The Confederation comes to the rescue of Axpo with a framework loan of 4,000 million

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

“Axpo is a systemically important electricity company for Switzerland”, specifies the SFOE. The Federal Council was based on the terms established in the federal law on subsidiary financial aid destined to the rescue of the electrical companies.

An impossible risk to take

“We cannot allow a large power 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, the Minister in charge of the Federal Department of the Environment, Transport, Energy and Communications (DETEC) also pointed out.

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

>> Simonetta Sommaruga’s explanations at 12:30 p.m.:

BKW criticizes the mechanism

At the moment, there is no information indicating that the other two systemically important companies in Switzerland, Alpiq and BKW, will apply for the same aid. In the case of the second named, his chief financial officer even said on Tuesday that he did not intend to use that “emergency umbrella.”

BKW is not opposed to the State supporting a company in case of need, but other companies should not suffer, it judged, for which it considered that “the emergency umbrella is not the ‘appropriate tool’.

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

confident alpiq

For its part, the company Alpiq points out in a press release that it is “thus automatically subject to this mechanism with immediate effect,” with the government’s decision. The energy company considers that the Confederation sends “an important signal to the markets, likely to generate confidence.”

The Lausanne-based group is confident and believes that it will not have to resort to this subsidiary aid mechanism, “although market conditions remain difficult.” It refers to “global operational measures in the energy sector” as well as additional financing in the credit and capital markets. These actions have strengthened the company’s financial margin, the statement said.

temporary help

Energy prices have skyrocketed 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 even further, the press release notes.

Electric companies must provide very high guarantees for their own production of electricity sold on a term basis. This is enormous liquidity, which led Axpo Holding to request temporary aid from the Confederation.

>> Details in the Forum show:

order of need

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 through an order of necessity.

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

The latter is subject to strict conditions, the press release underlines. These include a prohibition on paying dividends, selling assets, or undertaking restructuring that may jeopardize the repayment of loans or any collateral. “This is in no way to help with the lost funds,” Simonetta Sommaruga stressed.

>> Pierre Nebel’s analysis at 12:45:

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