Germany and the European Union race to fix the energy crisis

BERLIN/FRANKFURT (Reuters) – Germany said on Tuesday it would boost lending to energy companies at risk of collapsing due to rising gas prices, as Europe prepares for proposals to help households and industry weather the energy crisis.

On Wednesday, the European Commission will announce targets for reducing electricity consumption and capping revenues for non-gas stations. Energy ministers will hold an emergency meeting on September 30 to discuss it. Read more

Separately, the European Union’s securities watchdog is considering measures to help energy companies struggling to meet mounting warrants requests. Companies suffered from price hikes after Russia cut gas supplies to Europe to counter Western sanctions in the wake of Moscow’s invasion of Ukraine. Read more

The crisis is weighing on the European economy, even before 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 knew that our solidarity with Ukraine would have consequences,” German Chancellor Olaf Scholz said on Tuesday. He urged the Germans to prepare for the harsh winter as Russian gas energy supplies shifted. Read more

Under pressure utilities queue for more state aid.

The German Finance Ministry said it wants to increase government loans to energy companies using the facilities set up to provide relief during the Covid-19 pandemic. On Wednesday, the German cabinet is expected to approve a bill. Loan guarantees could reach 67 billion euros ($68 billion). Read more

Last week, VNG, one of Germany’s largest importers of Russian natural gas, became the latest energy company to request assistance from the government.

Uniper (UN01.DE)It is the country’s largest importer of Russian gas, which was bailed out in July. Legal procedures are being studied in Sweden to claim billions of euros in compensation from Russia’s Gazprom (GAZP.MM), Reuters reported on Tuesday. Read more

EU set of proposals

Businesses may also benefit from easing regulations.

A spokesman for the European Securities and Markets Authority (ESMA) said it was “actively examining” whether any regulatory actions were necessary to help support energy companies. Read more

ESMA regulates clearinghouses in the European Union, which in turn set minimum levels of collateral based on 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.

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 supplies it still sends to the European Union.

Meanwhile, investor sentiment in Germany deteriorated more than expected in September as concerns over energy supplies 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.

Additional reporting by Kate Abnett in Brussels and Andreas Reinke in Berlin. Writing by Ingrid Melander; Editing by Mark Potter, Matt Skovham and Mark Heinrich

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