Faced with the threat of a liquidity crisis in the sector, Minister Tinne Van der Straeten has validated in Kern a measure providing for a state guarantee on loans granted to energy suppliers struggling to find financing.
“The cascading effects on the wider market and on the security of supply that a supplier’s bankruptcy would cause should be avoided.”
To avoid this catastrophic scenario, the Minister for Energy, Tinne Van der Straeten (Groen), decided to take the lead and put forward a proposal making possible the granting of a state guarantee to suppliers and intermediaries in the gas and electricity value chain (e.g. traders) struggling to obtain financing, in order to replenish their cash flow.
“The explosion and volatility of market prices, the onset of winter, the phenomenon of margin calls, the risk of non-payment and pre-financing of reduced VAT or the social tariff all put great pressure on suppliers’ cash flow and therefore the risk of liquidity problems increases, explains the Minister. A liquidity problem does not automatically lead to a solvency problem, but the cascading effects on the wider market and on the security of supply that a supplier’s bankruptcy would cause must be avoided,” she adds. .
Access to finance
To avoid the serious consequences of such a scenario – and which would ultimately fall on the consumer, forced to sign a high contract with a replacement supplier –, the Minister prefers prevention to cure and wishes to secure access to financing today for players in need of cash.
In concrete terms, the kern on Wednesday approved the minister’s proposal for a royal decree aimed at creating a regulatory framework within which it could, after consulting the Council of Ministers, decide to grant a State guarantee to suppliers and intermediaries meeting certain conditions. Here, the guarantee would concern loans with a minimum duration of two years and would cover 70% of the amounts lent by the banks over a period of six or twelve months, depending on the size of the companies.
In addition, a premium of 4% would be claimed from the borrower. Note that it is impossible toestimate in advance how many public guarantees will have to be grantedbut they will easily amount to tens or even hundreds of millions of euros.
“We want to prevent suppliers from falling because of a situation for which they are not responsible and which they could not have foreseen.”
“We want to prevent suppliers from falling because of a situation for which they are not responsible and which they could not have foreseen, justifies the minister, who insists on the preventive side of the measure. We anticipate liquidity problems at come because of the increased risk of non-payment. Today, the suppliers are healthy and a rush on the mechanism is not expected, especially since the most important players in the market belong to large international groups.“, she underlines, recalling that, to have access to the guarantee, the suppliers must be able to demonstrate that, without it, they would not obtain financing on “reasonable conditions”. Suppliers whose ebitda is negative , or who were already in difficulty before the crisis, are also not eligible.
Immediate application
The minister intends to publish her royal decree as soon as possible, especially since the period during which a state guarantee can be granted will be limited. “If the European Commission’s temporary crisis framework is extended, which I hope, assistance can be requested until March 31, 2023“, specifies Tinne Van der Straeten, who recalls that the measure must comply with the European framework.
After the validation of the kern and subject to the opinion of the Council of State, the measure should be able to be applied before the end of October.
The summary
- This Wednesday, the kern approved the proposal for a royal decree from the Minister for Energy, aimed at setting the regulatory framework for the granting, subject to conditions, d’a state guarantee to energy suppliers struggling to obtain loans.
- The warranty would cover loans with a minimum duration of 2 years and would cover 70% of the amounts lent by the banks.
- This preventive mechanism aims tolighten the burden borne by suppliers and reduce the risk of a liquidity crisis which threatens the sector.
- Subject to the opinion of the Council of State, the mechanism should come into effect before the end of October.