SHARE
COPY LINK
For members

ENERGY

UPDATED: Why did Wien Energie ask for €6 billion from the Austrian government?

Austria's Finance Ministry said the state-run energy company need 'urgent financial support'. The government this Wednesday announced a €2 billion credit line for the energy supplier. Here's what you need to know.

UPDATED: Why did Wien Energie ask for €6 billion from the Austrian government?
An energy customer examines her electricity meter in her flat. (Photo by Susannah Ireland / AFP)

Austria’s federal government will provide a €2 billion credit line to the Viennese energy supplier Wien Energie after the company fell into some financial trouble last week, chancellor Karl Nehammer (ÖVP) said in a press conference on Wednesday.

The sharp rise in wholesale prices for gas and electricity has put the supplier Wien Energie in financial difficulties, according to Austria’s Finance Minister Magnus Brunner (ÖVP).

“Vienna Energy approached us over the weekend with the request that we meet urgently because they have fallen into a financial emergency,” the minister told ZIB2 on Sunday.

READ ALSO: Where are energy prices going up (again) in Austria?

On Monday, the Ministry of Finance released a statement explaining the situation. The ministry said that Wien Energie still has sufficient financial resources to secure future supply contracts, but it would need €6 billion to “conclude transactions on the energy exchange”.

Later in the week, the state company ensure consumers that supply was secured and said that as prices dropped, so did the security deposits and the cash it needed. The company, the City of Vienna, and Austria’s federal government then agreed on a €2 billion credit line for Wien Energie.

READ ALSO: ‘The supply is secured’: Vienna to audit energy firm after price shock

What happened?

The company, which is state-owned by the City of Vienna, said that to ensure customers’ supply, it carries out trading transactions on energy exchanges. But, like all other stock exchange participants, it has to pay a “security deposit”.

This is where the firm has run into trouble. “Because electricity prices exploded again across Europe on Friday, these necessary security measures have increased unexpectedly,” the firm said. 

That means that as prices sharply rose, the payment it needed to participate in trading also escalated.

However, Wien Energie added, this “collateral” it needs to pay “comes back once the trades are settled”, just like a security deposit would.

READ ALSO: Vienna to handout €200 payments to counter rising energy costs

“Wien Energie & Wiener Stadtwerke are solid, economically healthy companies with excellent credit ratings,” the company added.

Why does Wien Energie trade in the energy market?

Energy is traded on the European stock exchange, where companies can make transactions in the “futures market”. This basically means that you can buy and sell energy today, but the actual delivery will only take place in the future.

Wien Energie sells electricity from its power plants up to two years in advance while it buys electricity and gas on the stock exchange for its customers in the long term, the company explained. It does that to protect itself – at least to a certain point – against future price fluctuations.

Trading in futures allows the company to close a deal at a specific price, even if the product will only be delivered years later. This way, Wien Energie (and other companies that do the same) can estimate energy prices for customers and power plants for the next few years.

READ ALSO: Energy crisis pushes nuclear comeback in Europe

“This increases planning security and is a proven tool for risk management in the energy sector,” the company added.

When prices explode, however, like what happened last week, as the cost of electricity in retail rose from €700 to around €1,000 in just one day, the security deposit to participate in those trades also went up.

What has been decided?

After talks between the federal government and Vienna, the federal government agreed on a special €2 billion credit line for the company to cover it in the future if prices unexpectedly soar.

A credit line works like a loan, but the money is not sent directly to Wien Energie. Instead, it is left available for the company to draw if necessary. The City of Vienna said that the company doesn’t need the cash “from today’s perspective”. However, the credit line would provide a “security to cover extreme outliers on the electricity exchange”. 

“In any case, the federal government has the instruments and the will to help the city of Vienna in this financial emergency. It is about the security of supply for two million people, which must be guaranteed.”, the Finance Ministry said.

It added that it is considering a loan “in the billions”, which the Austrian Federal Financing Agency would handle.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

LIVING IN AUSTRIA

How much do you need to earn for a good life in Austria?

Austria is known as a country with a high standard of living, but it also comes with a high cost of living. Here’s an overview of what you can expect to earn in Austria.

How much do you need to earn for a good life in Austria?

As with most things in Austria, the question of ‘what is a good salary?’ is difficult to answer as the cost of living (and wages) can vary between states and cities.

For example, the east of Austria is typically much cheaper than the west for housing (with the exception of Vienna). And those living in cities often have easier – and cheaper – access to public transport when compared with people living in rural areas. 

READ ALSO: ‘Bad-tempered locals’: Vienna ranked the world’s ‘unfriendliest city’

Childcare is also something to consider with huge differences between Vienna, where there is access to heavily subsidised services, and places like Tyrol where childcare costs more.

To delve a bit deeper, we looked at the data to find out the average salary in Austria and how it differs between professions and locations.

What is the average salary in Austria?

In 2021, the average gross annual salary in Austria was €44,395, according to the latest data from Statistics Austria

However, in the latest survey by online job platform Step Stone, the average gross annual salary in Austria is €49,609.

The Step Stone survey then broke it down further by industry with those working in pharma earning the most at €60,504. This was followed by energy at €60,345, medical technology at €59,106 and banking at €58,711.

The industry with the lowest average annual salary is hotels/gastronomy at €37,546, followed by agriculture at €39,779 and tourism at €43,965.

FOR MEMBERS: REVEALED: The best and worst districts to live in Vienna (as voted for by you)

Occupation also plays a part with people working in management earning the most – on average €66,768. Consulting came second at €53,721.

And like many other European countries, the gender pay gap in Austria prevails. The average annual salary for a man is €52,633 and for a woman it is €44,330.

Furthermore, the top earning city in Austria is Bregenz in Vorarlberg with an average annual salary of €54,620. When comparing the west of Austria with the east, the median salary in Vorarlberg is €46,450, whereas in Burgenland it is just €39,100.

What is the average cost of living in Austria?

Many international residents will find everyday living costs in Austria to be expensive, especially for those that come from countries with a much lower cost of living.

Inflation has also been rising steadily in Austria throughout 2022, leading to some steep rises in prices for groceries, housing costs and energy.

READ MORE: EXPLAINED: 10 ways to save money on your groceries in Austria

However, the average cost of living varies across the country, depending on the location. For example, Vienna and Innsbruck in Tyrol are two of Austria’s most expensive cities, but more affordable places to live are Graz in Styria and Klagenfurt in Carinthia.

In Vienna, the average price for a one bedroom apartment in the city centre is €915, going up to €2,000 for a three bedroom apartment, according to Expat Arrivals.

Whereas in Graz, the average cost of a one bedroom city centre apartment is around €609, and a three bedroom apartment is €1,170.

SHOW COMMENTS