Switzerland readies financial safety net for power sector

  • Four-year package set for fast-track legislative process
  • Could be worth up to 10 billion Swiss francs, minister says
  • Terms will be tough to avoid false incentives

ZURICH, April 14 (Reuters) - The Swiss government is readying a multibillion-dollar financial safety net for the electricity sector, it said on Thursday, citing increased liquidity requirements amid unprecedented price swings.

Terms of the package are still being discussed but it could be worth as much as 10 billion Swiss francs ($10.7 billion) and last four years, Energy Minister Simonetta Sommaruga told a news conference in Bern.

The idea is to safeguard Swiss power supply even if the situation worsens for critically important players in a European energy crisis, the government said.

Strong price fluctuations on energy markets mean that electricity companies need more financial resources to cover security deposits associated with electricity trading, it said.

"An uncontrolled failure of a large company could jeopardise the security of supply in Switzerland and trigger a chain reaction," it added.

Major Swiss power groups include Alpiq , BKW (BKWB.S) and Axpo (AXPOH.UL).

The government said it should act only on a subsidiary basis to companies and their providers of debt and equity.

Conditions for federal support would be very strict and any aid only temporary. Interest rates would be in line with the market and companies receiving aid would not be able to pay dividends.

After consultations with electricity companies, the government will draft a law for fast-track consideration in parliament's summer session.

The wild swings in prices have prompted some companies to sound out prospects for aid, Sommaruga said, adding that one company had approached the Swiss government late last year before being able to arrange liquidity on its own.

German utility Uniper (UN01.DE) in January secured credit of up to 10 billion euros ($10.91 billion) from parent Fortum (FORTUM.HE) and state bank KfW (KFW.UL) to help it to cope with unprecedented volatility in energy markets. read more

($1 = 0.9336 Swiss francs)

($1 = 0.9166 euros)

Reporting by Michael Shields Editing by Jason Neely and David Goodman

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