State signs bridge financing agreement with Fortum to cover collateral needs in electricity derivatives market
The State of Finland will provide fixed-term bridge financing to Fortum Corporation to mitigate the difficult situation in the Nordic electricity derivatives market. The aim of the arrangement is to strengthen Fortum’s liquidity reserves and thereby secure Finland’s energy supply.
In its meeting on 30 August 2022, the Ministerial Committee on Economic Policy agreed that, under the leadership of the Ownership Steering Department of the Prime Minister’s Office, the State of Finland as a major shareholder in Fortum would provide Fortum with up to EUR 2.35 billion in fixed-term bridge financing on market terms. The purpose of the financing, which will be provided by the wholly state-owned special assignment company Solidium, is to ensure that the Finnish energy market can function without interruptions.
The State has a strategic majority holding in Fortum, and there are significant social, financial and security and security of supply interests associated with securing its operations. In the midst of the current energy crisis, the State wants to ensure that the company is able to carry out its task, which is to produce sufficient electricity in Finland without disruptions under all circumstances. At the same time, efforts are being made to ensure the company’s operating and investment capacity in the Finnish energy market over the long term. The Government proposed more extensive measures to stabilise the electricity derivatives market on 4 September 2022.
The record increase in the price of electricity derivatives and the fact that prices remain high has led to unprecedented collateral requirements for electricity price hedging. Solidium will provide market-based, fixed-term bridge financing to secure Fortum’s liquidity as the company prepares for exceptional price development until the electricity covered by the hedging is delivered and the collateral is returned.
Due to this exceptional situation, Solidium’s Extraordinary General Meeting of shareholders decided on 6 September 2022 to grant Fortum an incremental liquidity facility available immediately with the following terms:
• Maximum amount EUR 2,350,000,000
• Maximum term 12 months
• Margin 10/12 per cent, effective annual interest cost 14.2 per cent for the whole amount and term, excluding the share issue
• The arrangement includes a share issue component; when the loan is withdrawn, Solidium will be granted a share issue without payment and will have the option to buy further shares in Fortum corresponding to 1 per cent of all of Fortum’s share capital following the share issue. The directed share issue requires approval by Fortum’s Extraordinary General Meeting.
• The first instalment of the loan must be withdrawn by 30 September 2022.
• Restrictions will be placed on the remuneration of Fortum’s management and Board of Directors.
“The ongoing energy crisis in Europe is the result of Russia’s decision to use energy as a weapon. As a major shareholder in Fortum, the State aims to ensure that the Finnish energy market can function without interruptions. The loan arrangement is market-based. Its nature and terms are such that is intended for use as a last resort and to strengthen Fortum’s liquidity reserves,” says Minister for European Affairs and Ownership Steering Tytti Tuppurainen.
Inquiries: Maija Strandberg, Senior Financial Adviser, Ownership Steering Department of the Prime Minister’s Office, tel. +358 50 407 8423
Requests for interviews with Minister Tuppurainen: Roosa Pöyhönen, Special Adviser, tel. +358 295 160 866