The extremely high costs of gas and electricity are driving entire families to the brink of ruin. But their suppliers are also increasingly in need. Even soundly managed municipal utilities suddenly report payment difficulties. Is there even a bankruptcy wave?
There are words that get under your skin: “The current situation makes us very afraid,” reports a young family man FOCUS online. “In the worst case, we lose our house.” In August, his supplier called for a down payment of 1,200 euros for electricity, gas and water.
Not an isolated case, rather the new normal in Germany – and not one that lets you sleep well at night. Despite the first, at least slight, recovery on the gas market at the beginning of the week, the situation remains tense. And more dark clouds are already gathering on the horizon.
Because after the large gas importers such as Uniper or Leipzig-based VNG, who have to be supported with billions of euros, the public utilities are now also in danger of getting into financial difficulties. There are around 900 of them in Germany.
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What does that mean when the municipal utilities, which are deeply rooted in the region and are often responsible for local transport, waste and swimming pools in addition to the electricity and gas supply, stumble? Does everything fall apart then? How dramatic is the situation with local suppliers really?
The Association of Municipal Companies (VKU) is already warning of a wave of insolvencies and is calling for talks about possible state aid.
“We need an understanding between the federal and state governments regarding the liquidity problems of the municipal utilities and the development of a rescue package,” said managing director Ingbert Liebing of the Reuters news agency. “Of course we want to prevent a wave of insolvencies, that’s our top priority.”
The same applies to the Saxon metropolis of Leipzig. A few days ago, this announced: “In Leipzig, as in other cities, the municipal utilities are coming under increasing pressure due to the price explosions on the energy markets.”
The city is therefore making a temporary credit line of up to 400 million euros available to the Leipzig supply and transport company (LVV) by decision this Wednesday.
In this way, the local municipal utilities should be able to “provide the extremely high level of security against failure that is due on the energy markets – regardless of the creditworthiness of a trading partner – and to secure trade”.
You have to know that when trading energy on the exchange, in addition to the already extremely high prices, there are security payments, a kind of deposit, in technical jargon: margin call. The companies get them back when the deal is done.
However, they must be advanced and tie up liquidity accordingly. Many municipal utilities cover at least part of their acquisitions via the stock exchange.
“With electricity prices of 20 euros and gas prices of 10 euros per megawatt hour, depositing a deposit or margin call was usually not a problem,” explains Mirko Schlossarczyk in an interview with FOCUS online.
Schlossarczyk is a partner at “enervis energy advisors”, an independent management consultancy based in Berlin that specializes in energy management issues. With the exploding energy prices, the security deposits have risen significantly, he says.
“As a result, this is currently a significant challenge and may pose a risk to liquidity.” Schlossarczyk refers to a particularly dramatic case from Austria, which also caused a stir internationally.
There, Wien Energie encountered enormous turbulence in August and had to be rescued with a government loan of over two billion euros. “This is not an international energy company, but as an energy company part of Wiener Stadtwerke and fully owned by the City of Vienna.”
But the situation is also serious in Germany. According to information from the “Handelsblatt”, several municipal utilities are having payment difficulties. “Of course, municipal utilities are also active with trading transactions on the energy markets and, like other large suppliers, are not immune to getting into difficulties,” says Schlossarczyk, classifying the situation.
“This is not scaremongering, but a very real fear given the current situation.” But politicians generally have a great interest in supporting their municipal utility in a precarious situation, the expert continues.
See Leipzig. According to Schlossarczyk, too much depends on the public utilities beyond the energy supply, especially when it comes to public services. These include energy and water supply, transport services, telecommunications, street cleaning as well as sewage and waste disposal.
“That’s why I rate the risk of insolvencies at municipal utilities as very low.” So the all-clear? That’s what four major municipal energy suppliers say when asked by FOCUS online:
“Public utilities are indisputably systemically important and have always been committed to public services,” says N-ERGIE, the energy supplier for Nuremberg and Franconia.
“In order to continue to ensure security of supply in Germany, we expressly support the VKU’s demand for a rescue package that must be opened up immediately by all energy suppliers.” With sufficient financial resources, but also in the hope of never needing it.
However, security deposits are not a problem for N-ERGIE: “Unlike other municipal utilities, N-ERGIE does not buy its energy quantities directly on the futures market on the exchanges, but bilaterally from trading partners.”
However, the “severely increased purchase prices for energy, but also for materials and services, required a significantly higher level of liquidity,” it continues. By its own admission, N-ERGIE is in a very solid financial position.
However, payment defaults by customers or supplier defaults could very quickly “require additional liquidity requirements”. It is therefore completely incomprehensible why the federal government has still not set up a financial rescue package for the energy suppliers Stadtwerke.
“Our entire democratic society is facing immense challenges,” says MVV Energie AG, based in Mannheim. All social and political actors must work together to cushion the economic consequences of the Russian war of aggression.
All companies in the energy industry are currently facing the same three challenges: First, to ensure a secure supply of affordable energy for the respective customers. Secondly, to act economically and thirdly, to manage the conversion of the energy system away from fossil to renewable energies.
The latter is no longer just a question of climate protection, but also a contribution to independence from Russian energy supplies. According to a company spokesman, MVV is a solidly positioned company that operates both with foresight and conservatively.
“Through our long-term procurement strategy, we have, for example, fixed the prices for energy supplies until the end of 2022 and were thus able to offer our customers a price guarantee for electricity and gas during this period.”
But: “We will also have to take into account the increased prices on the energy markets and the financial risks due to the changed trading conditions in our pricing policy. We communicated that accordingly some time ago.”
Stadtwerke München (SWM) describes itself as a “large, stable and economically healthy company” that is positioned across the entire energy value chain and set about expanding its own power generation from renewable energies early on.
But the Bavarian state capital and its supply and service company in energy matters are not a place of exclusively blissful people.
The current situation on the energy markets with extreme price fluctuations on the trading markets is therefore also a major challenge for SWM. “However, SWM will not be dependent on the financial support of its shareholder, the City of Munich, for the foreseeable future,” they say.
In Cologne at RheinEnergie it says: “In view of the very volatile situation on the energy markets, energy procurement is associated with many financial risks that need to be managed.”
One is active in almost all fields of the energy industry – generation, procurement/trade, networks, sales, energy services. “Due to this good and diversified structure, the company is well positioned in a market comparison.”
It remains to be seen how things will ultimately turn out. With a view to the future, energy expert Mirko Schlossarczyk makes it clear that nobody can currently predict with absolute certainty and certainty how the energy market will develop.
“We can only drive on sight and manage the things that we can influence and control as best we can.” Hopefully well enough.
The citizen money replaces Hartz IV. A decision that gives many economists stomach ache. Because people with low incomes are hardly better off than those who do not work at all.
What do you think of the citizen money? Is the work still worthwhile for you personally? Tell us about your life situation, also with a view to the increased energy costs.
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