Sweden, Finland to offer utility firms billions of dollars in liquidity guarantees
- Sweden will provide Nordic, Baltic utilities up to US$23.2 billion in credit guarantees while Finland aims to offer US$9.95 billion
- Surging energy prices in Europe have made it more expensive for utilities to buy and sell electricity, because of the collateral required for trades on power markets
Finland is aiming to offer 10 billion euros (US$9.95 billion) and Sweden plans to offer 250 billion Swedish crowns (US$23.2 billion) in liquidity guarantees.
The measure is aimed at helping companies struggling to meet the surging collateral requirements needed to trade electricity, and avoid the threat of some going into technical defaults as soon as Monday, Finance Minister Mikael Damberg said at a news conference in Stockholm. Utilities registered with Nasdaq Clearing AB are eligible for the guarantees.
“The issue is currently isolated to energy producers, but unless we act, it could have contagion effects on the rest of the financial market,” the minister said on Sunday. “Ultimately, it could lead to a financial crisis.”
The surging price of energy in Europe has made it more expensive for utilities to buy and sell electricity, because of the collateral required to guarantee trades on power markets facing unprecedented turbulence.
The facility is made up of loans and credit guarantees, Finland’s Prime Minister Sanna Marin said at a news conference in Helsinki on Sunday that the facility will be made up of loans and credit guaratantees.
Fortum Oyj of Finland said on August 29 that its collateral rose by 1 billion euros (US$1 billion) in a week to five billion euros, excluding funds posted by its German subsidiary Uniper SE.