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Sweden's Vattenfall braces for cash outflow from margin calls

By Nora Buli

OSLO (Reuters) -Swedish utility Vattenfall is preparing for an expected outflow of cash from margin calls caused by high energy market volatility, the company's chief executive told Reuters on Thursday, following inflows this year.

Deposits made by companies to secure financial trading in energy, known as margin calls, have been driven higher by a surge in power prices that has left some seeking government help to secure funds.

Until now, power producer Vattenfall has seen big inflows from margin calls, Chief Executive Anna Borg said.

"But eventually, when the prices go down, or when the positions go into delivery, we will of course also have an outflow of margin calls," she added.

Cash and cash equivalents on the company's balance sheet rose to 173.4 billion Swedish crowns at the end of September from 90.2 billion at the end of June, the company's earnings reports for the second and third quarters showed.

Vattenfall has increased efforts to produce detailed forecasts of its liquidity needs to deal with expected larger and faster price swings than previously seen, Borg said.

The company has issued some bonds to ensure extra liquidity and would issue more in future if necessary, Borg said.

The state-owned company on Thursday reported a 30% rise in third-quarter underlying earnings before interest and tax to 6.2 billion Swedish crowns ($570.34 million) from 4.8 billion a year earlier.

"The third quarter was characterised by the turbulent markets and there is major uncertainty ahead of the winter," Borg said in the financial report.

The company's wind and sales segments profited from price increases in the market, and offset the negative effect of price differences between Nordic price areas, it said.

The benchmark Nordic system price for wholesale power averaged 176.35 euros/MWh, up from 68.27 euros/MWh, in line with higher European prices caused by the war in Ukraine.

However, in Sweden, which is divided into four market areas, prices in the north were as low as 43.73 euros/MWh compared with 209.32 euros/MWh furthest south, data from power exchange Nord Pool showed.

($1 = 10.8707 Swedish crowns)

(Reporting by Nora Buli, editing by Anna Ringstrom, Terje Solsvik and Barbara Lewis)