German League secures credit facility from public lender KfW – sources

General view of the coal-fired power plant of German energy company LEAG, in Jaenschwalde, Germany, October 21, 2021. REUTERS/Matthias Rietschel

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  • VNG also confirms having approached KfW
  • Leag becomes the third German energy company to seek credit lines
  • Energy companies need billions of euros to cover margin calls

DUESSELDORF, March 14 (Reuters) – German utility Leag has secured a multi-billion euro credit facility from state-owned bank KfW, two people familiar with the matter said. .

Leag, which operates lignite-fired power plants and is owned by Czech investor EPH and private equity group PPF Investments, declined to comment on the news, which was first reported by Handelsblatt.

A source close to the German finance ministry said on Sunday that a German public limited company had received a short-term loan of 5.5 billion euros ($6 billion).

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Leag is the third German energy company after Uniper (UN01.DE) and VNG to seek funding from KfW to cover margin payments related to electricity and gas sales hedges – known in the industry as margin call name.

Margin calls become a problem when the spread between “spot” electricity prices and the level at which utilities sold their generation forward widens too much, forcing them to post the margin as evidence that they can deliver in the unlikely event of a defect.

VNG, a division of regional utility EnBW (EBKG.DE), confirmed on Monday that it had applied to KfW for an emergency credit line as a precautionary measure.

Although he did not provide details regarding the volume, he said it was comparable to the installation Uniper obtained in January. Uniper, which is majority-owned by Fortum (FORTUM.HE), said at the time that it had secured a facility of up to 2 billion euros.

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Reporting by Tom Kaeckenhoff and Christian Kraemer; Written by Christoph Steitz; Editing by Maria Sheahan and Ed Osmond

Our standards: The Thomson Reuters Trust Principles.

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