Germany Weighs Options for Gazprom Unit Shunned by Clients

(Bloomberg) -- The German government is weighing options for a unit of Russian gas giant Gazprom PJSC shunned by clients in response to the war in Ukraine, according to people familiar with the matter.

Options being analyzed include restructuring Wingas GmbH, which supplies about 20% of the German gas market, or finding a new energy provider for its clients, said the people, who asked not to be identified because the talks are private. Berlin officials are currently studying what impact the possible failure of Wingas would have on the economy, and no final decision has been made.

Gazprom subsidiaries in Europe are coming under pressure as clients and business partners refuse to do business with them, raising the prospect that some of them won't survive. Germany is considering nationalizing or even expropriating the German subsidiaries of Gazprom and Rosneft, Handelsblatt reported on Thursday, citing sources in the government. Gazprom Germania operates gas storage facilities while Rosneft Deutschland accounts for 25% of the German refinery business, according to the report.

Some banks are delaying transactions for Wingas and clients don't want to sign new contracts with the company, the people said. Previously signed deals are still in place. Wingas didn't respond to calls and emails seeking comment.

Helping Wingas won't be an easy task. That's because the businesses of the Gazprom group's many companies are so intertwined. For instance, it's the London-based trading arm Gazprom Marketing & Trading that holds Wingas's hedges, or the energy previously purchased to supply clients. Without those, customers could be left to pay the current high spot prices.

That's the same problem the U.K. faces. Britain has made plans to nationalize Gazprom Energy, a unit that supplies gas and electricity to about a fifth of the British market and has clients including parts of the National Health Service. But the government soon figured out that hedges worth 3.5 billion pounds ($4.6 billion) were held by the trading arm.

For the German market, the problem could be even bigger. Wingas's hedges are about four times bigger than those of Gazprom Energy, according to one person, and energy regulators in both countries have already held talks. Germany's Bundesnetzagentur and U.K's Ofgem declined to comment.

Gazprom's Marketing & Trading, which has more than 300 employees, is also coming under pressure. Just a few large European energy companies are still doing deals with it and the firm is even being kicked out of its London offices by landlord British Land Co. Its failure could spark a domino effect that takes down other subsidiaries, from the U.K. to Germany and Singapore.

Wingas is part of Gazprom Germania GmbH, which also owns about 25% of Germany's gas storage capacity. The offices of both companies were raided by European Union officials this week as part of an antitrust probe into whether Gazprom had a role to play in Europe's worst energy crunch since the 1970s, which sent prices breaking several records since last summer.