Nasdaq says Sweden, Finland guarantee support for orderly power trading By Reuters
© Reuters.
By Anna Ringström
STOCKHOLM (Reuters) – Liquidity guarantees pledged by Sweden and Finland to support the Nordic power derivatives market will support orderly trading at a time of extreme uncertainty, Nasdaq Nordic said on Monday.
The two countries announced plans on Sunday to offer up to $33 billion in guarantees to power companies and traders after Russia’s Gazprom ( MCX: ) shut down the Nord Stream 1 gas pipeline, deepening Europe’s energy crisis.
Two-thirds of the money would be put up by Sweden and offered over the next two weeks to all Nordic companies trading electricity derivatives to prevent a collapse of the Nasdaq Clearing system, the Swedish government has said.
Clearinghouse owner Nasdaq Nordic said in an email that it believed Nasdaq Clearing and its members were well prepared for dramatic market price movements.
“We recognize that this is a time of extreme uncertainty and the addition of government liquidity guarantees will add an extra layer of stability to support orderly trading and energy companies,” it said.
Lower gas flows from Russia before and after its invasion of Ukraine have driven up energy costs, triggered paper losses on futures contracts and forced companies to post more collateral with Nasdaq Clearing.
The Finnish government said its loans to power companies under the guarantee scheme will initially have an interest rate of 10% plus the six-month daily Euribor reference rate.
Even before Nord Stream 1 was shut down, the demand for such collateral reached 180 billion Swedish kronor ($16.6 billion), up from 25 billion in normal times after electricity prices rose by about 1,100%, Sweden’s interest rate office said on Saturday.
Europe’s benchmark gas price on Monday rose 35%, adding to the strain.
Finland’s budget document on Monday said the country should be prepared for derivatives costs to double or triple and said failure to meet those requirements could have major consequences.
“If several companies risk insolvency at the same time, this could trigger a transfer of power plants to foreign owners. This is crucial for Finland’s security of supply,” the government says in the document submitted to the Riksdag.
Swedish state-owned company Vattenfall welcomed all initiatives to stabilize the market and said its own economy was stable. It declined to comment on Sweden’s proposal to offer additional liquidity guarantees.
Peer Fortum, majority-owned by the Finnish state, urged authorities last week to take steps to stabilize the market, adding that its standalone collateral tied to the Nasdaq Nordic Commodities exchange had soared.
Fortum’s stock fell 8% on Monday to trade at an 18-year low.
($1 = 10.8225 Swedish kronor)