Sweden’s Vattenfall accounts for the cash outflow from margin calls
OSLO, Oct 27 (Reuters) – Swedish energy company Vattenfall is preparing for an expected outflow of cash from margin calls caused by high volatility in the energy market, the company’s chief executive told Reuters on Thursday, following inflows this year.
Deposits made by companies to hedge financial energy trades, known as margin calls, have been pushed higher by a rise in electricity prices that has left some seeking government help to secure funds.
So far, the power producer Vattenfall has seen large inflows from margin requirements, says CEO Anna Borg.
“But eventually, as prices go down, or as the positions go into delivery, we will of course also have an outflow of margin calls,” she added.
Cash and cash equivalents on the company’s balance sheet rose to SEK 173.4 billion at the end of September from SEK 90.2 billion at the end of June, the company’s earnings reports for the second and third quarters showed.
Vattenfall has increased efforts to produce detailed forecasts of its liquidity needs to handle expected larger and faster price fluctuations than before, says Borg.
The company has issued some bonds to ensure extra liquidity and would issue more in the future if needed, Borg said.
The state-owned company on Thursday reported a 30% increase in underlying earnings before interest and tax for the third quarter to 6.2 billion Swedish kronor ($570.34 million) from 4.8 billion a year earlier.
“The third quarter was characterized by the turbulent markets and there is great uncertainty ahead of the winter,” says Borg in the financial report.
The company’s wind and sales segments benefited from price increases in the market and offset the negative impact of price differences between Nordic price areas, it said.
The Nordic standard price for wholesale electricity averaged €176.35/MWh, up from €68.27/MWh, in line with higher European prices caused by the war in Ukraine.
But in Sweden, which is divided into four market areas, prices in the north were as low as 43.73 euros/MWh compared to 209.32 euros/MWh in the far south, data from electricity exchange Nord Pool showed.
($1 = 10.8707 Swedish kronor)
Reporting by Nora Buli, editing by Anna Ringström, Terje Solsvik and Barbara Lewis
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