HELSINKI: Finland and Switzerland offered financial backing to utility companies on Tuesday (Sep 6), the latest energy firms in Europe to receive state support as gas prices have spiked since Russia invaded Ukraine.
The conflict has created a cash crunch for power companies in Europe, prompting governments in several countries to open credit lines in recent months.
The Swiss Federal Energy office said on Tuesday that Axpo, a publicly-owned Swiss electricity group, will have access to 4 billion Swiss francs (US$4.1 billion) in credit to ensure liquidity after it requested the temporary aid last week.
“The government responded favourably to avoid putting Switzerland’s energy supply in jeopardy,” the office said in a statement, adding that Axpo was an electricity firm of “systemic importance” for the country.
In Finland, utility group Fortum said it had agreed on a bridge financing arrangement with the state – which is also the majority owner – to “ensure access to sufficient liquidity resources” if power prices continue to rise.
The liquidity facility gives Fortum access to €2.35 billion through state-owned holding company Solidium, but Fortum said “utilisation of the arrangement is a last resort”.
“The European energy crisis is a result of Russia’s decision to use energy as a weapon,” Fortum CEO Markus Rauramo said, adding that this has put his company and other Nordic energy suppliers “in a difficult situation”.
“There is great uncertainty in the market and energy prices have been record high,” Rauramo said.
Gas prices have soared since Russia invaded Ukraine.
Utilities rely on futures markets to guarantee a certain price for their supplies. Under the contracts, they are required to put collateral upfront.
But if prices rise, a company is required to put up more collateral, creating a potential cash crunch.
Fortum said the collateral tied up Nordic commodities exchange Nasdaq amounted to around €3.5 billion as of Sep 5.
“Regulatory changes are urgently needed to curb the unreasonably high margining and collateral requirements,” Rauramo said.
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