This Aug 15, 2022 photo shows an electricity pylon in Lydd, southern England. A deepening cost-of-living crisis in Britain is about to worsen, with millions of people expected to pay more a year on their household energy bills starting in October. (FRANK AUGSTEIN / AP)
HELSINKI/ZURICH – Finland and Switzerland provided billions in financial support to power companies on Tuesday, as Europe scrambles to secure energy supplies in a deepening crisis sparked by Russia's move to shut a major gas pipeline.
Finnish utility Fortum said it had signed a bridge financing arrangement with government investment company Solidium worth 2.35 billion euros ($2.34 billion) to cover its collateral needs.
A Finnish government official told Reuters the support was in addition to the 10 billion euros of liquidity guarantees Helsinki announced for power companies on Sunday.
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Swiss utility Axpo said it had received a credit line of up to 4 billion Swiss francs ($4.1 billion) from the government to help secure its liquidity needs.
European governments are pushing through multi billion-euro packages to prevent utilities from collapsing and protect households amid soaring energy costs
The Swiss government has lined up a 10 billion franc safety net for power firms, but decided to allocate the funds to Axpo even though the legislation is still before parliament.
European governments are pushing through multi-billion-euro packages to prevent utilities from collapsing and protect households amid soaring energy costs.
Benchmark gas prices in Europe have surged about 340 percent in a year, and jumped as much as 35 percent on Monday after Russia's state-controlled Gazprom said it would indefinitely extend a shutdown to the major Nord Stream 1 gas pipeline.
Europe has accused Russia of weaponising energy supplies in retaliation for Western sanctions imposed on Moscow over its special military operation in Ukraine. Russia blames those sanctions for causing the gas supply problems, which it puts down to pipeline faults.
"The ongoing energy crisis in Europe is caused by Russia's decision to use energy as a weapon, and it is now also severely affecting Fortum and other Nordic power producers," Fortum Chief Executive Markus Rauramo said in a statement.
The Financial Times also reported that Britain's largest energy supplier, Centrica, was in talks with banks to secure billions of pounds in extra credit. Centrica declined to comment.
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Many European power distributors have already collapsed and some major generators could be at risk, hit by caps that limit the price rises they can pass to consumers, or caught out by hedging bets.
Utilities often sell power in advance to secure a certain price, but must maintain a "minimum margin" deposit in case of default before they supply the power. This has raced higher with surging energy prices, leaving firms struggling to find cash.
The benchmark front-month Dutch gas price was down 10 percent at 220 euros per megawatt hour in early trade, but still up about 5 percent from Friday's close.