Trading futures on the Nasdaq exchange means that Norwegian power companies must suddenly guarantee large sums of money – so-called margin requirements. The purpose of these financial agreements is to exchange risk for safety and stability, but when the market makes big mistakes, the effect can be the opposite. Then the agreements become expensive and unpredictable. Helge Haugane, director of gas and energy at Equinor, told the Bloomberg news agency that the energy market “will dry up” unless European countries guarantee at least 1,500 billion dollars. – And that is a conservative estimate, he added during the Gastech conference in Milan this week. Helge Haugane in Equinor says the energy market “will dry up” unless European countries guarantee at least 1,500 billion dollars. Photo: Arne Reidar Mortensen / Equinor ASA Last Saturday, the Swedish and Finnish governments announced that they are providing billions in credits to Nordic energy companies – to prevent a domino effect of bankruptcies. The Ministry of Finance, the Ministry of Oil and Energy, Norway’s Bank and the Financial Supervisory Authority stated at the same time that Norwegian companies are solid enough to handle the cash crunch, but that the Norwegian governing authorities are “closely following developments”. It is not good enough for Energi Norge, which organizes Norwegian power companies. They encourage Norwegian authorities to provide “quick cash” in the same way as the Swedes. – Things are changing extremely quickly and we think it is right that the Norwegian governing authorities follow their Nordic colleagues and create a corresponding guarantee scheme. We must stand together to avoid the energy crisis also becoming a financial crisis, says director of Energi Noreg, Toini Løvseth. The Ministry of Finance at Vedum says that “the current assessment is that the measures announced in Sweden and Finland will reduce the risk of unrest in the financial system”. Photo: Beate Oma Dahle / NTB Selling itself to avoid a “cash crunch” A stock exchange announcement this week shows that the municipal power giant Eviny is reducing the amount of pre-sold power on Nasdaq Clearing from a net 4.4 TWh to 2.0 TWh. A sign that Norwegian power companies are selling down to avoid having to guarantee increasingly large amounts to the power exchange. The crisis explained Losses in the power industry are, in short, about two issues: (1) About problems with large margin requirements in contacts with Nasdaq Clearing (2) About large accounting losses on industrial contracts and bilateral contracts since the value of these plummets. In an extremely volatile (big swings) market, with a large margin of error, the Swedish and Finnish authorities are keen to provide loan guarantees for these positions. In Norway, the actors currently have no problem fulfilling their obligations, but the government announces that it is “monitoring closely”. Eviny states that the agreement means that the company now has “access to the necessary liquidity to meet its ongoing obligations”. – This move means that we are exposed as before, but we have moved the exposure away from the stock exchange and towards another counterparty, says CFO of Eviny, Anne Marit Steen. The reduction comes after Eviny last week presented half-year accounts with a deficit of NOK 1,201 million. The most important explanation is a loss of NOK 2.6 billion on hedging trading. The magazine Minerva writes that Eviny “many-folded this trade” in 2021. – This move means that we have moved the exposure away from the stock exchange and towards another counterparty, says CFO of Eviny, Anne Marit Steen. Photo: Ørn E. Borgen / NTB – The company has exposed itself to a lot Bergen municipality, which is the main shareholder in Eviny, announced on Monday that over time they have seen question marks in Eviny’s security strategy. Together with the other owners, they have asked for a meeting with the power producer later in September. Finance Council in Bergen, Per-Arne Hvidsten (V) tells news that he “doesn’t find it right” to get involved in the ongoing management of the power company, but that it is important for him to convey that the owners “envision a reduction in the security part’. A similar signal comes from the mayors of Sunnfjord and Austrheim, who are also among the owners of Eviny (see below). – It’s a worrying situation Jenny Følling (Sp), Mayor of Sunnfjord – It’s a worrying situation. We have not received information about the consequences of the company’s security strategy, what measures have been put in place and how the damage can be reduced. A meeting must be arranged immediately where all the owners are informed of the serious situation. Per Lerøy (Ap), mayor of Austrheim – The market has changed greatly in recent years and what was a business wise choice a few years ago is the opposite today. I am confident that Eviny will at all times do what they consider to be right for the company and the owners. A limited company must at any time maximize its owners’ values and I am sure that the management in Eviny is trying to do that, but in a market characterized by war and insecurity, it is extremely difficult to predict the future. A move declared genius today, can be judged north and down in a few weeks. – Our skepticism about the security strategy was reported at a meeting with all the owners before the summer, and there will now be a meeting during the autumn where Eviny is asked to ensure a good basis for discussion, says finance council in Bergen, Per-Arne Hvidsten (V) . Photo: Simon S. Brandseth / news – State guarantees are an emergency measure Energy policy spokesperson in Høgre, Nikolai Astrup, tells news that he “expects that the companies have good routines and strict rules for how they should handle risk”. – It is important that the companies do not incur financial obligations that have a say in how much power is produced when. If a company, for example, finds itself in a situation where power production must be increased because the company has to cover short-term income needs, at a time when they should actually have held back production, it would have been indefensible. He adds: – State guarantees are an emergency measure, where the state takes on financial responsibility for the company. It goes without saying that it is something one tries to avoid.
ttn-69
Power company sells itself on the stock exchange to avoid cash crunch – news Vestland
