Renewable power producer Axpo receives €4.16B credit line from Swiss govt to prepare for European energy crisis

Switzerland-based Axpo, the country’s largest producer of renewable energy, announced on Tuesday, September 6, that it has received a credit line of up to CHF 4B (€4.16B) from the Swiss government.

Axpo’s board of directors and its executive board made the request for a credit line on September 2. The company now says that the Swiss government’s Federal Council and the Financial Delegation approved the proposal. The company also clarifies that the credit line is subordinated to existing financing and there are no collateral obligations.

Energy market turmoil

The company mentions in a press release that the European energy markets have seen unprecedented volatility since the fourth quarter of 2021, and had deteriorated drastically over the last few weeks. Compared to September 2021, wholesale power costs have climbed tenfold while recent price volatility continues to set new records.

The situation is so dire that many European countries have passed laws or are doing other things to help energy companies get cash.

Axpo’s new credit line guarantees that the company can continue to meet the collateral needs of its customers’ long-term power supply contracts and support Switzerland’s energy security even if the situation worsens.

Christoph Brand, CEO of Axpo, says, “Paradoxically, while in the short-term we are confronted with the challenges of an historic energy crisis, Axpo’s long-term outlook remains positive. We have therefore made the responsible, proactive decision to apply for this additional financing. By taking this action, we want to ensure that the company can continue to make its vital contribution to Switzerland’s security of energy supply, even if the highly uncertain market situation intensifies further as we approach the winter half-year.”

Axpo has access to liquid assets worth more than CHF 2 billion. 

Hedging strategy for power companies

Axpo, and other European energy companies, hedge their outputs years in advance. This is a globally recognised process where energy companies sell the power generated in advance. 

Axpo says that its hedging practices are conservative and are beneficial to both the company and its customers. Swiss transmission grid operators with multiple end customers, large industrial operations, or SMEs can secure a guaranteed energy supply at a predictable price through long-term PPAs. 

The company, therefore, minimises future price risks. Axpo customers that have concluded such agreements will continue to benefit from comparatively low, stable prices and do not have to purchase electricity at the highs that energy prices are witnessing now.