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Tuesday, January 25, 2022

German utilities receive funding in the face of soaring energy prices.

As European natural gas prices continue to break records, German utilities are scrambling to secure millions of euros in additional liquidity to secure future contracts.

Steag, Germany’s fifth-largest utility company, said on Wednesday it had arranged financing in the “triple-digit million euros” range through an investor partner.

“We needed to get more liquidity to secure future contracts,” spokesman Daniel Muhlenfeld said. He emphasized that the financing was not a bank loan, but was arranged through another business partner. Steag operates several coal and gas power plants in western Germany and generates electricity from renewable sources including wind, biomass and geothermal.

Last week, another leading German utility, Uniper, announced that high energy prices forced it to seek an additional 10 billion euros ($11.4 billion) loan. Most of the money, 8 billion euros, came from Uniper’s parent company, Fortum, based in Finland. The rest came from Germany’s state-owned development bank KfW and was secured as a backup to mitigate future price fluctuations, the company said.

Other German energy companies, including RWE and EnBW, said they have taken similar steps to secure enough credit to weather volatility in the European energy market, but declined to provide details. They all face the same problem: they need to hedge their gas and electricity sales in order to cover price differences in different markets.

In a statement explaining the decision to provide additional financing to Uniper, Fortum said European gas prices reached “unprecedented levels” in December. In Germany, energy prices for heating and electricity for homes rose by more than 101 percent in November compared to last year, the country’s official statistics office, Destatis, said.

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In the UK, a sudden rise in prices led to the collapse of several small energy suppliers.

Global energy demand jumped last year after the global economy woke up after massive shutdowns aimed at slowing the spread of the coronavirus pandemic. When many economies reopened last spring, demand for natural gas soared. Natural gas is critical to generating electricity, running factories and heating homes across the continent.

European countries usually stock up on gas in the summer when prices are relatively cheap, but the pandemic and a cold winter last year reduced gas supplies, causing prices to fluctuate wildly.

Natural gas prices have risen about six times to record highs. The spike means the wholesale price of electricity has reached stratospheric levels, making headlines across Europe as consumers hit hard by the pandemic now suffer massive increases in electricity bills in their homes. Many European countries have tried to soften the shock to consumers through price ceilings, subsidies and direct payments.

These high costs also undermine the economics of companies that produce fertilizers, steel, glass and other energy-intensive materials.

World Nation News Deskhttps://www.worldnationnews.com
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