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Germany prepares Uniper bailout as gas prices soar

The German cabinet on Tuesday approved plans to quickly prop up struggling energy companies, such as Uniper, as the soaring price of gas puts the sector under pressure.

The emergency legislation will “facilitate” stabilisation measures for energy companies, including the possibility of the government becoming a shareholder, the economy ministry said.

Uniper, one of the biggest importers of Russian gas, has been hit hard by a cut in deliveries to Germany via the Nord Stream pipeline.

The 60-percent reduction in gas supplies via the undersea link since mid-June forced the group to pay higher prices for alternative supplies on the spot market.

Unable to pass the cost on, the squeeze left Uniper with “significant financial burdens”.

As a result, the Duesseldorf-based provider entered into talks with Berlin over a possible rescue plan last week.

Officials estimate a rescue package for the struggling energy group could cost around nine billion euros ($9.2 billion), according to Bloomberg News.

In any deal, the state could take up to a 25-percent stake in Uniper, the German financial daily Handelsblatt reported.

Germany would “not allow system effects” to ripple through the gas market, where the failure of one company could lead others to go under as well, Economy Minister Robert Habeck told reporters.

Berlin has criticised Gazprom’s “political” decision to limit supplies, which the Russian energy company blames on delayed repairs.

The supply reduction prompted Berlin to raise the alert level under its emergency gas plan, bringing it a step closer to rationing the fuel.

The government has mandated for its gas storage facilities to be 90 percent full by the beginning of December.

In June, Berlin also bailed out Russian energy giant Gazprom’s former subsidiary in Germany with between nine and 10 billion euros worth of loans after it had been placed under state control.

Securing Energy for Europe, as the company was renamed, is a network operator, and indirectly controls Germany’s largest but largely empty gas storage facility in the northwestern town of Rehden.