WRAPUP 2-UK weighs huge package of support as Europe battles energy crisis

– Britain’s new prime minister was working on what appears to be Europe’s biggest energy crisis support package as countries scramble to protect households and businesses from soaring bills and support suppliers in difficulty. Liz Truss, who took over from Boris Johnson on Tuesday, plans to freeze household energy bills at current levels for this winter and next, paid for by government-backed loans to suppliers, the BBC reported, adding that the program could cost 100-130 billion pounds ($116-151 billion).

The government is also working on helping businesses, but this is likely to be more complex and will be reviewed more frequently, the BBC said. European governments are imposing multibillion-euro packages to prevent public services from collapsing and protect households from soaring energy costs triggered primarily by the fallout from Russia’s invasion of Ukraine.

Benchmark gas prices in Europe have jumped around 340% in a year and jumped as much as 35% on Monday after Russian state-controlled Gazprom announced it would indefinitely extend the closure of the main gas pipeline Nord Stream 1. Europe has accused Russia of militarizing energy supplies in retaliation for Western sanctions imposed on Moscow following its invasion of Ukraine. Russia blames these sanctions for causing gas supply problems, which it attributes to pipeline failures.

Germany said on Sunday it would spend at least 65 billion euros to protect customers and businesses from soaring inflation, triggered mainly by rising energy costs. Several countries are also providing billions in support to energy distributors exposed to wild price swings that force them to cough up huge guarantees for supplies.

Norwegian energy company Equinor estimated that these guarantee payments, known as margin calls, amounted to at least 1.5 trillion euros ($1.5 trillion) in Europe, excluding Britain. RECESSION FEARS

Finnish utility Fortum announced on Tuesday that it has signed a bridge financing agreement with government investment company Solidium worth 2.35 billion euros to cover its collateral needs. A Finnish government official told Reuters the support comes on top of the €10 billion in liquidity guarantees announced by Helsinki on Sunday for power companies.

“The ongoing energy crisis in Europe is caused by Russia’s decision to use energy as a weapon, and it also seriously affects Fortum and other Nordic power producers,” Fortum’s chief executive said. , Markus Rauramo, in a press release. Swiss utility Axpo said it had requested and received a line of credit of up to 4 billion Swiss francs ($4.1 billion) from the government to help its finances.

The Swiss government has provided a 10 billion franc safety net for power companies, but has decided to allocate the funds to Axpo even though the legislation is still before parliament. The Financial Times also reported that Britain’s biggest energy supplier, Centrica, was in talks with banks to secure billions of pounds in additional credit. Centrica declined to comment.

Many European electricity distributors have already collapsed and some large producers could be at risk, hit by caps that limit the price increases they can pass on to consumers, or caught off guard by hedging bets. 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 has increased with soaring energy prices, leaving companies struggling to find cash.

Soaring prices are forcing energy-intensive industries to cut production, increasing the risks of plunging European economies into recession. Aluminum Dunkerque, France’s largest aluminum smelter, plans to cut production by a fifth in response to rising electricity prices, a source familiar with the matter told Reuters on Tuesday. The company was not immediately available for comment.

The benchmark Dutch gas contract for the previous month was down 9.6% at 222 euros per megawatt hour at 12:15 GMT, but still up around 5% from Friday’s close. ($1 = 1.0085 euros) (Additional reporting by William James, Susanna Twidale, Nora Buli, Caroline Pailliez and Gus Trompiz; Writing by Mark Potter; Editing by Jan Harvey and Carmel Crimmins)

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

Mary I. Bruner