Germany and the European Union race to fix the energy crisis

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  • Germany plans to expand lending to energy companies
  • The EU’s securities watchdog is considering measures at the EU level
  • European Commission announces broader plans on Wednesday

BERLIN/BRUSSELS (Reuters) – Germany said on Tuesday it would boost lending to energy companies at risk of collapsing due to rising gas prices, as the European Union prepared proposals to help households and industry cope with the energy crisis sparked by Russia’s invasion of Ukraine.

On Wednesday, the European Commission is due to announce proposals that include targets to cut electricity consumption and a revenue cap for non-gas stations. EU energy ministers will hold an emergency meeting on September 30 to try to agree on it. Read more

Separately, the European Union’s securities watchdog is also considering measures to help energy companies struggling to meet rising warranties after suffering price hikes as Russia cut gas supplies to Europe. Read more

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The crisis is already weighing on the European economy, even before the onset of winter when industrial users face rationing if gas reserves prove insufficient. Industry sentiment sank in Germany, the bloc’s economic strength.

“Of course we knew, and we know that our solidarity with Ukraine will have consequences,” German Chancellor Olaf Schulz said on Tuesday, urging Germans to prepare for a harsh winter and rise to the challenge of shifting energy supplies away from Russia. Gas. Read more

“Let’s handle the task together!” Schulz said.

Germany’s Finance Ministry said it wants to boost government loans to energy companies using credit passes created to provide relief in the Covid-19 pandemic, with a German newspaper estimating their value at 67 billion euros ($68 billion). Read more

Last week, VNG Corporation (VNG.UL), one of Germany’s largest importers of Russian natural gas, became the latest energy company to request government assistance to stay afloat.

The German Cabinet is expected to approve a bill for enhanced credit funds on Wednesday.

EU set of proposals

At the EU level, a spokesperson for the European Securities and Markets Authority (ESMA) said Monday that the regulator is “actively examining” whether any regulatory actions are necessary to help support energy companies. Read more

ESMA directly regulates clearinghouses in the European Union, which in turn sets mandatory levels of margin based on potential risks from markets and counterparties. Public intervention in this area is rare, especially after the global financial crisis more than a decade ago led to stricter margin requirements.

The European Commission’s draft proposals, seen by Reuters, would set the price at which wind, solar and nuclear plants could sell their energy in the 27-nation bloc at 180 euros per megawatt-hour. It would also force fossil fuel companies to share the excess profits. Read more

Governments will be required to use the cash to help consumers and businesses facing expensive energy bills.

However, EU officials said emergency liquidity support plans for energy companies facing additional collateral needs are still being prepared, and are likely to be published later Wednesday.

There is no maximum price for gas

Diplomats say there is broad support for capping revenues from non-gas generators, as well as plans to impose cuts on electricity demand. But countries are divided on other ideas – including a cap on the price of gas, which was not included in the commission’s draft proposals.

The European Union also backtracked on an earlier plan to cap the price of Russian gas. Countries including Hungary and Austria opposed the idea if Moscow retaliated by cutting off the dwindling supplies it still sends to the European Union.

Meanwhile, investor sentiment in Germany fell more than expected in September as concerns about the country’s energy supply increasingly weighed on the outlook for Europe’s largest economy. Read more

“The possibility of a winter energy shortage has made the outlook even more negative for large parts of German industry,” said Achim Wambach, head of the ZEW economic research institute.

Separately, Swedish utility company Vattenfall said it has delayed restarting its Ringgals 4 nuclear reactor by two months until Jan. 31, in another setback to power supplies in the Nordic region and the Baltic states.

“This is exacerbating an already difficult power situation in southern Sweden,” said Tor Raer Lillholt, an energy market analyst at Norway’s Volue.

Meanwhile, the CEO of Ukrainian energy company Naftogaz said on Tuesday he hopes to restore production thanks to recent military successes. Read more

Naftogaz produces the lion’s share of Ukrainian gas, with a total production of 13.7 billion cubic meters in 2021.

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Written by Ingrid Melander Editing by Mark Potter

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