Stockholm 5 Sep : Electricity firms in Sweden and other countries will be granted credit guarantees of up to 250 billion Swedish crowns ($23 billion) to address the issues that have occurred in the electricity market the Swedish government announced.If the parliament approves If it is approved by the parliament, the Swedish government will appoint the National Debt Office to issue the credit guarantees which will be in place before the markets shut on Monday, Xinhua news agency said.
Concerns about Sweden’s financial stability were raised when the total amount of required collateral for companies’ trading in derivatives of electricity with Nasdaq Clearing AB increased from 70 billion crowns in June to 180 billion crowns in the last few months due to the skyrocketing electricity prices, Sweden’s government stated at a press conference Sunday.
Prices that have risen dramatically in Europe have made it harder for utilities to purchase and sell electricity due to the expense of the additional collateral needed to protect the power market.
This has in the process led to an absence of the liquidity needed by utilities and put them towards the risk of bankruptcy according to the federal government.
Inability of a company to provide its security, even with solid financials, could result in the instability of Nasdaq Clearing AB, which in turn could put the entire financial system in danger.
The Swedish energy sector is in an uneasy situation, which is made worse due to Russia’s decision to stop gas supplies to Germany according to Swedish Finance Minister Mikael Damberg.
“We are therefore taking action fast to put assurances in place to manage the current situation that electric businesses are in and, ultimately, avoid an economic crisis.”
(1 Swedish crown = $0.093)
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