The UK is considering offering state-backed loans to energy firms after wholesale gas prices soared, prompting big suppliers to ask for support from the government to cover the cost of taking on customers from companies that have gone bust.
Wholesale gas prices have risen in the past few months as economies reopen amid the easing of the COVID-19 pandemic and high demand for liquefied natural gas in Asia pushed down supplies to Europe, leading to quirks such as a shortage of carbon dioxide.
The rise in prices has already forced four small energy suppliers to cease trading in the past few weeks and British Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng held emergency talks with executives from National Grid PLC, Centrica PLC, EDF Energy and the Office of Gas and Electricity Markets (OFGEM) regulator on Saturday.
“If a supplier fails, OFGEM will ensure customers’ gas and electricity supply will continue uninterrupted,” Kwarteng wrote on Twitter.
“If a supplier of last resort is not possible, a special administrator would be appointed by OFGEM and the Govt. The objective is to continue supply to customers until the company can be rescued or customers moved to new suppliers,” he wrote.
Kwarteng said he was yesterday scheduled to hold meetings with the energy industry and consumer groups.
Britain’s largest suppliers are requesting a multibillion-pound emergency support package from the government to help them survive the crisis, including the creation of a “bad bank” to absorb potentially unprofitable customers from failing rivals, the Financial Times reported.
The BBC reported that the government was considering state-backed loans to keep firms afloat.
Firms were beginning to be more hesitant about taking on new customers through regulator OFGEM’s supplier of last resort scheme, a source at one large energy company said.
Under the scheme, energy firms bid to take on the customers from those companies that have gone bust, usually offering to honor any outstanding credit.
Companies typically hedge their customer’s needs many months in advance so taking on new customers at this stage would likely mean buying their energy at the current elevated wholesale price, which is much higher than they are allowed to charge under the price cap.
“OFGEM continues to work closely with government and industry to ensure consumers continue to be protected while global gas prices are high and will speak further on these issues at the industry roundtable today,” OFGEM said.
Surging gas prices have led to an array of stresses in other markets, including a shortage of carbon dioxide after fertilizer plants had to shut.
Carbon dioxide is used to stun animals before slaughter and prolong the shelf-life of food. Kwarteng also met Tony Will, chief executive of CF Industries Holdings Inc, the country’s largest domestic supplier of carbon dioxide.
Benchmark wholesale British gas prices have more than trebled to record highs this year due to several factors, including low stock levels, robust demand in Asia making it more difficult to attract liquefied natural gas cargoes and maintenance issues at key infrastructure.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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