Mecklenburg-Western Pomerania’s Prime Minister Manuela Schwesig and Bavaria’s Prime Minister Markus Soeder visit a pipeline transfer station of the Baltic Sea pipeline link near Lubmin, Germany, August 30, 2022. Portal/Lisi Niesner
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- UK to freeze energy bills for this winter and next – BBC
- Over $1.5 trillion in margin calls in Europe excluding the UK Equinor
- Finland’s Fortum receives EUR 2.35 billion bridging loan
- The Swiss Axpo receives a credit line of up to 4 billion Swiss francs
- Centrica in talks with banks for special loan – FT
HELSINKI/ZURICH, Sept 6 (Portal) – – Britain’s new prime minister is working on what is being seen as Europe’s biggest energy crisis support package as countries scramble to protect households and businesses from soaring bills and prop up struggling suppliers.
Liz Truss, who succeeded Boris Johnson on Tuesday, plans to freeze household energy bills at current levels for this winter and next, which will be paid for by government-backed loans to suppliers, the BBC reported, adding that the program could cost 100.00 euros. £130 billion (US$116-151 billion).
The government is also working on aid for businesses, but these are likely to be more complex and subject to more frequent scrutiny, the BBC said.
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European governments are pushing for multibillion-euro packages to avert utility collapses and protect homes amid rising energy costs, largely fueled by the aftermath of the Russian invasion of Ukraine.
Benchmark European gas prices are up about 340% in a year and jumped as much as 35% on Monday after Russia’s state-controlled Gazprom (GAZP.MM) announced it would indefinitely extend the shutdown of major gas pipeline Nord Stream 1 . Continue reading
Europe has accused Russia of arming energy supplies in retaliation for Western sanctions against Moscow over its invasion of Ukraine. Russia blames these sanctions for gas supply problems, which it blames on pipeline failures.
Germany said on Sunday it would spend at least 65 billion euros to protect customers and businesses from skyrocketing inflation, mainly fueled by higher energy costs. Continue reading
Several countries are also supporting billions of dollars in utilities that face sharp price swings that force them to post huge collateral for supplies.
Norwegian energy company Equinor estimates these collateral calls, known as margin calls, total at least €1.5 trillion ($1.5 trillion) in Europe excluding the UK. Continue reading
RECESSION FEAR
Finnish energy company Fortum (FORTUM.HE) announced on Tuesday that it has signed a €2.35 billion bridge financing agreement with state-owned investment company Solidium to meet its collateral needs. Continue reading
A Finnish government official told Portal the support is in addition to the €10 billion in liquidity guarantees Helsinki announced for energy companies on Sunday. Continue reading
“The ongoing energy crisis in Europe, caused by Russia’s decision to use energy as a weapon, is now also severely affecting Fortum and other Nordic power producers,” Fortum chief executive Markus Rauramo said in a statement.
Swiss utility Axpo (AXPOH.UL) said it had requested and received a credit line of up to 4 billion Swiss francs ($4.1 billion) from the government to support its finances. Continue reading
The Swiss government has put in place a CHF 10 billion safety net for energy companies but has opted to allocate the funds to Axpo, although the law is still in parliament.
The Financial Times also reported that Britain’s largest energy supplier, Centrica (CNA.L), was in talks with banks to secure billions of dollars in additional loans. Centrica declined to comment. Continue reading
Many European power distributors have already collapsed, and some large generators could be at risk, hit by caps that limit the price increases they can pass on to consumers, or caught off guard by hedging bets.
Utilities often sell electricity up front to secure a certain price, but are required to deposit a “minimum margin” before delivering the power in the event of an outage. This has skyrocketed as energy prices soar, leaving businesses struggling to find cash.
Rising prices are forcing energy-hungry industries to scale back production, increasing the likelihood of European economies sliding into recession.
Aluminum Dunkerque, France’s largest aluminum smelter, plans to cut production by a fifth in response to rising electricity prices, a source close to the matter told Portal on Tuesday. The company could not immediately be reached for comment.
The benchmark Dutch front-month gas contract fell 9.6% to 222 euros per megawatt-hour by 1215 GMT but was still up about 5% from Friday’s close.
($1 = 1.0085 euros)
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Additional reporting by William James, Susanna Twidale, Nora Buli, Caroline Pailliez and Gus Trompiz; Writing from Mark Potter; Edited by Jan Harvey and Carmel Crimmins
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Michael Shields