Berlin Weighs Full Uniper Exit, Targets Deal After Summer: Sources

Uniper SE, once Germany's largest buyer of Russian gas, is now at the center of a potential exit strategy by the German government, which owns more than 99% of the company. Sources familiar with the matter have revealed that Berlin is considering a full sale of Uniper, which could rank among the country's biggest share sales in recent years. Citigroup Inc., Deutsche Bank AG, and UBS Group AG have been appointed as joint global coordinators on the potential offering, with deliberations ongoing and details subject to change.

The German state's stake in Uniper was acquired during the energy crisis in 2022, when the company faced financial difficulties due to Russia's invasion of Ukraine and the subsequent gas supply restrictions. The European Commission required Germany to reduce its stake in Uniper to not more than 25% plus one share by the end of 2028, setting a deadline for the divestment process. However, the government is now exploring the possibility of exiting its holding in one go, with a full sale to a private equity fund such as Brookfield being one option.

A full sale would generate higher proceeds right away, but it would remove the possibility of Berlin benefiting from any future gains in the Uniper share price. In contrast, a partial stake sale, or re-IPO, of around 25% is the preferred option for the German government. This would allow Berlin to maintain a stake in Uniper and potentially benefit from future gains in the company's share price. However, a partial stake sale may not generate as much immediate proceeds as a full sale and may be more complex to execute, as it would require a public offering and may be subject to more regulatory scrutiny.

Regulatory requirements play a significant role in shaping the Uniper divestment process. The stabilization measures agreed upon by the German government, Uniper, and Fortum in 2022 are subject to regulatory approvals in various jurisdictions, including state-aid and merger control approvals from the EU Commission. These approvals are necessary before the Extraordinary General Meeting on December 19, 2022, can take place. Additionally, the withdrawal of Uniper’s lawsuit against the Netherlands in connection with the Energy Charter Treaty (ECT) is a condition for the stabilization measures to proceed.

The timing and structure of Berlin's Uniper exit strategy are influenced by several factors, including market conditions, the political calendar, dividend policy, asset sales, regulatory approvals, and potential buyers. The government is considering the market environment to determine the optimal time for a share sale, with a more favorable market potentially leading to a higher valuation for Uniper. The snap election in Germany next month may also impact the timing of the sale, as the new government's plans for the holding are as yet unclear. Before a stake sale, Berlin needs to lift the ban on dividends, which was part of the 13.5 billion euro bail-out. This requires parliament to pass a law, which is considered ambitious and may delay the sale. However, the current government is expected to at least attempt to make an attempt before the election.

Uniper is trying to sell some assets, including coal procurement contracts, which could weigh on its valuation. The company last month said it intends to sell its coal-fired power plant Datteln 4 in North Rhine-Westphalia, and it also permanently shut down its hard coal power plant Heyden 4 Petershagen near Minden. These asset sales could improve Uniper's valuation and make it more attractive to potential buyers. Regulatory approvals, such as state-aid and merger control approvals from the EU Commission, are also necessary before the sale can proceed.

In conclusion, the German government is considering a full sale of Uniper, with deliberations ongoing and details subject to change. The timing and structure of the exit strategy are influenced by various factors, including market conditions, the political calendar, dividend policy, asset sales, regulatory approvals, and potential buyers. The government is exploring the possibility of exiting its holding in one go, with a full sale to a private equity fund being one option. However, a partial stake sale, or re-IPO, of around 25% is the preferred option for the German government. Regulatory requirements play a significant role in shaping the Uniper divestment process, with stabilization measures subject to regulatory approvals and the withdrawal of Uniper’s lawsuit against the Netherlands in connection with the Energy Charter Treaty (ECT) being conditions for the stabilization measures to proceed.