In recent days, news about the problems of key energy companies have appeared, for example, from Norway, Sweden or Switzerland. The Equinor ASA group, for example, warned that European energy trading is at risk of collapse, under the weight of calls to pay margins of at least 1.5 trillion dollars, which is roughly 36 trillion crowns in conversion.
The energy company Fortum Oyj has already received a loan of 2.35 billion euros (about 58 billion crowns) from the Finnish government to ensure liquidity. Switzerland then provided a credit line of 4 billion francs (roughly 100 billion crowns) to the renewable energy producer Axpo.
For example, the British company Centrica, which is the largest energy supplier in the United Kingdom, is to discuss credit lines, Bloomberg writes.
What is a line of credit?
A contract on the basis of which a financial institution makes a certain amount of money available to a borrower.
During this period, he can use the entire credit limit, or only part of it.
The problem of the present time is that producers, importers and traders have to make so-called margin calls on the energy markets, i.e. advances for the settlement of future trades. Companies have billions of euros frozen because of this, and there are fewer trades on the stock exchange for this reason as well.
The resulting price on the markets in such a situation consists of contracts of negligible volume, which makes the tension even worse. If the governments managed to at least reduce this margin burden on stock market players, the trades could at least partially move again. For this, states could use, for example, loans or state guarantees for contracts that can be concluded.
Energy in the sights of politicians
In recent weeks, politicians have gradually begun to listen to warnings from the industrial sector. He has been repeating since last winter that due to high prices, political support is necessary to maintain the stability of the energy environment.
“We must do everything in our power to secure energy supplies in the future. We have to avoid the fact that a company gets into trouble due to insufficient liquidity and could drag down other businesses as well,” Swiss Energy Minister Simonetta Sommaruga told Bloomberg.
The European Commission, which wants to involve the European Central Bank in the game, is already examining possible steps. Credit lines, temporary suspension of derivatives markets or the creation of completely new financial products come into consideration.
Some experts see the seriousness of the situation similarly. “Governments must be prepared to manage the situation and support companies through direct loans,” said Kristian Ruby, who is secretary of the Eurelectric association, which defends the interests of the electricity industry at European level.