Farce about DJ as Gazprom Germania owner
The question of who owns Gazprom Germania (GPG) and what the consequences are took on bizarre features in the first days of April. If the GPG Group did not include companies of great importance to the German gas market, it could be dismissed as a funny farce.
In 2020, the sales and trading company Wingas - according to the last annual report published in the Federal Gazette - sold around 700 TWh in trading and sales in Germany and neighboring European countries. Its market share in Germany is likely to be around 20 percent. It mainly supplies large industrial companies and municipal utilities. Astora is the second largest storage operator in Germany, with two storage facilities in Rehden and Jemgum. In Austria, it also operates the Haidach storage facility. The discussions about the Rehden storage facility, which is presumably used exclusively by companies of the Gazprom Group, and its very low filling level have been very widely publicized in recent weeks and months. In the meantime, the storage facility has been completely emptied. GPG holds a stake of just under 50 percent in the transmission system operator Gascade via an intermediate holding company. In addition, there are further shareholdings. Among others, Gazprom Marketing & Trading (GM&T), the London-based trading company of the Gazprom Group, is controlled by GPG.
Gazprom Export: Ownership of GPG "relinquished
The farce then began on April 1 when Gazprom Export announced on its Telegram channel that the company had "relinquished" ownership of GPG. The only thing that was clear pretty quickly, it was not an April Fool's joke. Other than that, no one in Germany could explain what "abandoned" meant and who controls GPG now. This was a problem for Wingas' customers, among others, who wondered how reliable their supplier still was. A number of customers looked very closely at their contracts for possible "change of control" clauses. Whereby in view of the current market prices for gas a new procurement of the quantities would be connected as a rule with substantial economic disadvantages. On Monday, the darkness surrounding the events slowly lifted. Already on March 25, Gazprom Export had transferred the GPG shares to Gazprom Export Business Services, a company newly founded by Gazprom. On March 31, Gazprom Export then sold 99.9 percent of the shares to the new company. 0.1 percent went to a joint stock company Palmary. However, 100 percent of the voting rights in Business Services also went to Palmary. It thus effectively controls the intermediate holding company and the GPG Group. Palmary, according to research by various media, is not much more than a shell company. It has a small office in an industrial area of Moscow. Who owns the company is unclear. Since March 30, Dmitry Tseplyaev has been Palmary's general director. He has, also this has investigated different media in Russia, so far among other things as DJ and car dealer earned his money.
Over the weekend, the German government also dealt very intensively with the strange behavior of Gazprom. This was still intensified - so it reported then the Minister of Economics Robert Habeck on Monday in a press conference - because the new owner on 1 April requested the GPG managing director Igor Fedorov in writing to liquidate GPG. During this press conference, Habeck announced that the GPG Group had been placed under trusteeship by the Federal Network Agency. This is a hitherto unique procedure in Germany, but one that is permitted by the Foreign Trade and Payments Act. Habeck justified the step with a violation of Gazprom Export against reporting obligations of the Foreign Trade and Payments Act as well as the unclear legal relationships at Palmary. GPG or the group's subsidiaries operate critical infrastructures in Germany, which is why such a reporting obligation exists. However, Habeck also justified the decision with the security of gas supply in Germany, which should not be exposed by the German government to arbitrary decisions by the Kremlin.
Will the BNetzA replace current management boards?
What does the fiduciary management, which is limited until September 30, mean? The BNetzA will exercise voting rights, can issue instructions to the companies' management, and can also replace management boards. Exactly how the authority will act remains to be seen. Immediately after Habeck announced his decision, BNetzA President Klaus Müller commented on his authority's new role only in very general terms: "We are aware of the responsibility for secure gas supplies that this task entails. Our goal will be to ensure that Gazprom Germania is managed in the interests of Germany and Europe. We intend to take all necessary steps to further ensure security of supply. The business of Gazprom Germania and its subsidiaries is to be continued in this sense in a controlled manner." Presumably, the BNetzA will primarily examine whether it can cooperate with the current management teams or whether it will have to replace them. Fedorov, the GPG managing director appointed by Gazprom, will certainly leave the company very quickly. Gazprom Export has already announced - as reported by the Journal for Municipal Economics (ZfK) - that it will remove all of its own executives from the companies.
It remains to be seen what further concrete measures the BNetzA will take. Presumably, the main focus will be on how to achieve a filling of the Rehden storage facility. The new "Storage Act" (approval by the Bundesrat was still pending at the time of going to press) provides that a storage user can have his capacity withdrawn if he does not use it, i.e. if he fills the storage facility. The BNetzA will ensure that this is implemented. Otherwise, the companies are acting in accordance with the market rules. Employees from the affected companies therefore also reacted rather relieved to the new situation. For Wingas in particular, this could mean the opportunity to stabilize business relationships again and gain trust. The question of how Gazprom Export will now react is exciting. The withdrawal of permission for GPG to use the logo and brand name should be easy to take. This has already been ordered by Gazprom Export. The central question is whether Wingas will continue to be supplied with Russian natural gas. The exact amount Gazprom will supply under long-term contracts is not known. But it is likely to be in the order of 15 to 20 billion m3/a. Information in older annual reports leads to the estimate. Habeck said at the press conference that he assumes all parties will act in accordance with their contractual terms. However, he also said that there were doubts about this in view of the threat of liquidation. As of the editorial deadline for this issue, nothing has changed in the gas flows from Russia. Since the beginning of April, transit through Ukraine has actually increased compared to March. Restrictions on deliveries to Wingas cannot be ascertained.
It is open how things will continue after September 30. Habeck emphasized that the trusteeship is a transitional solution. The BNetzA will use the time to bring order to the situation, whatever that means. Whether Gazprom Export will then take over the company again or GPG will be sold remains to be seen. In recent weeks, there has been repeated speculation as to whether GPG or individual companies will be nationalized. Habeck reacted evasively to a corresponding question at the press conference. In recent weeks and months, there has been speculation above all about a possible nationalization of the storage operator Astora in Berlin.
Why did Gazprom Export make a DJ the owner of GPG? There is no answer to this question yet. What is clear is that companies in the GPG group have come under economic and regulatory pressure in recent weeks for various reasons. This is especially true for Wingas and Astora. Whether this is why the Russian gas group wanted to part with the group is completely unclear. But even then, this could probably have been handled with less irritation. At least from the German point of view, the solution chosen was completely absurd and ultimately no solution at all. The whole action is likely to have once again destroyed a great deal of German confidence in Gazprom Export. What future German/European-Russian gas relations can have at all after the end of the Ukraine war is unclear. After the events in the first days of April, another question mark has probably been added.
