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September 12, 2022

German’s gas firm VNG seeks state aid after Russia cut supplies

VNG, which is which is 74%-owned by German utility EnBW, expects the aid to help avoid potential further damage.

Understand the impact of the Ukraine conflict from a cross-sector perspective with the Global Data Executive Briefing: Ukraine Conflict


German natural gas importer VNG is seeking aid from the government to reduce the incurred and anticipated losses amid worsening energy crises as a result of Russia’s invasion of Ukraine.

The move comes as the suppliers failed to meet their gas supply obligations, thus forcing VNG to purchase gas at ‘considerably higher prices’ to meet its supply contracts.

In a press statement, VNG said: “This is because of the necessary replacement procurement; gas quantities affected by Russian supply disruptions, in some cases at agreed fixed prices, now have to be procured at massively higher prices on the gas markets.”

VNG expects the aid to help avoid potential further damage and help it continue its business operations.

The company has filed an application for stabilisation measures under section 29 of the Energy Security of Supply Act with the German Federal Ministry for Economic Affairs and Climate Action (BMWK).

VNG is 74%-owned by German utility EnBW and said the Russia-Ukraine conflict’s impact on the energy markets placed the firm in an ‘increasingly critical financial situation’.

The German gas importer is currently under two long-term gas contracts with Russian firms, with a total volume of 100 terawatt hours (TWh).

This includes a direct contract with Gazprom Export, a subsidiary of Russia’s Gazprom, for approximately 35TWh of gas per year, which is valid until the end of the year.

Considering that Gazprom Export is expected to not be fulfilling obligations for the foreseeable future, VNG anticipates the contract to result in approximately €1bn in losses in 2022, even if the gas levy relief is expected from 1 October 2022.

VNG said the second contract, which involves the purchase of nearly 65TWh per year of gas from Gazprom Germania, has not been consistently fulfilled since mid-May.

In a statement, VNG said: “With support from the German government, ways have been sought in recent weeks to reach a final settlement. However, this does not appear achievable in the near future in a form that is economically viable for VNG. The resulting financial burden would be unsustainable for VNG.”

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