European governments are taking steps to financially support their countries' power and gas utilities as they attempt to ride out the unprecedented period of high and volatile commodity prices exacerbated by Russia's invasion of Ukraine.

Germany, France and the Czech Republic are among the nations that have moved to shore up the finances of utilities such as Uniper SE, Electricité de France SA and CEZ a.s. — each of which are major players in their respective national power and gas markets — by taking stakes in the companies or providing credit support.

In Germany, Economy Minister Robert Habeck said the government is "working flat out" on stabilization measures for the energy sector after July 8 announcement that Uniper, the country's largest gas importer, applied for state support under Germany's newly adopted energy security legislation. Options being discussed by Uniper include the government becoming a shareholder in the company or increasing the €2 billion credit line it has with state development bank KfW.

"Politically, one thing is clear: we will not allow a systemically important company to go bankrupt and cause turbulence on the global energy market as a result," Habeck said in a statement.

While Uniper CEO and Chairman Klaus-Dieter Maubach said on a conference call the same day that the company is "not facing bankruptcy," in recent weeks it has only been receiving about half of the contracted gas volumes from Russian state-owned PJSC Gazprom via the Nord Stream 1 pipeline, forcing it to buy fuel at higher prices elsewhere.

Analysts at CreditSights said the German government is seemingly "prepared to stand behind these companies in the current environment and do whatever it takes to preserve their business and financial integrity."

They added that this bodes well for other gas midstream companies in Germany, such as EnBW Energie Baden-Württemberg AG-owned VNG - Verbundnetz Gas AG and, to a lesser extent, RWE AG.

However, "the fact that [Uniper's] situation has become dire enough for the company to ask for support is not positive," CreditSights said in a July 11 note.

The situation at Uniper is also uncertain for majority owner Fortum Oyj, which "could well end up with a reduced stake in Uniper, with that reduced stake giving it less control, and with that reduced stake potentially being worth a lot less than it originally paid," the analysts said. Uniper's share price closed at €9.35 on July 11, compared to the €22 per share Fortum paid to buy into the company in 2017.

France seeks EDF renationalization

In neighboring France, the government confirmed July 6 that it intends to pursue a renationalization of Electricité de France SA, or EDF, restructuring the debt-laden group and giving the state a greater ability to tackle a multitude of technical and operational issues in the company's aging fleet of nuclear reactors.

Just a few months earlier, EDF announced it would issue €2.5 billion in new shares to shore up its balance sheet, with the government — already an 84% shareholder in the company — footing €2.1 billion of that bill.

The nationalization is not without risk, according to Elchin Mammadov, environmental, social and governance research analyst at MSCI Inc.

"Owning 100% of EDF means that the French taxpayers would bear a greater risk of nuclear project delays and cost overruns," Mammadov said in a note to clients. "Delisting of the company may lead to reduced transparency, financial discipline and operational efficiency."

Buying out minority shareholders will cost the French state between €8 billion and €10 billion, Reuters reported July 12 citing two sources with knowledge of the matter, adding that the aim is to complete the deal in the fourth quarter.

The valuation range reported by Reuters "implies a potential buyout share price of €10.0 to €12.5," Jefferies analysts said in a July 12 note. EDF's share price closed at €9.65 on July 11 but had risen to €10.32 by 11:30 a.m. London time on July 12 on the back of the Reuters report.

Czech state lends support to CEZ

In another example of direct government support to utilities, Czech power producer CEZ said July 8 it signed a credit agreement with the country's Ministry of Finance worth up to €3 billion, which it said would strengthen its liquidity position.

"We are witnessing a high increase in energy commodity prices resulting from reduced supplies from Russia and in anticipation of the operational shutdown of the Nord Stream 1 pipeline," Daniel Beneš, CEZ chairman and CEO, said in a statement. "The market is already expected to become even more sensitive to cuts and closures in gas supply during the summer and autumn, when the demand to fill gas storage facilities increases across Europe."

CEZ expects to draw €2 billion from the credit line in the coming days, and will be able to draw the remaining €1 billion within five days of requesting the funds.

The company has already purchased gas for the Czech Republic in recent weeks and ensured capacity from a liquified natural gas terminal in the Netherlands. It has also contracted with Westinghouse and Framatome to supply fuel assemblies for its Temelín nuclear power plant, which until recently had a Russian supplier, and has become the sole owner of the previously Russian-owned nuclear business Škoda JS a.s.

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