More European energy firms get state aid as prices soar

Finland and Switzerland offered financial backing to utility companies on Tuesday, 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 Tuesday that Axpo, a publicly-owned Swiss electricity group, will have access to four billion Swiss francs ($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.

Read also

Germany puts two nuclear plants on standby in energy U-turn

The liquidity facility gives Fortum access to 2.35 billion euros ($2.34 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 euros as of September 5.

Read also

European stocks, euro tumble as Russia fuels energy crisis

"Regulatory changes are urgently needed to curb the unreasonably high margining and collateral requirements," Rauramo said.

Europe-wide problem

Other governments in Europe have offered billions of euros in loans to energy firms.

German energy giant Uniper said last week it would need an additional four billion euros in state-backed loans after already having used a nine-billion-euro credit line, following a July deal.

Fortum, which is the majority owner of Uniper, clarified in its statement that its arrangement with the Finnish state could not be used to cover Uniper's needs.

Also last week, Austria announced a two-billion-euro loan for Wien Energie, the country's main electricity provider.

At the weekend, Sweden said it would provide liquidity guarantees to Nordic and Baltic energy companies worth up to $23 billion in a bid to prevent a financial crisis sparked by Europe's energy crunch.

Independently of the agreement with Fortum, the Finnish government also proposed Sunday a rescue package of up to 10 billion euros in loans and guarantees for energy companies facing insolvency.

Source: AFP