October 1, 2022

Wire Service Canada

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Energy volatility also overwhelms traders, with one in five taking risks

“Without interventions in the gas and energy market, one in five suppliers is at risk of default. Liberation will take a step back 20 years, with greater focus and higher prices.” To make this recognition, Aiget, the Italian association of energy wholesalers and traders representing companies in this sector such as Edison, Hera, Engie, Edf, E.On, Iberdrola and Axpo, to name a few, except for the former monopolists Enel and Eni. Some are subject to additional profit tax; For others, a season of uncertainty has already begun.

“Suppliers are under pressure because of the liquidity problem: we have to buy from producers at prices 15 times higher in 2-3 months than when we collect from customers. For many, this is unprecedented financial stress and the risks of it being unsustainable. “There is also the risk of exiting supply contracts, which puts consumers in the position of having to look for new contracts, in worse conditions,” he adds, since it has been impossible to find fixed-price offers for at least a quarter of a year. .

In February, the EU Commissioner, Kadri Simsun, “although there is no complete overview”, gave the news of “23 defaults” in Europe: from the Green Grid to Interconsult.

“When prices go up too high, suppliers fail to get the liquidity to buy,” Bellow emphasizes: “It is necessary to speed up the Sace guarantees put in place by the government through automated mechanisms with the banks. Snam and Gse are stockpiling a mandate from the same CEO because the market is unable to Do this. A system must be defined under which gas can be sold when winter comes with easy payment and guarantee mechanisms, once again to ensure liquidity.”

Hedging instruments traditionally used by companies have not been able to handle gas values ​​above €300 per MWh and energy above €700 per MWh. In fact Bellow explains: “60% of customer consumption is stable and predictable. The share covered by suppliers is usually barter type contracts. On the other hand, 20-30% is part of variable consumption, influenced by many factors: Climate , holidays, strikes.And then there’s another 10% which is the so-called “imbalances” or the unexpected portion of the energy consumption, which is related to unexpected changes and events in the last hour: the client system crashes and I have to consume that energy and send it back to Terna, for example Example. I may have sold a contract for 100 euros, but if it costs me 500 in the variant, then this is a problem. In addition, swap contracts are concluded in less than a year, and last year the price has already begun to rise. Finally, it must be taken into account That with high spreads between the agreed price and the market price, the counterparties demand a margin call, and a financial deposit that confirms the ability to honor the contract. And we return to the problem of liquidity.”