The Confederation comes to the rescue of Axpo with a framework credit of 4 billion

The Confederation comes to the rescue of Axpo with a framework credit of 4 billion

Due to the sharp price increases on the energy markets, the Confederation decided on Tuesday to make available to Axpo a framework credit of 4 billion francs. The Federal Council thus wants to prevent the electricity group from experiencing liquidity problems.

Axpo applied for temporary support at the end of last week from the Federal Council, said the Federal Office of Energy (SFOE) in a press release on Tuesday. The government responded favorably to avoid jeopardizing Switzerland’s energy supply.

“Axpo is a systemically important electricity company for Switzerland”, specifies the SFOE. The Federal Council relied on the terms set out in the federal law on subsidiary financial aid intended to rescue electrical companies.

An impossible risk to take

“We cannot allow a large electricity company to run out of cash,” Federal Councilor Simonetta Sommaruga told the media. The Federal Council has already taken certain measures, but the rise in energy prices continues, also noted the Minister in charge of the Federal Department of the Environment, Transport, Energy and Communication (DETEC).

For the government, it is also a question of avoiding a domino effect for other companies. “Axpo and its subsidiaries are systemically important: they supply power from the turbine to the outlet”. Today’s decision is important for the economy and the population.

BKW criticizes the mechanism

For the moment, there is no information indicating that the two other systemically important companies in Switzerland, Alpiq and BKW, will ask for the same help. In the case of the second named, its finance director even said on Tuesday that he did not intend to use such an “emergency umbrella”.

BKW does not object to the state supporting a company in case of need, but other companies should not suffer, he said, therefore believing that “the emergency umbrella is not the ‘adequate tool’.

At the end of June 2022, the Bernese group’s liquidity amounted to almost one billion francs.

Temporary help

Energy prices have soared due to the war in Ukraine and the low availability of French nuclear power plants. Since the electricity and gas markets are closely linked, prices rose sharply during the summer with the interruption of Russian gas deliveries. In recent days, the situation has worsened further, notes the press release.

Electric companies must provide very high guarantees for their own forward-sold electricity production. This involves enormous liquidity, which led Axpo Holding to request temporary aid from the Confederation.

Necessity order

Meeting on Monday, the government decided to activate the rescue mechanism. The latter was supported by the Council of States in June, but not yet by the National Council. The support of the Confederation thus intervenes by means of an order of necessity.

Also on Monday, the Finance Delegation of the Federal Chambers approved a commitment appropriation of 10 billion francs, as well as a supplement to the 2022 budget of 4 billion. After this green light, DETEC granted the framework credit to Axpo.

The latter is subject to strict conditions, underlines the press release. These include the prohibition on paying dividends, selling assets or carrying out restructuring that could jeopardize the repayment of loans or any guarantees. “It is in no way a question of help with lost funds”, underlined Simonetta Sommaruga.

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