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

By Foo Yun Chee

BRUSSELS, October 28 (Reuters)Energy companies, hit by soaring electricity and gas prices linked to the war in Ukraine, can obtain state guarantees exceeding 90% from EU governments to cover margin call requirements under more flexible state aid rules, the European Commission announced on Friday.

Energy suppliers across Europe have been struggling with a liquidity crunch amid record wholesale electricity and gas prices following Russia’s invasion of Ukraine, prompting governments to intervene to help.

Utilities often sell electricity in advance to guarantee a certain price, but must maintain a “minimum margin” deposit in the event of a default before supplying the electricity. This exploded as energy prices surged, mainly due to reduced gas supplies from Russia to Europe.

β€œIn exceptional cases and subject to strict safeguards, Member States may provide government guarantees above 90% coverage, when provided as financial collateral to CCPs or clearing members,” said the European executive in a press release.

It is the second time that the EU competition authority has relaxed the emergency rules, which are extended until the end of 2023.

Businesses can get up to 2 million euros ($1.99 million) in state aid, a fourfold increase, the EU executive has said. The ceiling for state support for companies in the agricultural sector has been raised to 250,000 euros instead of 62,000 and for the fishing and aquaculture sectors to 300,000 euros instead of 75,000 euros.

Energy-intensive businesses can also get more state aid, while those that receive larger amounts will have to take steps to ensure they use cleaner energy.

Companies benefiting from recapitalization support measures will be prohibited from paying dividends and bonuses and from making acquisitions.

($1 = 1.0057 euros)

(Reporting by Foo Yun Chee, editing by Louise Heavens)

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