Norway should prepare to offer credit to utilities, industry groups say

By Nora Buli

OSLO (Reuters) - Norway should join neighbours Sweden and Finland in offering credit to utilities exposed to the volatile power derivatives market, even if Norwegian companies are in less urgent need of support, industry representatives said on Wednesday.

Utilities often sell power in advance to lock in prices but must maintain a deposit, known as a margin, in case of default. This margin requirement has surged along with soaring power prices, leaving many companies searching for cash.

Sweden and Finland plan to offer more than $35 billion in loans and guarantees for utilities facing margin calls after Russia shut the Nord Stream 1 gas pipeline.

Toini Loevseth, head of the markets section of Energy Norway, which represents around 300 companies involved in the production, distribution and trade of power, said the Norwegian government should follow suit.

Although "for the time being there are few Norwegian market participants that say they struggle with margin requirements", given market volatility, "we would wish that the government put guarantees in place", she said.

Another industry group, the Nordic Association of Electricity Traders (Naet), echoed that call. "It is better to be safe then sorry," Naet Chairman Hermund Ulstein said.

The Norwegian government said it would monitor the situation.

Norwegian energy minister Terje Aasland said following a meeting with his Swedish counterpart in Stockholm on Monday that there was no need for Norwegian measures now, but that "we are following the development closely".

While households in many countries typically sign long-term electricity contracts, most Norwegians pay their supplier based on daily spot market prices, reducing the need for producers to hedge future delivery commitments, Loevseth said.

For power-intensive industries, contracts are often fixed outside the financial power market as well.

"The biggest share of our price hedging are long-term, physical contracts... without margin requirements," said Hallvard Granheim, head of market operations at state-owned Statkraft, Norway's largest power producer.

This meant the company is less exposed to margin risks, but it has nonetheless built up an "unusually high" liquidity buffer to handle the rising market uncertainty, he added.

(Reporting by Nora Buli; Editing by Terje Solsvik and Jan Harvey)