Warning of 'energy-industry Lehman Brothers' moment as gas crisis brings on cash crunch

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The aid effort is a response to a rapidly worsening situation after Russia cut off gas supplies through the Nord Stream pipeline. Read more

Recent days have seen a flurry of news — from Sweden to Switzerland to the UK — as companies and governments try to get to grips with the situation. Norway’s Equinor ASA has said that European energy trading risks collapsing under the weight of margin calls amounting to at least US$1.5 trillion.Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.

In the UK, Centrica Plc is in talks with banks on the potential extension of credit lines, according to a person familiar with the matter. Centrica declined to comment. “Companies have been bleeding cash for a long time because of the margin calls and collateral requirements,” said Kristian Ruby, secretary general of power industry group Eurelectric. “This triggers the question — ‘What if things get worse?’ Governments need to be ready to handle such a situation and back up companies with direct credit, otherwise there’s a risk of one falling and dragging down others.

“We now have to do everything we can to secure our power supply,” Swiss Energy Minister Simonetta Sommaruga said Tuesday. “We need to avoid that because of a temporary liquidity bottleneck a company gets into a tailspin and pulls others with it.”

 

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