More liquidity support for energy utilities under looser EU state aid rules

More liquidity support for energy utilities under looser EU state aid rules

by Reuters News Service
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Energy companies, hit by soaring power and gas prices related to the war in Ukraine, can secure public guarantees exceeding 90% coverage from EU governments to cover margin call requirements under looser state aid rules, the European Commission said on Friday.

Energy suppliers across Europe have struggled with a liquidity problem in the face of record-high wholesale power and gas prices following Russiaโ€™s invasion of Ukraine, prompting governments to step in to help.

Utilities often sell power in advance to secure a certain price, but must maintain a โ€œminimum marginโ€ deposit in case of default before they supply the power. This has rocketed as energy prices jumped due mainly to Russia cutting gas supplies to Europe.

โ€œIn exceptional cases and subject to strict safeguards, member states may provide public guarantees exceeding 90% coverage, where they are provided as financial collateral to central counterparties or clearing members,โ€ the EU executive said in a statement.

This is the second time that the EU competition enforcer has relaxed the emergency rules, which are being extended to the end of 2023.

Companies can get up to 2 million euros ($1.99 million) in state aid, a fourfold increase, the EU executive said. The cap for state support to businesses in the agriculture sector was lifted to 250,000 euros from 62,000 and for the fisheries and aquaculture sectors to 300,000 euros from 75,000 euros.

Energy-intensive companies can also get more state aid while those receiving larger amounts will have to take measures to ensure they use cleaner energy.

Companies benefiting from recapitalisation support measures will be banned from paying out dividends and bonus payments and from making acquisitions.

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