Ex-Gazprom Arm to Use $10 Billion German Loan to Boost Trading

(Bloomberg) — A former Gazprom unit now under the control of the German government plans to use a 10-billion euro ($10.4 billion) loan backed by Berlin to get back on the front foot in the energy market.   

The lifeline will be used to replace natural gas supplies cut by Russian sanctions and pay down increasing amounts of collateral needed to back trades after prices surged, Egbert Laege, managing director of Gazprom Germania GmbH, said in an interview. The firm will soon be renamed Securing Energy for Europe GmbH after it was brought under German trusteeship in April to ensure enough supplies in the region’s largest economy. 

The loan “finally ensures the stabilization of the company and reestablishes the company as a key player in the European and German gas market,” said Laege, an EON SE veteran who took over the helm earlier this month. 

The company has several subsidiaries with offices from Houston to London and Singapore housing almost 1,700 employees. Rival firms had been hesitant to strike new deals in the aftermath of Russia’s invasion of Ukraine, but Laege and his team are now talking to “more than a dozen” companies about restoring trading and banking relationships, he said. 

European Gas Rises Further as Russian Cuts Escalate Energy War

The state-backed bailout was cited by a German deputy economy minister as a possible reason why Russia cut gas flows through the Nord Stream pipeline on Tuesday and Wednesday. Russia said the shipments were reduced because of delays to returning equipment sent for maintenance abroad. German Economy Minister Robert Habeck also claimed it’s politically motivated. 

Moscow has already retaliated against Germany’s control over the company by issuing sanctions which cut pipeline contracts with the firm and threatened the future of its liquefied natural gas business. The measures also pose a risk to major storage and retail arms in Germany, Austria and the UK. Still, the major sites at Rehden and Haidach should be sufficiently stocked by the winter, Laege said. 

Two of the company’s main LNG contracts are based on taking the liquid fuel from Russia in Yamal and Sakhalin in the far north and eastern part of Russia. So far, trading partner Yamal LNG has secured a 90-day waiver from the Russian government to trade with Gazprom Germania, but there has been no similar waiver for its Sakhalin-2 plant off-take.

“It’s very difficult to assess whether this waiver can be extended or not,” Laege said, adding that the group’s traders are trying to mitigate the risk on its Sakhalin position. “In the same way our pipeline exposure to Russia has gone to zero, we will follow a similar strategy with our LNG exposure.” 

The group could eventually become the property of the German government if politicians opt to convert the loan into a stake-holding, which would further cut any remaining association with Russia. “That’s a political decision which is beyond my paygrade,” Laege said.