It will take 1500 billion to offset the losses of European energy companies. Debt monetization in sight?

Reuters reports today that Finland and Switzerland have joined the rescue brigade of their energy companies, with major funds:

• Finnish utility Fortum said it has signed a bridge financing agreement with government investment firm Solidium worth € 2.35 billion to cover its collateral needs. A Finnish government official told Reuters that the support comes on top of the € 10 billion of liquidity guarantees that Helsinki announced Sunday for power companies.
• Swiss electricity company Axpo said it received a credit line of up to 4 billion Swiss francs ($ 4.1 billion) from the government to cover its liquidity needs. The Swiss government has set up a safety net of 10 billion francs for electricity companies, but has decided to allocate the funds for Axpo even though the legislation is still under consideration in parliament.

The numbers are piling up fast, but they pale in comparison to what the final price could be if European governments decide this is their "whatever it takes" moment. Because aid to companies to pay their bills is a tiny fraction of the liquidity shortage of energy companies.

Norwegian energy giant Equinor ASA has warned that European energy trading risks stalling if governments don't extend liquidity to cover margin calls of at least $ 1.5 trillion: if the physical market works, the derivatives market begins to show. serious signs of systemic stress.

Practically the energy companies have sold energy forward, at high prices, but lower than those of the current market. If on the sale of the physical, that is electricity, they have also gained because they generate it, when it comes to buying the energy they do not have to fulfill the sales contracts beyond their capacity they are pains. So they sell other futures, but at this point the collateral, the collateral needed to trade, is enormously growth. So these companies find themselves literally without money, with zero liquidity, and they go to governments to ask for cash.

What's even more fun is that, as the FT tells us : Currently, the EU's European Market Infrastructure Regulation, which establishes the legal framework for margin requirements, does not distinguish between energy producers and financial counterparties as well. By reducing or eliminating the collateral that exchanges require from electricity producers, analysts say regulators could ease the pressure on utilities' liquidity with limited risk for their counterparties. “These are companies with power generation businesses, so they're not running anywhere,” Bernstein's Venkateswaran said. "It is different from those who are only speculating on energy prices". So, given that to speculate they allowed dogs and pigs to enter the market, even without a real counterpart, now if they intervene and bail out the market they would not only help speculators, and all this is beautiful, because it is the result of a fraudulent market. artfully created.

Bloomberg reports that Helge Haugane, Equinor's senior vice president for gas and energy, said in an interview that "liquidity support will be needed," warning that his company's estimate of $ 1.5 trillion to support the so-called paper trading is “conservative” .

Haugane confirms what we explained behind the disruption of the functioning of (paper) energy markets:

" It is only dead capital and bound by margin call requests ", that is linked to a situation of futures that are either periodically renewed, or will lead to the bankruptcy of the energy or speculative companies that issued them, said Haugane in an interview with Gastech conference in Milan.

“ If companies need to make so much money available, it means that the liquidity of the market is drying up and this is not good for this part of the gas markets ,” he said. Because if four fools who follow the meme actions speculate there would be no problem: you make them fail, you leave them in their underwear and save money, as well as provide a very useful life lesson. Here

This figure is 55% of the Italian public debt which, however, has been generated in quite a few years. Here we have something that governments should release tout court to keep the market alive and therefore also their energy companies. Obviously this can only happen by monetizing the debt in some way. Do it for a reason in the EU slave to finance that has not even thought about producing the energy it uses. And when you hear someone talking about the Italian public debt, tell them before you rinse your mouth.

Now the ECB will raise rates by 0.75%, a way to speed up the moment when it has to step in and take on all this debt, and we will explain why it will do so later.

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The article It will take 1,500 billion to offset the losses of European energy companies. Debt monetization in sight? comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/ci-vorranno-1500-miliardi-per-compensare-le-perdite-delle-societa-energetiche-europee-monetizzazione-del-debito-in-vista/ on Tue, 06 Sep 2022 17:23:59 +0000.