Federal Government and VNG reach agreement – settlement creates necessary legal certainty and basis for planning

The Federal Ministry for Economic Affairs and Climate Action has arrived at a settlement with VNG Handel & Vertrieb GmbH (VNG). The agreement creates the necessary legal certainty and basis for planning, and also ensures that VNG has the liquidity it needs. VNG has withdrawn an application for stabilisation measures.

Specifically, the settlement between the Federation and VNG entails agreement on compensation under the Energy Security of Supply Act. VNG had claimed compensation from the Federation for damage caused to its assets because, in order to maintain energy security, the company had been prohibited from exercising contractual rights of retention in the period from 12 July to 12 October 2022. This prohibition made it possible to continue supplying gas to municipal utilities and industrial clients. It was necessary in order to maintain security of supply, but also creates the need to compensate VNG. This claim is now settled in today’s agreement. The agreement creates legal certainty and a basis for planning.

Background:

On 9 September 2022. VNG AG had applied to the Economic Affairs and Climate Ministry for stabilisation measures under section 29 of the Energy Security of Supply Act. This had become necessary because VNG is having to purchase much more expensive volumes of gas to replace Russian gas which was not delivered under two contracts with upstream suppliers, in order for it to be able to keep supplying its clients with gas at the substantially lower contractually agreed prices. The restriction on the exercise of contractual rights of retention resulted in liquidity difficulties for VNG, and these were to be remedied by the implementation of stabilisation measures.

The settlement gives VNG partial compensation of an amount in the middle of the three digit million range for the costs of purchasing substitute volumes of gas and enables it to bear the costs of purchasing the gas to replace the missing Russian shipments itself with the aid of its owners. The solution stabilises VNG’s commercial position, so that there is no longer any need for public-sector stabilisation measures under section 29 of the Energy Security of Supply Act and the application has thus been withdrawn. The Federation will not be taking on a stake in VNG.

The withdrawal of the application under section 29 of the Energy Security of Supply Act improves the image of VNG as a reliable contractual partner on the market. This is particularly important with a view to acquiring new sources for the import of gas, and is thus also in the interest of Germany’s energy security.