Germany and the EU in the race to solve the energy crisis

BERLIN/FRANKFURT, Sept 13 (Reuters) – Germany will step up lending to energy firms threatened with being crushed by soaring gas prices, it said on Tuesday, as Europe prepares proposals for help households and industry cope with the energy crisis.

The European Commission will announce electricity consumption reduction targets and a revenue cap for non-gas-fired power plants on Wednesday. Energy ministers will hold an emergency meeting on September 30 to discuss it. Read more

Separately, the EU securities watchdog is considering measures to help energy companies struggling to meet growing demands for guarantees. Companies have been caught off guard by soaring prices after Russia cut off gas supplies to Europe to counter Western sanctions following Moscow’s invasion of Ukraine. Read more

The crisis is weighing heavily on the European economy, even before winter when industrial users could face rationing if gas reserves prove insufficient. Industry sentiment in the bloc’s economic powerhouse, Germany, plummeted.

“Of course we knew, and we know, that our solidarity with Ukraine will have consequences,” German Chancellor Olaf Scholz said on Tuesday. He urged Germans to prepare for a harsh winter as its energy supply shifts from Russian gas. Read more

Under pressure, utilities are in line for further state aid.

Germany’s finance ministry wants to increase public loans to energy companies using facilities set up to provide relief during the COVID-19 pandemic, he said. The German cabinet is expected to approve a draft law on Wednesday. Loan guarantees could amount to 67 billion euros ($68 billion). Read more

Last week, VNG, one of Germany’s biggest importers of Russian natural gas, became the latest energy company to seek government help.

Uniper (UN01.DE), the country’s largest importer of Russian gas, was bailed out in July. It is considering legal action in Sweden to seek billions of euros in compensation from Russia’s Gazprom (GAZP.MM), Reuters reported on Tuesday. Read more

BUNDLE OF EU PROPOSALS

Companies could also benefit from an easing of regulations.

The European Securities and Markets Authority (ESMA) is “actively considering” whether regulatory action is needed to help support energy companies, a spokesperson said on Monday. Read more

ESMA regulates clearing houses in the EU, which in turn set minimum levels of collateral based on market and counterparty risk. Public intervention in this area is rare, especially after the global financial crisis more than a decade ago led to stricter margin requirements.

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

Governments would be required to use the money to help consumers and businesses facing sky-high energy bills.

EU officials, however, said emergency liquidity support plans for power companies facing growing collateral needs were still being drawn up and would likely be released later than Wednesday.

NO GAS PRICE CAP

Diplomats say there is broad support for a revenue cap for non-gas generators, as well as plans to impose reductions in electricity demand. But countries are divided on other ideas – including a gas price cap.

The EU also backed out of an earlier plan to impose a price cap on Russian gas. Countries like Hungary and Austria had opposed the idea in case Moscow retaliates by cutting off the supplies it continues to send to the EU.

Meanwhile, investor sentiment in Germany deteriorated more than expected in September as concerns over its energy supply weighed on the outlook for Europe’s largest economy. Read more

“The prospect of energy shortages in winter has made expectations even more negative for much of German industry,” said Achim Wambach, president of the ZEW economic research institute.

Additional reporting by Kate Abnett in Brussels and Andreas Rinke in Berlin; Written by Ingrid Melander; Editing by Mark Potter, Matt Scuffham and Mark Heinrich

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