazprom’s German subsidiary under supervision and injected 9 to 10 billion euros in aid. At the same time, Paris has begun the process of complete renationalization of EDF, which suffered a historic loss of 5.3 billion euros in the first half of the year.
“In exceptional circumstances, exceptional measures,” summarizes for AFP Elvire Fabry, researcher in trade policy at the Jacques Delors Institute.
Austria’s main electricity supplier has obtained a loan of two billion euros and the Finnish giant Fortum, which is already 50.7% owned by the state, has received a public loan of 2.35 billion. The Swiss government has granted a framework credit of four billion Swiss francs (4.1 billion euros) to Axpo Group.
“State support is crucial to prevent a market collapse,” confirmed analysts at the rating agency Scope in a note.
Uniper and EDF, special cases?
In Germany, the nationalization of Uniper is reminiscent of the entry of the state into the capital of Lufthansa, which was saved from bankruptcy at the start of the Covid-19 pandemic in 2020.
“Uniper is systemic and needs to be protected,” according to Claudia Kemfert, an energy economist at the German DIW Institute.
Faced with an “unprecedented” price spike, “you can’t let energy providers go out of business because of the impact on consumers,” says Jonathan Stern, a professor at the Institute of Energy Studies in Oxford who has been following the industry since the 1970s.
As for EDF, “it is not a nationalization in the sense that one could understand it in the 1980s, or even a nationalization like at the time of Covid, when the States went to the rescue of their large national companies”, explains Jean-Michel Gauthier, director of the energy and finance chair at HEC Paris.
The takeover bid for the shares not held by the State should give EDF, which is already nearly 85% publicly owned, the possibility to borrow at lower cost, to reorganize more easily and to become the “armed arm” of the State in the greening of its energy policy and the conquest of a greater sovereignty in this area.
“Completely controlling the company is not crazy” but “at the same time, there won’t be much money left to spend” after an expensive acquisition, Stern notes.
What are the long-term consequences?
If the German state has completely withdrawn last week from the capital of its national airline Lufthansa, back in the green, “two years seems short” to consider the privatization of Uniper, says Mr. Stern.
France “could well” sell some of its shares in EDF, but “not only will the crisis have to fade, but the whole situation around nuclear power will have to improve,” the British researcher said, referring to the delays of reactor builders and the corrosion problems.
But this will not necessarily signal the end of public intervention and, in some countries, “it is possible that we will return to something like the pre-1990″ energy market and a “less liberal and competitive” market, he adds.
“There is a reversal of rhetoric,” Gauthier analyzes. “We are unraveling decades of building a single European market.”
Without it being a “fundamental shift” in the policy of European states traditionally attached to free trade, the acquisition of shares “does not simply correspond to the management of a crisis” but also to a “stronger consideration of an economic security issue”, according to Ms Fabry.
“It’s not just about saving companies,” she says, but “about securing strategic supplies,” and states will be able to play a “different role in how the economy works.”
