With Russia closing the gas pipelines to Europe as a catalyst and using the people of Finland as blackmail material the Finnish government is taking control of company payment structures and grabs 1% of any company that signs up to the possibility of taking a loan from the government at extortionate interest rates.
It’s pretty obvious it’s a safe loan that will be paid back, but the amounts are beyond normal banking facilities to provide.
Energy companies can simply not afford to not sign up for the possibility of the loan (even if they’re not sure they actually need the facility yet) because bankruptcy is not an option if you’re servicing heating for the population and energy for companies to operate on. It’s this need to care for people that the Finnish government – which is supposed to protect the population – is strong arming the energy sector to sign up for these bizarre conditions.
To be sure: the Finnish government take the 1% of the company and control payments whether a loan is taken out or not and even after repayment of the loan.
They have potentially valued the energy sector in Finland at EUR 0,-.
Minister of Finance Annika Saarikko (Centre) stated that the funding should not be misconstrued as financial aid or subsidy.
“It’s a loan,” she emphasised. “Companies must pay it back in two years’ time. And the government would only lose money in the extreme circumstance where the company ends up permanently insolvent. Even then, similarly to a regular loan, a share of the company’s collaterals – such as power plants or electricity production – corresponding to the [loan] value would end up in the state’s possession.”
The emergency funding scheme enables the government to grant loans and guarantees to companies with an electricity production capacity of more than 100 megawatts that have exhausted all other financing options, that are deemed critical for the functioning of the electricity market and that are at risk of insolvency due to soaring collateral requirements.
The financing will be available until the end of next year with a maximum repayment period of two years and with a total interest rate of 10 per cent for the first six months and one of 12 per cent for the rest of the repayment period, according to Helsingin Sanomat.
The borrower, in turn, will be prohibited from making dividend payouts or re-distributing their profits in other ways until the loan has been repaid. Offering bonuses, pay rises and other incentives to the management will similarly be prohibited between 2022 and 2023. The borrower must also invite the government to take up a one per cent stake through a free share issue or consent to a three-percentage-point increase in the interest rate.
“The loan terms are exceptionally strict,” confirmed Saarikko. “It’s a message from the government to companies that this is a last-resort form of assistance. You should first turn to your owners, such as municipalities in the public sector, and market-based financing solutions.”
The government introduced the emergency funding scheme due to the mounting collateral requirements faced by energy companies active in the electricity derivatives market. Collaterals can be demanded by customers as a form of guarantee of their future electricity supply as their value is equal to the difference of the price defined in the futures contract and current price.
Energy prices have soared in the wake of Russia’s invasion of Ukraine.
Source: Helsinki Times