Finland’s Fortum taps government loans amid market turbulence

Finnish utility Fortum said Monday it would draw the first tranche of a 2.3-billion-euro government loan to “remain prepared for continued market turbulence.”

While noting that Nordic power prices had declined somewhat from record levels and that the market had been “less volatile,” the energy company needed to draw 350 million euros by the end of September for the facility to remain in effect.

Utilities rely on futures markets to guarantee a certain price for their supplies. Under the contracts, they are required to put collateral upfront.

But if prices rise, a company is required to put up more collateral, creating a potential cash crunch.

“For the moment, Fortum has sufficient liquid funds to meet current collateral requirements,” the company said in a statement.

“However, Fortum must remain prepared for continued market turbulence, and drawing the first tranche already in September ensures that it has access to the liquidity facility should the collateral requirements increase again during the winter,” it added.