Norway Sees No Need for Local Power Derivatives Market Measures

Norwegian authorities are closely monitoring developments in the financial power market after Sweden and Finland decided to set up $33 billion of emergency backstops, but said they currently see no need for measures of their own.

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(Bloomberg) — Norwegian authorities are closely monitoring developments in the financial power market after Sweden and Finland decided to set up $33 billion of emergency backstops, but said they currently see no need for measures of their own.

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“Norwegian hydropower producers have high profitability and are not known to have challenges in securing market funding,” the government said in a website statement on Sunday. Measures in the Swedish and Finnish markets will contribute to promoting financial stability throughout the Nordic region, it added.

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Sweden and Finland are setting up liquidity facilities made up of loans and credit guarantees, worth $33 billion in total, to avoid some power companies going into technical defaults as soon as Monday over surging collateral requirements. The aim is to prevent Russia’s energy curbs from sparking a financial crisis.

Any financial issues with other producers may affect Norwegian producers’ opportunity to hedge prices, the government said. Significant defaults at the central counterparty in Sweden may also have damaging effects on the rest of the financial system, it added.

Norway’s finance ministry, the energy ministry, Norges Bank and the Financial Supervisory Authority are assessing the need for measures on an ongoing basis, also in the case of any individual solvent participants who may face liquidity challenges.