Germany’s third largest gas supplier seeks state aid to cushion losses

Major natural gas importer VNG will seek financial support from the German government to cushion the considerable losses it is making due to high gas market prices. “Due to unfulfilled supply obligations by upstream suppliers, it has been and continues to be necessary to procure gas quantities at considerably higher prices on the energy markets in order to maintain the ability to reliably supply VNG customers at contractually agreed significantly lower prices,” the company said. To avoid further economic damages, VNG will be applying for “stabilisation measures” granted by the economy ministry (BMWK) that go beyond the already agreed levy for gas importers. VNG, a subsidiary of energy company EnBW, is the second German gas importer appling for state aid in the wake of the European energy crisis, after Uniper was bailed out this summer.

“Until the start of the Russian war of aggression, VNG was a healthy corporate group,” the company said, adding the invasion had cast it into financial difficulties due to the high costs for substituting Russian gas on international markets after Russia almost entirely cut its gas flows to Germany. It will aim to “shield customers from the impacts of the war,” which include local utilities and industrial companies, by providing gas at contractually agreed prices that lie far below VNG’s current procurement costs. The company expected losses to amount to around one billion euros by the end of the year, which it would be able to cope with if aided with further stabilisation measures. According to EnBW, the gas importer is “systemically relevant” for energy supply in eastern Germany in particular, and in 2021 accounted for about one fifth of Germany’s gas demand. 

Germany’s largest gas importer, Uniper, applied for state aid in July before announcing a loss of about twelve billion euros so far in 2022 due to war-induced price hikes. The government has introduced a gas levy taking effect from 1 October that will be added on top of gas customers’ bill and used to help struggling importers weather the price crisis. A bankruptcy of importer companies would ultimately lead to much higher customer prices, the government argued. Gas flows from Russia have gradually diminished since the country attacked its neighbour Ukraine in February and were cut almost entirely at the beginning of September.