Nordstream: Change of boss, relocation of headquarters, shortage of time and money

For more than a year and a half now, the Zug operating company of the Baltic Sea Gas Pipeline Nord Stream 2 has been considered de facto insolvent. Without restructuring or agreement with creditors within the immediate future, there is a risk of foreclosure. With far-reaching consequences.

It has been almost two years since the operating company of the Nord Stream 2 gas pipeline laid off over 100 employees at its headquarters on the Baarerstrasse in Zug, and deposited its balance sheet with the Zug Cantonal Court. The move came less than a week after Russian troops invaded Ukraine on 24^th February 2022.

The sanctions immediately imposed by the USA against the company and its then managing director Matthias Warnig had an immediate effect. The blocking of its accounts and communication channels prevented any financial transactions - at least temporarily – caused the subsidiary of the Russian Gazprom Group to slip into an acute liquidity crisis.

This continues to this day. Nord Stream 2 AG has been in probate proceedings for more than a year and a half, and a definitive moratorium has been in effect since January 10, 2023. This status is granted if the operating costs are being covered and there is a prospect of restructuring or an agreement with the creditors. During this time, a company is allowed to continue its operations without being put into liquidation..

The definitive deferral cannot be extended forever, however. According to the law, two years is the upper limit. In this regard, Nord Stream 2 AG is currently halfway through. The Zug Cantonal Court recently extended the deadline again by six months, until 10th July 2024; and it could be extended by another six months, until 10^th January 2025. Then it's definitely over. If no restructuring or agreement is reached by then, the company will be liquidated.

Consequently, the fate of the operating company, on which that of the pipeline always depends, will be decided in the next twelve months. Not only the few remaining employees are afraid of compulsory enforcement, but also the creditors and the affected countries, namely Germany, Russia, Denmark, Finland and Sweden. Because even though no natural gas is currently flowing from Russia to northern Germany, the two 1,230-kilometre-long pipes of Nord Stream 2 have to be maintained.

The status quo is the best scenario
Environmental associations have long been warning about the consequential damage of a potentially unmonitored pipeline wreck in the Baltic Sea. These warning calls have certainly not become quieter following the sabotage operation in September 2022, the origins of which are still unclear, in which one section of Nord Stream 2 was damaged,.

Pipeline section in the Mecklenburg-Western Pomerania in Germany, which was intended to feed gas into the European network after the completion of Nord Stream 2.  Photo: Stefan Sauer, 2019
Inconspicuous entrance to the old headquarters of Nord Stream 2 AG in Zug           Photo: Stefan Kaiser
Philipp Possa in his office at Transliq in Bern          Photo: Dominik Wunderli
Former German Chancellor and current Nord Stream 2 VRP Gerhard Schröder (left) with former CEO Matthias Warnig in Lubmin, Germany, where the gas pipeline ends.  Photo: Stefan Sauer

All of this is also being taken into account in the decision-making process regarding the operating company, says Philipp Possa from the Transliq company. This company, which specialises in debt collection and bankruptcy law, is acting as administrator in the Nord Stream 2 case. Philipp Possa is familiar with the legal nuts and bolts. Among other things, he was involved in the inheritance proceedings of Swisscargo from the Swissair complex and the late financial jongleur Dieter Behring.

He describes the Nord Stream 2 case as “extraordinary”, however, because of its geopolitical components. With a view to a possible commercial commissioning of the pipeline in the future, he explains: “Maintaining the pipeline and maintaining the status quo is currently the best scenario for everyone involved.” This is also why the debt moratorium has been extended so far.

Out of consideration for those responsible, he does not want to provide any information about who will bear the running costs of Nord Stream 2 AG, which currently has no income. According to previous research by the Zuger Zeitung newspaper, a subsidiary of the Gazprom network has covered at least part of the temporary financing.

Some of the investors and lenders are said to have already written off their claims. The European energy companies Wintershall Dea and Uniper (both German), OMV (Austria), Engie (France) and Shell (UK) hold major stakes in Nord Stream 2. When asked about the write-offs, Philipp Possa replied: "Even if this were the case, it doesn’t mean that these creditors are waiving their claims."

Committee has taken over the management
What will happen to the pipeline if no solution for the operating company is found by 10 January 2025 at the latest is currently a matter of speculation. There are hardly any comparable precedents. Around 25 employees in Zug are currently still entrusted with technical and administrative tasks. In the meantime, the management wants to remain under the radar of the public.

The company did not respond to an enquiry. The company spokesperson, who last gave the Zuger Zeitung newspaper information via a private mobile phone, has since left the company, and there is no official successor. Nord Stream 2 AG has had a turbulent few months behind it.

In the middle of the debt restructuring proceedings, the sanctioned company boss Matthias Warnig stepped down at the age of 67 in March 2023. According to well-informed circles, a four-member committee has taken over the management on an interim basis. It is not clear which of the persons entered in the commercial register is in charge, however. The German former Chancellor Gerhard Schröder continues to act as Chairman of the Board of Directors.

In addition, the auditors already had to be replaced in autumn 2022, because the PwC company bailed out and the company headquarters were moved from Zug city centre to Steinhausen. According to administrator PhilippPossa, the latter at least is not related to the ongoing debt restructuring proceedings, and had already been planned before the deferral was granted. "The relocation had to do with the transition from the project phase to the operational phase."