Sweden announces $23 billion liquidity guarantees to power companies, Energy News, ET EnergyWorld
Stockholm: Electricity companies in Sweden and neighboring countries will receive credit guarantees of up to 250 billion Swedish kronor ($23 billion) to address the problems that have arisen on the electricity exchange, the Swedish government announced.
If approved by parliament, the Swedish government will task the National Debt Office with issuing the credit guarantees, which are expected to be in place before the stock markets close on Monday, Xinhua news agency reported.
Fears for Sweden’s financial stability arose when the total amount of collateral required from companies trading in electricity derivative contracts on Nasdaq Clearing AB increased from around SEK 70 billion in June to SEK 180 billion recently, due to soaring electricity prices, the government said at a press conference on Sunday.
Skyrocketing prices in Europe made it more expensive for utilities to buy and sell electricity because of the extra collateral required to guarantee deals in the electricity markets. This, in turn, has led to a lack of liquidity for utilities and pushed them into the risk zone of insolvency, according to the government.
A company’s inability to pledge its collateral, despite sound finances, could lead to instability at Nasdaq Clearing AB, which in turn would put the entire financial system at risk.
Sweden’s energy sector is in a difficult situation, which has been made worse by Russia’s decision to cut off the gas supply to Germany, says Sweden’s Finance Minister Mikael Damberg.
“We are therefore acting quickly to get guarantees in place to deal with the situation the electricity companies find themselves in and ultimately avoid a financial crisis.”