Uniper richly valued on the eve of its reprivatization

Brought to its knees by the German-Russian divorce, then rescued in the midst of a collapse by the Federal State, the German energy giant has reached a new crossroads.

The eighteen months following the outbreak of the war in Ukraine cost Uniper €23bn, suddenly pushing it into insolvency before a €20bn bailout package - €14bn in equity and €6bn to cover its liabilities - was swiftly unlocked by Germany.

Under European Union regulations, the Federal State, which now controls 99% of the capital, must however reduce its stake to 25% by 2028. Suffice it to say that the timeline dictates that major maneuvers begin without delay.

For Friedrich Merz's government, the challenge will be to secure the best possible exit in an otherwise difficult context, as placing 3/4 of the energy company's capital in the midst of restructuring will involve a series of high-stakes negotiations against a group of seasoned acquirers.

Uniper, which operates assets in Germany, the Netherlands, the UK and Sweden, recently informed to the market that its major investment projects - notably in new gas-fired power plants in Germany and the UK - remained contingent on these developments. In the meantime, the group remains focused on "execution" and "financial discipline."

Several acquirers have already come forward, including Finland's Fortum, Uniper's former majority shareholder ruined in 2022, which is eyeing the German group's nuclear assets in Sweden; the inevitable Czech billionaire Daniel Kretinsky, logically interested in Uniper's coal-fired plants, which still represent one-seventh of its total generation capacity; and numerous other players, including TAQA, Equinor and Vattenfall.

The German government has repeatedly stated its intention to realize a profit on these future disposal operations. This highly political declaration - aimed as much at appeasing the taxpayer as at supporting Uniper's valuation - effectively sets a valuation floor. Judging by the share price, the market has received the message.

With less than 1% of its capital floating on the stock exchange, Uniper's market capitalization is indeed over €18bn, or €4bn more than the equity injected by the Federal State four years earlier. The latter, moreover, already received €2.6bn last year in the form of early repayments.

Expressed as a multiple of its operating profit, Uniper's valuation also appears surprisingly generous compared to the average of its European peers. It is uncertain, however, whether this metric holds any relevance in the current state of affairs, as the group is engaged in a vast restructuring effort and shifts in its business scope.