The system would be valid until the end of next year and would offer loans on a case-by-case basis with a repayment period of up to two years on stricter terms than market conditions, the details of which will be clarified on Monday.
The government will discuss the proposal in its plenary session today.
“Taxpayers’ money is not transferred anywhere. The conditions are very strict. This is not about transferring taxpayers’ money anywhere. We are talking about the loan program, Prime Minister Sanna Marin (SDP) was quoted saying Helsingin sanomat newspaper.
the Treasury minister Annika Saarikko (The Center) stated that the financing arrangement primarily aims to prevent companies from becoming insolvent as a result of collateral requirements that weaken their liquid assets.
“According to our estimate, this would affect approximately 30 electricity producers. We are not talking about handing over money to the company for free, but about loans granted under very strict conditions, he said.
Minister of Economy Mika Lintilä (The Center) described the scheme as an attempt to cool the electricity market by signaling that government funding may be available as a last resort. According to Lintilä, it is not difficult to identify companies facing a liquidity crisis relatively quickly in Finland.
The risk of a domino effect also exists in the country. “Here are the ingredients for this to be the Lehman Brothers of the energy industry,” he characterizes.
Russia’s war of aggression in Ukraine has seriously disrupted the European electricity and natural gas markets. Disturbances in the common wholesale market have been reflected in electricity prices in Finland as well.
Rising prices, on the other hand, have increased the collateral needs of energy companies by up to 1000 percent to hundreds of millions if not billions of euros. Electricity producers who use future derivatives to secure their protection may be required to provide collateral so that the buyer can obtain electricity from another producer if delivery is not successful.
The security is defined based on the difference between the selling price and the market price.
Jukka LeskeläSuomen Energia’s CEO said on Sunday that he was satisfied with the government’s proposal.
“It is clear that applying for funding is primarily the responsibility of the companies, but if they are not successful [financing] it is important that the board is ready to secure the continuity of operations”, he commented to Helsingin Sanomat.
Matti Liski, professor of economics at Aalto University, stated to the newspaper that the government is in a hostage-like situation partly due to the previous failure to curb the market’s expectations of maximum prices. He added that the government is providing financing because of problems caused by old energy contracts, while unprotected generation is expected to be very profitable due to energy shortages.
“The whole crux of the problem is in the wholesale electricity market,” he saw.
“The European Union should quickly introduce a price cap on the wholesale market, in which case collateral requirements will immediately decrease and companies’ struggles would be eased, but the price of electricity would remain under control.”
Aleksi Teivainen – HT
Source: The Nordic Page
