Over the past few weeks, the energy markets have been thrown out of balance
The extreme prices are increasing the liquidity and credit risks for all market participants, primarily impacting large electricity producers that have taken the precautionary measure of hedging their electricity production in advance
The shareholders have provided Alpiq with temporary liquidity of CHF 223 million. An increase up to CHF 300 million is being discussed
Alpiq has a stable operational business with healthy profitability and continues to expect a positive operating result before exceptional items for the 2021 financial year lying below the previous year’s results
Lausanne, 19 January 2022 – Over the past few weeks, the energy markets have been thrown out of balance: This is due to a massive increase in the demand for gas and coal in Asia, geopolitical uncertainties surrounding European gas supplies as a result of increasing tensions between Russia and the EU, outages of French nuclear power plants due to technical issues, and strategic concerns regarding the security of supply of energy and electricity. In conjunction with the Covid-19 crisis, this has led to an extreme climb in prices, in particular for gas and electricity. These price fluctuations have increased the liquidity and credit risks of all market participants, as is also clearly illustrated by recent statements issued by companies and by reports published by European media over the past few weeks regarding state support.
High electricity prices increase liquidity and credit risks
Although such high prices enable market participants, such as Alpiq, to increase their trading margins, they also increase the financial collateral that electricity producers such as Alpiq have to deposit with the energy exchanges for the hedging of the electricity generated by Swiss power plants, as is customary in the electricity trading business. In particular, this affects large electricity producers that have taken the precautionary measure of hedging their electricity production in advance.
Shareholders strengthen Alpiq’s liquidity
Due to these market developments, in order to achieve a short-term liquidity boost, Alpiq initiated and implemented wide-ranging precautionary measures at an early stage: On the one hand, comprehensive operational measures were implemented in its energy business, and additional credit and guarantee lines were negotiated with banks. On the other, the shareholders have provided Alpiq with temporary liquidity of CHF 223 million. An increase up to CHF 300 million is being discussed. These measures have significantly improved Alpiq’s room for manoeuvre and enhanced the company’s resilience in the face of the current market developments.
Addressing systemic challenges in the energy markets
In the run-up to Christmas, the energy markets experienced extreme price surges. On 21 December, the price for electricity even momentarily soared to 2000 EUR/MWh. In preparation for a possible continuation of this price trend, and because it was only possible to partially implement key measures to achieve a short-term liquidity boost over the Christmas period, Alpiq approached ElCom shortly before Christmas with a request to review the possibility of precautionary liquidity support. Since Christmas, the situation on the energy markets has eased considerably, and the measures outlined above to improve liquidity have taken effect, permitting the precautionary request to ElCom to be withdrawn. Nevertheless, the trading markets remain very unpredictable and tense. Alpiq remains in contact with the authorities in order to analyse the situation on the energy markets and the associated systemic challenges for all market participants.
More information about Alpiq: www.alpiq.com