Energy | Fortum is negotiating with the government about a support package to cover the growing collateral requirements

Energy company is negotiating with the Finnish government on a support package that would secure Fortum’s short-term liquidity in a situation where the collateral required from the company has multiplied in a short time and grown to billions. CEO of Fortum Markus Rauramo told about it in the results information on Thursday.

Rauramo did not say in what form the support could come or how much support Fortum needs. According to Rauramo, the Fortum group’s collateral requirements are currently around 11 billion euros, of which parent Fortum’s share is more than four billion euros. The rest of the claims are aimed at Uniper, and according to Rauramo, the German state-owned KfW bank is responsible for them.

Fortum is therefore in a very similar situation to its German subsidiary Uniper at the end of last year. At that time, the rise in the market price of gas drove Uniper into a liquidity crisis, and Fortum granted the company eight billion euros in loans and guarantees.

When Fortum sells electricity, the customer can demand a guarantee that lives up to the market price of electricity. The idea is that if Fortum is not able to deliver electricity, the security is enough for the customer to buy the electricity they need from the market.

Fortum has sold, for example, electricity to be delivered next year at a price of less than 40 euros per megawatt hour. On the stock exchange that sells electricity derivatives, the price of supplies for the first quarter of next year was already 440 euros per megawatt hour on Thursday at 1 pm.

Fortum has to cover the price difference with guarantees. The security is released when the electricity is delivered.

Rauramon according to the company’s situation is still under control.

“As an electricity company, our situation is not yet critical, but if prices continue to rise, we too will have to increase our working capital,” says Rauramo in the company’s earnings release.

However, according to Rauramo, the collateral requirements tie up an “unhealthy” amount of capital, which is not for, for example, investments. That is why the company has turned to the state. The state owns the majority of Fortum’s shares.

According to Rauramo, the support offered by the German state to Uniper could serve as a model for support in the Nordic countries as well. At the turn of the year, the German state-owned KfW bank granted Uniper a standby loan of two billion euros to cover liquidity needs.