April 26, 2019 / 1:36 PM / a month ago

Finland's Fortum frees up cash by replacing Nasdaq collateral with bond

OSLO, April 26 (Reuters) - Finland’s Fortum has freed up 310 million euros ($345 million) of cash previously used as collateral at Nasdaq’s Nordic power exchange by replacing it with a bank bond, it said on Friday.

The move, reflected in Fortum’s first-quarter cash flow, aimed to boost available funds for operations and investments, investor relations manager Mans Holmberg told Reuters.

The extra money helped lift Fortum’s cash flow before financing activities, which rose to 918 million euros in the quarter from just 60 million euros a year ago, the company’s earnings report showed.

Before buying a 49.9 percent stake in Uniper, Fortum held billions of euros in cash and posted some of it as collateral for clearing trades at Nasdaq, Holmberg said.

“Now the situation is different and we are back to normal. Freeing up cash is something that is reasonable to do, at a really low cost,” he said, without disclosing the name of the bank from which Fortum secured the bond or revealing the cost.

Fortum remains a clearing member at the exchange, he said, adding the move was aligned with Nasdaq’s rules and criteria.

Nasdaq said this month it would raise the amount of cash reserves Nordic power firms must hold to clear trades directly in its commodities exchange, a move traders said would make the market safer but push smaller firms out of the clearing house.

A Norwegian trader in September failed to cover his losses on the Nordic power market, forcing members of Nasdaq’s Nordic commodities exchange to replenish 114 million euros of clearing house contingency funds lost in the default.

After that, Nasdaq said it would introduce changes to prevent any repeat.

Holmberg said Fortum, not the bank that provided the bond, carried the trading risk, so Fortum would have to add any further collateral required.

Fortum reported improved quarterly profit year-on-year on Friday, although it fell slightly short of analyst forecasts.

$1 = 0.8981 euros Editing by Terje Solsvik and Edmund Blair

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