Sefe was dropped by Russia's Gazprom earlier this year and put under German state trusteeship in April. It has since received close to 10 billion euros ($10.3 billion) in state-backed credit lines.

The step was necessary to ensure the nation's energy supply, the ministry said, with Sefe threatened by insolvency after a plunge in Russian imports inflicted billions of euros in losses on it as the company and other gas importers turned to the expensive spot market to source gas elsewhere.

After Uniper, Sefe is the second German company to be nationalised as a result of the energy crisis triggered by the war in Ukraine.

Under a new energy security act, the German economy ministry on Monday ordered a capital cut, setting Sefe's previous existing registered capital of 225.6 million euros to zero. Gazprom will lose its investment as a result.

The ministry said this would be met with compensation, the amount of which would be based on Sefe's market value. The compensation procedure has not yet been finalised, it added.

Under the ordered measures, Sefe will then issue new shares to the same nominal amount that will be subscribed by Germany.

The European Commission gave its blessing for this over the weekend.

In addition to the nationalisation, Berlin also announced that it would boost Sefe's loan from state lender KfW to 13.8 billion euros from a previous 11.8 billion euros.

A large part of this will then be converted into equity, although this has not yet been approved by Brussels.

The additional state aid for Sefe is to come out of the 200-billion-euro fund announced by the government to shield Europe's largest economy from the impact of soaring energy prices.

($1 = 0.9696 euros)

(Reporting by Christian Kraemer, Writing by Maria Sheahan and Rachel More, Editing by Miranda Murray and Emelia Sithole-Matarise)