European energy industry "Lehman moment" is coming? Switzerland and Finland are also involved in lyrical distress trillion liquidity support is imminent
As the energy crisis intensifies, analysts warn that Europe's energy industry fears a "Lehman moment". To avoid a repeat of the 2008-style financial crisis, European governments have launched a wave of lyricism, providing huge amounts of liquidity support to utilities to prevent them from falling under the financial pressure of the energy market turmoil.
After the governments of Germany, Austria and Sweden have come to their aid, the latest European countries to offer assistance are Switzerland and Finland.
Energy markets are so volatile that power producers are saddled with huge margins to hedge the deals they sell. European governments fear that some utilities will not be able to pay the money, and any similar default scenario could trigger a chain reaction in the financial system.
The Swiss government said Tuesday it will lend 4 billion Swiss francs ($4.1 billion) to publicly traded Axpo to meet margin payments on its forward power contracts. The Swiss government has reportedly set up a 10 billion Swiss franc safety cushion for the power sector.
Also on Tuesday, Finnish utility Fortum said it had signed a €2.35 billion ($2.34 billion) bridge financing arrangement with government investment firm Solidium to meet soaring margin requirements in the Nordic power derivatives market.
However, the size of the current bailout that has been announced by European countries may be just a drop in the bucket. Norwegian energy group Equinor warned that European energy companies need at least 1.5 trillion euros ($1.5 trillion) to meet margin calls (not including companies in the U.K.), or European energy trading could come to a halt.
For now, the energy market turmoil continues. On Monday, after Gazprom announced an indefinite halt to gas supplies from the Nord Stream pipeline, European benchmark gas futures prices spiked 35% at one point, before falling back sharply on Tuesday.
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