Magdalena Andersson said on Saturday that the government would offer hundreds of billions of kroner in funding to power producers, who have seen the amount of collateral they have to post balloon in response to soaring gas and electricity prices and of growing volatility. EU energy ministers will also consider measures to ease liquidity shortages for energy companies across the bloc at an emergency meeting on Friday, according to two officials briefed on the discussions. Anderson warned that, if left unchecked, rising collateral requirements for power producers could ripple the main Nasdaq clearing market in Stockholm and, at worst, spark a financial crisis. Her remarks came after Russia said on Friday it would no longer supply natural gas through the Nordstream 1 pipeline. That announcement came after energy markets closed for the weekend. “Yesterday’s announcement not only risks leading to a ‘winter of war’, but also threatens our financial stability,” Andersson said, standing alongside Sweden’s financial regulator, central bank governor and emergency finance minister. press conference on Saturday. Finnish Finance Minister Annika Saarikko said on Twitter that her country would also act. “The concern is common. Similar preparations are already underway in Finland,” Saarikko tweeted. The dramatic actions underlined the seriousness of the situation facing Europe as it tries to secure enough power before winter and tries to avoid the spread of anxiety among power producers. After hitting an all-time high eight days ago, gas and electricity prices eased slightly this week, with benchmark gas and German power contracts both down by about a third — if and remain about 10 times historical levels. However, the prolonged shutdown of Nord Stream 1 could increase volatility and boost prices when trading reopens on Monday. Many European energy companies are benefiting from rising prices, but there are wide variations across the industry. Those that produce gas or generate electricity using renewable or nuclear sources — where input costs have not risen — should reap big profits. But those who depend on burning natural gas to generate electricity are more likely to struggle – especially if they are cut off from Russian supplies. The need to post additional collateral doesn’t mean the trades or hedges are unprofitable, but their positions — often tied to the supply of natural gas or electricity to households and businesses — have quickly become much more expensive to finance. Companies are struggling to raise their short-term borrowing facilities fast enough, risking a cash squeeze. Officials in Brussels are working on several possible ways to help energy companies, including emergency liquidity support, the two officials said. Margin calls were getting “too big” for power producers to pay, one said. Other measures could include price caps for either electricity or natural gas and ways to decouple the natural gas and electricity markets ahead of long-term reform. “The Russians are going to play with us and we are ill-equipped to deal with that,” the second official said. “We are not afraid of Putin’s decisions, we ask Putin to respect his contracts, but if he does not respect their contracts, we are ready to react,” Paolo Gentiloni, the EU’s economy commissioner, told reporters on Saturday in comments reported from news. Jean Francois Lambert, founder of Lambert Commodities and former head of commodity trade finance at HSBC, said other countries were likely to intervene in their energy markets. “The crisis is moving to the next stage. If one of the big energy companies collapses, there are fears there could be a domino effect,” he said. “The call for liquidity is so huge that maybe one day we have a problem that could hurt the whole market.” While the threat of contagion to the wider financial sector was limited, governments needed to act to stop the “freezing” of energy markets, he added. Andersson said Sweden’s support would apply to all Scandinavian and Baltic players and would need approval from the Swedish parliament’s finance committee on Monday. “We have to isolate it in a market so it doesn’t contaminate the financial sector,” said Stefan Ingves, governor of the Riksbank, Sweden’s central bank. Swedish authorities said they saw no immediate risk to financial stability, but were concerned that otherwise solvent companies could struggle to find enough liquidity, triggering potential repercussions. “Russia is waging an energy war against Europe to divide us. But we will not let Putin succeed,” Anderson said. Andersson’s comments come a week before a parliamentary election in Sweden, with opinion polls showing a close result. She said her centre-left government was ready to act, as it did on the Covid-19 pandemic. Erik Thedéen, head of Sweden’s Financial Supervisory Authority, said electricity prices in Sweden rose 11 times last year, leading to a jump in collateral requirements. He added that without liquidity support power producers could face defaults and large losses that could “shake up” the clearinghouse. “He’s under a lot of stress,” he said. Lambert said the situation was not yet a financial crisis. “The big banks in Germany, France, Italy and Spain should be able to realize this. But if one of their big customers gets caught in a liquidity crunch, then you could see all the banks go under,” he said. In July, the German government agreed a 15 billion euro rescue package for Uniper, Europe’s biggest buyer of Russian gas, and said it would take a 30 percent stake in the company. It has been losing tens of millions of euros a day since Gazprom first cut gas supplies to Germany via Nord Stream earlier this year. Late last month Uniper asked for a further €4 billion as rising gas prices burned through its cash reserves. Uniper, which is majority-owned by Finland’s Fortum, said it had already drawn down a 9 billion euro credit line from state development bank KfW. Fortum warned on Monday that its collateral requirements rose by €1bn to €5bn last week and that a default by a smaller player would cause “severe disruptions to the Nordic electricity system”. Additional reporting by Guy Chazan in Berlin
