A bang in the Swiss energy business: the federal government backs the expo with billions of loans
The power company is in danger of serious bankruptcy. The Federal Council is now taking drastic measures.
It’s about the stability of the Swiss electricity grid: if one of the major domestic producers suddenly runs out of money to participate in the electricity trade, the whole system could collapse – and a blackout paralyzes the country. .
Extraordinary Session on Monday
As it stands, this scenario is now becoming acute. Expo Group is in financial difficulties – and has to be rescued by the Federal Council. This was discovered on Tuesday morning. « The Board of Directors and Executive Board of Expo have decided to apply to the Federal Government on September 2, 2022 for a line of credit of up to CHF 4 billion. The Federal Council and the Financial Delegation approved this application on September 5, 2022,” the Expo announced Tuesday morning. The Federal Council confirmed the facts in a media release. Energy Minister Simonetta Somaruga (SP) and other responsible persons at 8.30 a.m. PM would like to provide details at a media conference in Bern.Click here for live stream and ticker,
According to a Federal Council press release, the so-called rescue package created by the government for power companies will be activated in the first half of the year. It provides federal loans for “system-critical” power companies that are at risk of bankruptcy. The Axpo, Alpiq and BKW are considered particularly system-critical – ie indispensable for a working power supply.
The Financial Delegation of the Federal Parliament (FINDEL) in an extraordinary meeting yesterday approved the emergency loan for the Expo, as is the case in such cases. This body consists of three members of the National Council and three members of the State Council. The body is chaired by the President of the Council of States, Thomas Hefty (FDP). Findlay not only spoke of 4 billion loans, but also 10 billion total commitment loans. The federal government would then be prepared to extend emergency aid to the expo.
In exchange for financial support from the federal government, the expo loses some of its independence. He cannot distribute any dividends until he has repaid the federal debt in full. In addition, it must allow the relevant federal agencies, the Electricity Commission (LCom) and the Federal Audit Office (SFAO), to view its books.
Why doesn’t the owner canton help?
It is politically important that the federal government has to save the expo and not the cantons. Because the group is actually 100 percent owned by the canton of north-eastern Switzerland and Cantonal Utilities, which also receives dividends from Expo. The largest shareholders are the cantons of Zurich and Aargau.
The other two big power companies, Alpic and BKW, do not appear to be affected for the time being. In a media conference, Alpic recently emphasized that it will be able to cope for some time despite rising electricity prices. At the end of the year, Alpic had similar problems and so applied for state aid, but then withdrew the application.
At BKW, net profit fell by two-thirds to CHF 71 million in the first half of the year, but liquidity fell only slightly: the company had short-term funds of about a billion at the end of half the year.
excessive time trouble
It is indeed intended that the rescue package will have a regular legal basis. In June, the Council of States approved the proposal; The National Council should also take a decision on this next week. Instead of waiting for the outcome of a parliamentary debate, the Federal Council is now implementing the provisions quickly through emergency legislation. This shows how serious the situation is Expo Is.
During the June debate at the Council of States, Somaruga clarified that the Federal Council would act like this in a worst-case scenario: “We expect a 24- to 48-hour time frame to provide liquidity support,” the energy minister said. Told. Time. The tight time window for the rescue should explain why Somaruga is no longer looking forward to a regular federal council meeting on Wednesday.
stock market storm
It is certain that the power companies are facing trouble due to high prices in the business business. When selling electricity through an exchange, corporations are required to deposit collateral. When the electricity is given and the deal is closed, only then do the companies get this money back.
If the price of electricity rises, so does the collateral for corporations to deposit on the stock exchange. This increases the liquidity requirement of the companies. In the past few days, electricity prices in Europe have reached unprecedented highs. The main reason for this is the Ukraine war and Russia’s decision to cut off gas supply to Europe through the Nord Stream 1 pipeline. These upheavals are causing problems not only for Swiss corporations, but also for European industry giants. For example, Germany supports the Uniper group with billions in aid to prevent bankruptcy.
In Switzerland, the turbulent market caused a moment of shock months ago: In December, Alpic asked the Federal Council for an injection of billions because it feared its liquidity. He later withdrew the request.
It is extremely rare for the Federal Council to save a company by emergency law. The relief operation for the large bank UBS in October 2008 is remembered as a dramatic one. The global financial crisis brought UBS to the brink of collapse. The Federal Council and the National Bank jumped in with nearly 60 billion francs in liquidity support. UBS was considered “too big to fail” – much like today’s Expo, Alpic and BKW.
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