# Fortum says rising costs of Nordic power trading are “worrying” Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-08-25 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Fortum CEO warns of 'worrying' Nordic power market Meta Description: Fortum's CEO Markus Rauramo expresses concerns over low liquidity and high price volatility in the Nordic power market, raising the need for potential URL: https://financedigest.com/fortum-says-rising-costs-of-nordic-power-trading-are-worryinghtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-08-25t132934z1lynxmpei7o0kkrtroptp4fortum-oyj-derivatives-1736815373658-compressed.jpg) By Anne Kauranen HELSINKI (Reuters) – Finnish utility Fortum on Thursday said low liquidity and high price volatility have created a “worrying” situation in the Nordic power market and it may need government help to manage rising margin call costs. Fortum’s Chief Executive Markus Rauramo said trade volumes on Nasdaq’s Nordic Commodities exchange had dropped 60% since February due to the exceptionally high electricity prices. The Nordic baseload power contract for 2023 has risen six-fold over the same period, leading to soaring margin requirements, he added. Margin [calls arise when the gap between ‘spot’ power](https://www.financedigest.com/emergency-call-services-telcos-urge-eu-to-protect-telecoms-networks-from-power-cuts.html "Emergency call services, telcos urge EU to protect telecoms networks from power cuts") prices and the level at which utilities have sold their output on a forward basis becomes too wide, forcing them to post the margin as proof that they can deliver in the unlikely event of default. As a result, the exchange [traded futures markets](https://www.financedigest.com/the-benefits-of-social-trading-in-a-volatile-market.html "The benefits of social trading in a volatile market") had become “dysfunctional”, Rauramo said. Fortum together with its [German subsidiary Uniper has 11 billion](https://www.financedigest.com/intel-wants-5-billion-more-in-german-subsidies-for-chip-plant-bloomberg-news.html "Intel wants billion more in German subsidies for chip plant – Bloomberg News") euros tied up in margins in the Nordics, compared to around 4 billion in March. The situation in the derivatives [market is not only challenging for electricity](https://www.financedigest.com/eu-u-s-eye-level-playing-field-for-eu-electric-cars-in-u-s-market.html "EU, U.S. eye level playing field for EU electric cars in U.S. market") producers but also for electric companies and hence consumers, who are increasingly dependant on daily volatile spot prices,” he said. Fortum has resorted to bypassing the Nordic exchange by [striking bilateral deals](https://www.financedigest.com/volkswagen-strikes-below-inflation-wage-deal-continues-german-trend.html "Volkswagen strikes below-inflation wage deal, continues German trend") with its electricity customers, to reduce its margin burden, Rauramo said. Fortum gets along at the moment but if the prices continue to soar, we will need more operating capital,” he told reporters, adding the company was in [talks on the matter with the Finnish](https://www.financedigest.com/finnish-centre-right-eyes-coalition-talks-as-defeated-marin-considers-future.html "Finnish centre-right eyes coalition talks as defeated Marin considers future") state, its majority owner with a 51% holding. He also called for the Nordic governments to consider a similar model to Germany where the government has ensured Uniper’s [liquidity via state-owned KfW bank](https://www.financedigest.com/boes-bailey-says-bank-reforms-worked-but-questions-about-liquidity-buffers.html "BoE’s Bailey says bank reforms worked but questions about liquidity buffers"). Earlier on Thursday Fortum posted a second-quarter net loss of 7.4 [billion euros](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility") ($7.4 billion) due to Uniper’s soaring losses. ($1 = 1.0036 euros) (Reporting by Anne Kauranen, editing by Nora Buli, Kirsten Donovan) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---