After Nord Stream 1 was closed, Sweden, Finland were forced to avert crisis for energy companies
The guarantees are aimed at preventing collateral requirements from toppling energy companies that trade electricity on the Nasdaq Commodities exchange, an event that could in turn spill over into the financial industry, the governments said.
Fortum in Espoo, Finland.Credit:AP
Lower gas flows from Russia both before and after the invasion of Ukraine in February have pushed up European prices and driven up electricity costs.
The rapid increase in electricity prices has resulted in paper losses on electricity futures contracts for power companies, forcing them to find funds to post additional collateral with the exchanges.
The collateral requirement for Nasdaq clearing recently reached 180 billion Swedish kronor, up from around 25 billion during normal times due to the strong power prices, which have risen by around 1,100 percent, Sweden’s National Debt Office said on Saturday.
The government feared that the shutdown of Nord Stream 1 would lead to a further increase.
Finland’s Navy said that measures are needed at the EU level to stabilize the functioning of both the derivatives market and the energy market as a whole.
Nasdaq clearing is a Swedish company under the supervision of Swedish authorities, which is the main reason why Sweden was the first country to step in to tackle the potential crisis.
Sweden’s Finance Minister Mikael Damberg said on Sunday that the guarantees will apply until March next year in Sweden and also cover all Nordic and Baltic nations for the next two weeks only.
Without government guarantees, electricity producers could have ended up in “technical bankruptcy” on Monday, Damberg said.