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Uniper nationalisation: Is struggling German utility stock a bargain after 90% share price plunge?

By Jenny McCall


Updated

A image of the Uniper logo against the German flag
Like most government bailouts, once the state wades in the stock price tends to fall - Photo: Getty Images

In the age of rising fuel prices and interest rate hikes, governments are seeking out ways to curb the price increases from utility companies that consumers face and literally saving flagging companies. Germany has followed its French neighbours and opted to nationalise one of its energy companies, Uniper (UN01). Good news for the customer, perhaps but bad news for Uniper’s stock price which has plunged 90% since the bailout.

Back in September the German government agreed to nationalise Uniper (UN01) in a bid to keep the energy company and industry afloat, as well as hoping to reduce rising energy prices that customers will face because of the global energy crisis.

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Uniper (UN01) share price chart

Will Uniper (UN01) suffer same fate as EDF?

Uniper (UN01) became aware of the bail out back in July and the German government agreed to help the major gas importer with a €16bn ($14.95bn) rescue plan. This would mean that the state will own 98.5% of Uniper.

But like most government bailouts, once the state wades in, the stock price tends to fall. This was seen when the French government announced it would inject €2.1bn into Électricité de France EDF (EDF) to fix the problems it caused when the state ordered the utility company to sell power below market prices.

EDF stock price fell by almost 4% in morning trading today on 18 February, following the French government’s announcement it would attempt to bail the company out with a cash injection.

In January, when the French government ordered EDF to sell its energy below market prices, EDF stock price fell by as much as 25%.

Seems the story is similar for Uniper (UN01). On 21 September, the announcement was made that Uniper would be nationalised, the stock fell by 25% and since June, when the stock traded at €23, it has now fallen by 90% and currently trades at €3, at the time this piece was written.

So, is Uniper a bargain purchase right now for investors looking to buy while cheap, in the hope it will at some point return to its glory days?

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Will Uniper (UN01) ever return to its glory days? 

Well, on Thursday Uniper (UN01) reported one of the biggest losses in German corporate history, due to Russia’s stranglehold on gas supplies leaving the giant utility struggling to survive.

Reporting a net loss of €40 billion in the first nine months of this year, after it was forced to buy gas prices for more than what it paid Russia under long-term contracts. According to analysts, Uniper has been one of the hardest hit by Moscow’s supply cuts and it really is in need of the rescue plan from the German government.

“The size of the support package relative to Uniper’s market cap before the war shows its unique exposure to Russian gas cuts and we don’t expect to see other companies struggle nearly as much as Uniper (UN01) as it struggles to replace these supplies with non-Russian sources,” said Patricio Alvarez, an analyst at Bloomberg Intelligence.

So, can investors trust and have confidence in companies with large government stakes?

“This latest chapter in the EDF story is one example of why we are particularly wary of companies with large government stakes. Governments will be tempted to influence company decisions when it suits them,” Jack Daley, portfolio manager at asset management company TwentyFour, wrote in a note.

Its hard to tell right now if Uniper (UN01) stock price will remain in bargain basement or return to the heights it has seen previously, one thing maybe certain, however, if the government has a stake in a utility company, it could reach a price of no return. 

Markets in this article

UN0
Uniper
41.530 USD
-0.84 -2.010%

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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