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    Home » Britain to open $44 billion support scheme for power firms on Oct.17

    Britain to open $44 billion support scheme for power firms on Oct.17

    September 25, 2022
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    London – Britain’s finance ministry and the Bank of England will on Oct. 17 open a 40 billion pound ($44.17 billion) scheme to help protect energy firms from volatile prices and ensure they are not hit by a liquidity squeeze, the Treasury said on Friday.

    Energy suppliers across Europe have struggled in the face of record-high wholesale power and gas prices following Russia’s invasion of Ukraine, leading governments to step in to make sure they do not collapse.

    “To deliver the scheme, there will be a 100% guarantee to commercial banks covering additional lending extended to firms,” the Treasury said, announcing applications for the Energy Markets Financing Scheme (EMFS) would open on Oct. 17.

    Prime Minister Liz Truss announced the scheme earlier this month.

    Utilities often sell power in advance to secure a certain price but must maintain a “minimum margin” deposit in case of default before they supply the power. This cost has surged along with rocketing power prices, leaving companies struggling to find cash.

    Norwegian energy company Equinor has estimated these collateral payments, known as margin calls, amounted to at least 1.5 trillion euros ($1.5 trillion) in Europe, excluding Britain.

    Germany on Wednesday agreed to nationalise one of its major energy firms Uniper, raising the bill to rescue the gas importer to 29 billion euros ($28 billion).

    Britain’s finance ministry said its support would be a short-term last resort and only available to companies that could prove they were otherwise in sound financial health and which make a material contribution to the liquidity of UK energy markets.

    The Financial Times reported earlier this month that Britain’s largest energy supplier, Centrica, was in talks with banks to secure billions of pounds in extra credit.Centrica declined to comment.

    Reporting By Susanna Twidale; Editing by Catherine Evans – Reuters

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