German utility Uniper said that it has secured credit facilities worth up to 10 billion euros ($11.3 billion) from parent Fortum and state bank KfW. This is in a precautionary move to address high volatility in energy markets. Uniper, in which Finland’s Fortum owns more than 76%. It said that as part of the measures it had also drawn 1.8 billion euros of credit facilities from its core banks. Uniper finance chief Tiina Tuomela said that the reason for these additional financial instruments is the unprecedented price increases of in some cases several hundred percent within a few months in a highly volatile market environment.
To give their customers security, they deposit liquid funds in forward transactions. The sharp rise in market prices has led to a corresponding need for liquid funds. Recently, energy prices have eased again, but they want to remain cautious. Uniper said that while the credit facility provided by Fortum had been partly used, the KfW loan had not, adding overall these steps would give it financial flexibility in potentially extreme market conditions.
Gas and power markets have seen prices skyrocketing over the past months. This includes higher overall demand and speculation around supplies from Russia, Europe’s biggest supplier of natural gas. Fortum, in a separate statement, said that European gas prices had risen up to 1,000% to unprecedented levels in December. The company stated that, while the high volatility increases the need for security payments. It also raises the value of Uniper’s gas and power assets. Adding its earnings prospects were not adversely impacted. Tuomela said that economically, Uniper is a very healthy company. They consider the agreements announced to be useful as precautionary measures to increase their liquidity headroom.