Finland’s Fortum secures 2.35 bln euro loan to stave off energy crisis

The sign of Finnish energy company Fortum is seen at its headquarters in Espoo, Finland July 17, 2018. REUTERS/Ints Kalnins/File Photo

HELSINKI, Sept 6 (Reuters) – Finland’s Fortum ( FORTUM.HE ) said on Tuesday it had signed a bridge financing deal with Finnish government investment firm Solidium for 2.35 billion euros ($2.34 billion) to cover the growing collateral needs in the Nordic energy raw materials market. .

European countries are stepping up efforts to shore up power companies after Russia shut down the main Nord Stream 1 gas pipeline, worsening the continent’s energy crisis. Read more

The bridge loan to Fortum is in addition to a 10 billion euro credit package for the electricity industry, announced by Finland on Sunday. Read more

“The ongoing energy crisis in Europe is caused by Russia’s decision to use energy as a weapon and is now also seriously affecting Fortum and other Nordic energy producers,” CEO Markus Rauramo said in a communicated

His comments echo a similar view by the CEO of the German unit of Fortum Uniper ( UN01.DE ) and accusations in Europe that Russia is weaponizing energy supplies in retaliation for Western sanctions imposed on Moscow for the war in Ukraine.

Russia says the West has launched an economic war and sanctions have caused gas supply problems. Read more

Fortum has said its main derivatives exposure on Nasdaq Clearing relates to the Nordic system’s 2023 power price contracts.

Global industry collateral requirements in the Nordic energy derivatives market recently reached SEK 180 billion ($16.7 billion), up from SEK 25 billion in normal times after energy prices rose 1,100 %, Sweden’s debt office said on Saturday.

Fortum said its Nasdaq-linked collateral stood at about 3.5 billion euros at Monday’s market close, well above historic levels but below the roughly 5 billion required on Aug. 26 as prices of the energy had dropped a little.

“The stabilization of Fortum’s financial position in the current market situation is understandable in the interest of the state owner,” Solidium chief executive Reima Rytsola said in a statement, adding that the loan was “exceptional”.

URGENT

Although parliament will start working on legislation for the €10bn package on Tuesday, the government said it wanted to ensure an immediate solution was put in place for Fortum, adding to the €2.35bn loan.

“This arrangement has been made precisely so that if a critical situation arises, this funding would be available immediately,” senior financial adviser Maija Strandberg of the government’s property management department told Reuters.

The jump in gas and electricity prices driven by a drop in gas flows from Russia since its invasion of Ukraine has put huge pressure on utilities. Read more

The terms of the loan guaranteed by Fortum said it could only be used for units in the Nordic region, and not to prop up Uniper, which has sought a multibillion-dollar bailout from the German government.

Fortum said it currently has sufficient liquid funds to cover collateral needs and would only withdraw funds as a last resort.

“The agreement aims to strengthen Fortum’s liquidity reserves and thereby secure Finnish energy supply,” the government said in a separate statement.

The first installment of the one-year loan would be 350 million euros and must be withdrawn by September 30 for the deal to remain in effect, Fortum said.

Solidium would also get an option to buy 1% of Fortum’s shares, increasing the state’s stake to 51.26%, the power company said.

($1 = 1.0042 euros)

($1 = 10.7520 SEK)

($1 = 0.9805 Swiss francs)

Reporting by Essi Lehto, editing by Terje Solsvik and Emelia Sithole-Matarise

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