Finland and Sweden on Sunday announced plans to offer billions of dollars in liquidity guarantees to power companies in their countries after Russia's Gazprom shut the Nord Stream 1 gas pipeline, deepening Europe's energy crisis.

Finland aims to offer 10 billion euros ($9.95 billion) and Sweden plans to offer 250 billion Swedish crowns ($23.2 billion) in liquidity guarantees.

"This has had the ingredients for a kind of a Lehman Brothers of energy industry," Finnish Economic Affairs Minister Mika Lintila said on Sunday.

When Lehman Brothers, the fourth-largest U.S. investment bank at the time, filed for bankruptcy in September 2008 with more than $600 billion in debt, it triggered the worst parts of the U.S. financial crisis.

"The government's program is a last-resort financing option for companies that would otherwise be threatened with insolvency," Finland's Prime Minister Sanna Marin told a news conference.

State-controlled Finnish power company Fortum, which last week had urged Nordic regulators to take immediate action to avert defaults even among smaller players, praised the proposals made by Helsinki and Stockholm.

"We appreciate Finnish and Swedish governments taking swift action to stabilize the Nordic derivatives market and support Nordic energy companies in time of crisis," the company tweeted.

"It's crucial to keep companies operational. Our discussions with the Finnish government are ongoing," it said.

The guarantees aim to prevent ballooning collateral requirements from toppling energy companies that trade electricity on the Nasdaq Commodities exchange, an event that could, in turn, spread to the financial industry, the governments said.

The rapid rise in electricity prices has resulted in paper losses on electricity futures contracts of power companies, forcing them to find funds to post additional collateral with the exchanges.

The collateral requirement on Nasdaq clearing recently hit 180 billion Swedish crowns, up from around 25 billion in normal times due to the surge in power prices, which have risen some 1,100 percent, Sweden's debt office said on Saturday.

The government feared that the Nord Stream 1 shutdown would lead to a further surge.

Finland's Marin said there needed to be measures at the European Union level to stabilize the functioning of both the derivatives market and the energy market as a whole.

Nasdaq Clearing is a Swedish company supervised by Swedish authorities, which is the main reason Sweden was the first country to step in to tackle the potential crisis.

Swedish Finance Minister Mikael Damberg said on Sunday that the guarantees would last until March next year in Sweden and would also cover all Nordic and Baltic nations for the next two weeks only.

Without government guarantees, electricity producers could have ended up in "technical bankruptcy" on Monday, Damberg said.

EU meeting

EU countries' energy ministers will meet on Friday to discuss options to rein in soaring energy prices, Reuters reported on Monday, citing a draft document it had seen.

The document said the ministers will consider options including a price cap on imported gas, a price cap on gas used to produce electricity, or temporarily removing gas power plants from the current EU system of setting electricity prices.

Ministers will also consider offering urgent "pan-European credit line support" for energy market participants facing very high margin calls, said the document drafted by the Czech Republic, which holds the EU's rotating presidency.

EU energy ministers will also discuss possible caps on the margin limits that energy exchanges can ask for, and a temporary suspension of European power derivatives markets, according to the document, which could still change ahead of the meeting.

(Source: Reuters with edits)