Govt signs bridge financing deal with Fortum

The government on Tuesday signed a 2.35-billion-euro bridge financing facility with the majority state-owned energy company Fortum, reported Xinhua.

The company can use it while awaiting the parliamentary approval of a ten-billion-euro package of credit for the country's power industry announced by the government last weekend.

Addressing Parliament on Tuesday, Finance Minister Annika Saarikko said the state could not take the risk that energy companies will fail.

The purpose of the financing, which will be provided by the wholly state-owned special assignment company Solidium, is to ensure that the country's energy market can function without interruptions, the government press release said. There are significant social, financial, security and security of supply interests associated with securing Fortum's operations, it said.

According to the government, the record increase in the price of electricity derivatives and the fact that prices remain high have led to unprecedented collateral requirements for electricity price hedging.

Solidium will provide market-based, fixed-term bridge financing to secure Fortum's liquidity as the company prepares for exceptional price developments until the electricity covered by the hedging is delivered and the collateral is returned, the release said.

Fortum is by far the largest energy producer in Finland. At the closing of markets on Monday, it reported that its collaterals in the Nordic market were worth 3.5 billion euros. The highest level was five billion euros on Aug. 26.

In an interview with national broadcaster Yle, Fortum's Chief Executive Officer (CEO) Markus Rauramo said that the loan will be raised if the prices of derivatives rise "very much higher." The strict loan terms reflect the fact that the loan is the last option, he noted.

The loan is not part of the emergency financing package announced by the government on Sunday, which is intended for other energy companies as well.