Switzerland prepares a financial safety net for the electricity sector

  • Four-year package for an accelerated legislative process
  • Could be worth up to 10 billion Swiss francs, says minister
  • The conditions will be harsh to avoid false incentives

ZURICH, April 14 (Reuters) – The Swiss government is preparing a multibillion-dollar financial safety net for the power sector, it said on Thursday, citing increased liquidity needs amid fluctuating unprecedented price.

The terms of the package are still under discussion, but it could be worth up to 10 billion Swiss francs ($10.7 billion) and last four years, Energy Minister Simonetta Sommaruga told a conference in press in Bern.

The idea is to preserve Switzerland’s electricity supply even if the situation worsens for crucial players in a European energy crisis, the government said.

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Sharp price swings in power markets mean power companies need more financial resources to cover security deposits associated with power trading, he said.

“An uncontrolled default by a major company could jeopardize Switzerland’s security of supply and trigger a chain reaction,” he added.

The main Swiss electrical groups are Alpiq, BKW (BKWB.S) and Axpo (AXPOH.UL).

The government has said it should act only in the alternative to companies and their debt and equity providers.

The conditions for federal support would be very strict and any assistance would only be temporary. Interest rates would be in line with the market and the assisted companies could not pay dividends.

After consultations with power companies, the government will draft legislation for fast-track consideration during the summer session of parliament.

The sharp swings in prices have prompted some companies to sound out prospects for aid, Sommaruga said, adding that one company approached the Swiss government late last year before it could arrange cash itself.

German utility Uniper (UN01.DE) in January secured a loan of up to 10 billion euros ($10.91 billion) from parent company Fortum (FORTUM.HE) and state bank KfW ( KFW.UL) to help weather the unprecedented volatility in energy markets. Read more

($1 = 0.9336 Swiss francs)

($1 = 0.9166 euros)

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Reporting by Michael Shields Editing by Jason Neely and David Goodman

Our standards: The Thomson Reuters Trust Principles.

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