German gas importer VNG applies for state aid as energy crisis deepens

A general view of a manometer at the gas trading company VNG AG in Bad Lauchstaedt, Germany July 28, 2022. REUTERS/Annegret Hilse/File Photo

Frankfurt — VNG (VNG.UL), one of Germany’s biggest importers of Russian natural gas, on Friday asked the government for aid to stay afloat, the latest European energy firm to seek state support because of Moscow’s supply cuts.

While the company did not disclose any details, this could theoretically include a request for partial state ownership according to stabilisation measures covered by Germany’s Energy Security of Supply Act.

The German government will review the application and is working on stabilising the company, economy ministry spokespeople said, adding Berlin was not aware of any additional applications for aid from energy companies having been submitted.

“We are on a very, very good path and this will be resolved soon,” German Economy Minister Robert Habeck said in Brussels on Friday on talks between the government and VNG.

Like Uniper, which in July secured a government bailout, now totalling 19 billion euros ($19.2 billion), VNG has been hit by a sharp drop in Russian gas deliveries, forcing it to fill the gap in the spot market at much higher prices.

RUSSIAN CONTRACTS

Shares in EnBW, which itself is majority-owned by the state except for a small free-float, narrowed losses and traded 0.9% higher at 1337 GMT after plunging as much as 10.3% earlier in the day.

VNG, which also counts local utilities and municipalities among its shareholders, has two long-term Russian gas contracts with a total volume of 100 terawatt hours (TWh): one, accounting for 35 TWh, is directly with Gazprom and will expire at the end of the year.

That contract will lead to losses of about 1 billion euros in 2022, even if a gas levy, which will enable gas companies to pass on soaring costs to customers from Oct. 1, is factored in, VNG said, adding this loss alone would still be bearable.

“This contract has not been consistently fulfilled since mid-May,” VNG said. “With support from the German government, ways have been sought in recent weeks to reach a final settlement. However, this does not appear achievable in the near future in a form that is economically viable for VNG.”

“Ongoing talks between VNG AG with its shareholders and the Federal Government on options for stabilisation of the company continue in parallel,” EnBW said.