Breaking News
Investing Pro 0
Free Webinar - The Role of Psychology in Trading - Thursday, December 8, 2022 | 04:00PM EST Enroll Now

Sweden, Finland step in to avert Lehman-like situation for power companies

Stock Markets Sep 04, 2022 01:35PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Swedish Finance Minister Mikael Damberg attends a press conference to propose relief for households affected by high electricity prices, in Rosenbad, Stockholm, Sweden January 12, 2022. Johan Jeppsson /TT News Agency/via REUTERS/File Photo
 
GAZP
-0.43%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Supantha Mukherjee and Essi Lehto

STOCKHOLM/HELSINKI (Reuters) -Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to power companies in their countries after Russia's Gazprom (MCX:GAZP) shut the Nord Stream 1 gas pipeline, deepening Europe's energy crisis.

Finland is aiming to offer 10 billion euros ($9.95 billion) and Sweden plans to offer 250 billion Swedish crowns ($23.2 billion) in liquidity guarantees.

"This has had the ingredients for a kind of a Lehman Brothers of energy industry," Finnish Economic Affairs Minister Mika Lintila said on Sunday.

When Lehman Brothers, the fourth-largest U.S. investment bank at the time, filed for bankruptcy in September 2008 with more than $600 billion in debt, it triggered the worst parts of the U.S. financial crisis.

"The government's programme is a last-resort financing option for companies that would otherwise be threatened with insolvency," Finland's Prime Minister Sanna Marin told a news conference.

State-controlled Finnish power company Fortum, which last week had urged Nordic regulators to take immediate action to avert defaults even among smaller players, praised the proposals made by Helsinki and Stockholm.

"We appreciate Finnish and Swedish governments taking swift action to stabilise the Nordic derivatives market and support Nordic energy companies in time of crisis," the company tweeted.

"It's crucial to keep companies operational. Our discussions with the Finnish government are ongoing," it said.

The guarantees aim to prevent ballooning collateral requirements from toppling energy companies that trade electricity on the Nasdaq Commodities exchange, an event that could in turn spread to the financial industry, the governments said.

Lower gas flows from Russia both before and after its February invasion of Ukraine have pushed up European prices and driven up electricity costs.

The rapid rise in electricity prices has resulted in paper losses on electricity futures contracts of power companies, forcing them to find funds to post additional collateral with the exchanges.

The collateral requirement on Nasdaq clearing recently hit 180 billion Swedish crowns, up from around 25 billion in normal times due to the surge in power prices, which have risen some 1,100%, Sweden's debt office said on Saturday.

The government feared that the Nord Stream 1 shutdown would lead to a further surge.

Finland's Marin said there needed to be measures at the European Union level to stabilize the functioning of both the derivatives market and the energy market as a whole.

Nasdaq clearing is a Swedish company supervised by Swedish authorities, which is the main reason Sweden was the first country to step in to tackle the potential crisis.

Swedish Finance Minister Mikael Damberg said on Sunday that the guarantees would last until March next year in Sweden and would 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.

($1 = 10.7633 Swedish crowns)

($1 = 1.0049 euros)

Sweden, Finland step in to avert Lehman-like situation for power companies
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Richie Berg
Richie Berg Sep 04, 2022 10:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What could be wrong with more free money? Heck governments could stop taxing and just print money.
Drr Terry
Drr Terry Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What a disaster as Sweden now follows Austria (which just bailed out Wien Energie on Wednesday with a 2 billion loan). Watch out as a liquidity ripple effect is now in the process of unfolding in Europe as more and more energy companies will come forth looking for Gov't bailouts. This will basically have the effect of pulling liquidity out of the system (and away from from non-energy businesses) at the same time the ECB is trying to follow the Fed and pullback on the excessive liquidity they pumped out during Covid. Only a matter of time before Europe has a "Minsky Moment" and something breaks. So sad.....
Karl Kessler
Karl Kessler Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They can burn money in oil drums to stay warm, while they figure out that it's ENERGY and not MONEY that matters. Please, we need people in government that know what a Joule is. What a BTU is. What a kilowatt hour is. Please. PLEASE.
Kris Jay
Kris Jay Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Karl Kessler  they know what a joule is just they spell it jewel
jason xx
jason xx Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The only thing that will break is the Russian economy. You think they can afford losing so much energy revenue? It's crumbling as it is.
Drr Terry
Drr Terry Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
jason xx  Hi Jason. No you're incorrect regarding Russia. Actually they're bring in plenty of revenue (despite western sanctions) because a) they've off-loaded alot of the excess energy from the sanctions to countries not part of the western alliance (China, India etc) and b) soaring energy prices in Europe more than compensated Russia for the loss in sales volume due to sanctions.
Gee Sss
Gee Sss Sep 04, 2022 10:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
jason xx The unfortunate reality is that we've been outsourcing our labour and manufacturing ability to countries such as China and India.  China manufactures the most steel in the world while we've dramatically reduced our capacity to make it.  Plenty of chinese steel is garbage quality, but even adjusting for complete lemons, it's significantly more.  We can't really push them too far.  Semi conductors are one thing, nearly every material good including pharmaceutical precursors are made there or India.
Warm Camp
Warm Camp Sep 04, 2022 8:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Another bankrupted country. Homeland of renewable energy.
Martin Ses
Martin Ses Sep 04, 2022 8:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
talking *******buddy
Kris Jay
Kris Jay Sep 04, 2022 8:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Martin Ses  they are indeed socialist "green" countries.  and look at where it gets them?  Is that what you want for the US
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email