Dusseldorf, Berlin The gas importer VNG wants to apply to the Ministry of Economic Affairs for stabilization measures because of the sharp rise in energy prices. The Saxon company announced this on Friday morning. These measures could absorb the significant losses and allow business activities to continue, said the subsidiary of the utility EnBW.
If VNG got into financial difficulties, this would have serious consequences for the energy supply in Germany. VNG is Germany’s third largest gas importer and a systemically important company for the energy supply of 400 municipal and industrial customers in Germany. In addition, VNG is Germany’s second-largest gas transmission system operator and third-largest gas storage operator. Now the company apparently fears for its own existence.
The problem: According to a statement, VNG currently has to do without gas from a supply contract that is 65 terawatt hours per year includes. This supply contract has hardly been served since May. 65 terawatt hours correspond to 6.5 percent of Germany’s total gas consumption in 2021.
VNG speaks of a domestic supplier. According to information from the Handelsblatt, this upstream supplier is the former Gazprom subsidiary Sefe (previously called Gazprom Germania), which is now under the trusteeship of the federal government.
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The VNG announcement states: “In contrast to what was previously expected, VNG had to bear a significant proportion of the replacement procurement costs in August at historically high gas prices.” As a result, the company would have no choice but to apply for state aid.
If VNG suddenly has to procure large quantities of gas itself on the market, this is doubly problematic. On the one hand, VNG has to pay for the currently high gas prices. On the other hand, trading in gas as such costs money.
Gas price has increased by almost 600 percent in one year
Gas expert Andreas Schröder explains in an interview with the Handelsblatt: “We are in a huge liquidity crisis.” VNG now has the same problem as the Düsseldorf importer Uniper: the security payments, So-called margins (a kind of deposit), which have to be deposited when trading gas on the exchange, are simply no longer bearable for many at the current prices.
A megawatt hour (MWh) of gas currently costs over 210 euros on the Dutch TTF exchange. In the meantime, the price even rose to 340 euros in the past week. For comparison: a year ago the price was 31 euros per MWh. An increase of almost 600 percent.
EnBW has already supported VNG with 550 million euros
As long as VNG is missing large delivery quantities, it will have to buy the gas, which it has promised customers such as public utilities, at the high prices on the exchange. However, it can only sell the raw material to its customers at the previously agreed price. Together with the necessary multi-million security payments for the sales, the situation is putting a considerable strain on the company.
>> Read here: Why security deposits for gas purchases are such a huge problem for companies right now
According to its own statement, EnBW has already provided 550 million euros in support for its guest subsidiary in recent months. VNG could probably have borne the losses caused by the complete stop to deliveries via the Nord Stream 1 pipeline. The company had expected a loss of around one billion euros for 2022.
However, because the former Gazprom subsidiary Sefe – contrary to what industry insiders have been assured by the federal government – is now hardly supplying any gas and VNG has to procure a replacement itself, VNG is getting into financial difficulties.
Legal dispute over gas supplies between VNG and Sefe
There has been a legal dispute between Sefe and VNG for some time now. A few days ago, a court in Frankfurt obliged the former Gazprom Germania to comply with the deliveries. However, Sefe had lodged an appeal through a subsidiary (Wieh). The industry service Energate reported about it first.
The Federal Ministry of Economics said on request that it would not comment on the process. In industry circles it was said that VNG is currently procuring the gas itself, but that Sefe is paying the difference between the current exchange price and the contractually agreed price. When asked, Sefe declined to comment. Gas market expert Schröder says: “Even if Sefe were to pay the difference, the security payments to be made would currently have to be met by VNG.”
The higher energy prices rise, the higher the security payments required. More and more corporations lack the money to participate in trading on the stock exchange. The Norwegian energy company Equinor warns that all the collateral that European energy companies have currently deposited on exchanges is worth $1.5 trillion.
>> Read here: This is how much it currently costs homeowners to heat with gas
The large sums of money, called margins, are a form of deposit. If energy prices rise too quickly, many companies will lack the necessary liquidity. This is exactly what is happening more and more often. The problem is that when prices rise, the exchange, which stands between the trading partners, demands higher margin payments from the energy provider.
VNG did not expect to have to procure large parts of the guaranteed quantities from Sefe itself. Representatives of VNG have been discussing with the federal government for weeks in order to find an agreement. “Economically viable”, however, no agreement seems to be achievable, according to VNG.
Amount of government aid for VNG still unclear
It is not yet known how high the state aid would have to be to save the importer. After all, VNG can expect to receive the first funds from the gas surcharge from autumn. From October 1st, the additional costs for the procurement of replacement Russian gas will be shared between all gas customers. 2.4 cents per kilowatt hour are then added to the gas price.
After Uniper and Sefe, VNG is the third-largest recipient of the gas levy funds. According to initial estimates, the surcharge could cost a total of 34 billion euros by April 2024. More than 90 percent of the funds are to go to the three German gas traders.
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