Electricity companies will get support in billions of euros, given the current energy crisis.
On Tuesday, Finland and Switzerland gave power firms billions of dollars in financial support as Europe rushed to ensure energy supplies in the midst of a crisis that was caused by Russia’s decision to shut down a significant gas pipeline.
In order to meet its collateral needs, Finnish utility Fortum announced it had entered into a bridge financing agreement for 2.35 billion euros ($2.34 billion) with government investment firm Solidium.
The assistance is in addition to the 10 billion euros in liquidity guarantees Helsinki announced on Sunday for electricity providers.
The government has given the Swiss utility Axpo a credit line of up to 4 billion Swiss francs ($4.1 billion) to help it meet its liquidity needs.
The Swiss government has prepared a 10 billion franc safety net for power companies, but despite the law still being in the parliament, they chose to give the money to Axpo.
In order to safeguard homeowners from rising energy costs and keep utilities from collapsing, European governments are pushing through multibillion-euro packages.
Benchmark gas prices in Europe have increased by approximately 340% over the past year. On Monday they increased by as much as 35% after Russia’s state-controlled Gazprom announced it would extend the shutdown of the important Nord Stream 1 gas pipeline indefinitely.
In retaliation for Western sanctions against Moscow over its invasion of Ukraine, Europe has accused Russia of turning energy supplies into weapons. Russia attributes the gas supply issues, which it attributes to pipeline defects, to the sanctions.
Fortum Chief Executive Markus Rauramo stated in a statement that “the ongoing energy crisis in Europe is driven by Russia’s determination to use electricity as a weapon, and it is now seriously harming Fortum and other Nordic power producers.”
Several big energy suppliers could be in danger due to limitations that cap the price increases they can pass on to consumers or being caught off guard by hedging bets, and many European power distributors have already collapsed.
In order to lock in a price, utilities frequently sell power in advance. However, they are required to keep a “minimum margin” deposit on hand before supplying the electricity. With rising energy prices, this has risen quickly, leaving businesses scrambling to raise money.
