“The data is catastrophic,” says Remus Borza, the lawyer who controls Euro Insol, the company designated as judicial administrator of Hidroelectrica after the largest energy producer in Romania went insolvent on June 20.
In the first five months of the year the largest energy producer in Romania made a net profit of just EUR200,000. Electricity is now sold at the same price as last year, although prices on the energy exchange have risen significantly, because price negotiations are ongoing.
“2010 was a grace year and at the time the company produced 19.6 TWh of energy. In 2011 production was over 14 TWh – the force majeure started on September 1 and lasted until May this year. The 2012 budget was made for a production of 15.6 TWh, but we will have a maximum of 13 TWh. At a production of 15.6 TWh the company’s costs were 125 lei per MWh, but now they will reach RON130-135,” Borza explains.
As energy production declines, the company’s costs rise, but the prices of direct contracts, those deals that have been going on for more than ten years and that put an over EUR1.5 billion hole in Hidroelectrica’s accounts, are the same as last year because negotiations are only being conducted now.
So, companies such as Alro and Energy Holding have access to the cheapest energy in Romania at a price of just RON130 per MWh, below the company’s current costs, and two times lower than on energy exchange OPCOM, where on Tuesday the spot price was RON284 per MWh. To this adds the fact that the company sells 5.5 TWh of its production on the regulated segment, i.e. to the population and to small consumers. On this segment, the price is RON72 per MWh, around RON60 less than the company’s costs per MWh.
“We asked the National Energy Regulatory Authority (ANRE) to acknowledge our costs. No law can force a producer to sell at below costs. We asked for the amounts producers are required to sell to the regulated segment to be resized and for our contribution to be reduced to 4.5 TWh,” Borza also said.
According to him, the amounts that producers make available for the regulated segment, i.e. for the population and small consumers, are of 28 TWh, while demand is for just 16 TWh.
“Apart from them, there are those looking for a bargain,” Borza said.
At the same time, the only direct contract terminated so far, the one with Euro P.E.C., controlled by businessman Adrian Comsa, will be loss-making for Hidroelectrica.
“Euro P.E.C. has filed for insolvency, so we will have to take the losses from the contract,” Borza explains. Once the company goes insolvent, Hidroelectrica will find it difficult to recoup Euro P.E.C.’s debts of RON37 million.
Moreover, the drought could determine the energy producer to use the force majeure clauses, which it also did last year. By using this clause, the company is no longer required to fulfill its contractual obligations.
“There haven’t been two consecutive years of drought since 1990. We will have the lowest production in 22 years, but the same spending. By the end of the week, we will have to put together the documents enabling us to use the force majeure clause,” Borza also said.
All the company’s contracts will be affected if the company uses the clause. According to 2011 data, Hidroelectrica’s largest contract is with Alro, the largest energy consumer in Romania. Last year Alro took 2.49 TWh of hydropower for which it paid RON322.4 million, i.e. RON130 per MWh. Energy Holding, Alpiq and EFT are other major holders of direct contracts.
So far negotiations have been held with EFT and the contract with Euro P.E.C. was terminated.
“Today we are meeting Alro Slatina (Tuesday i.e.), tomorrow (Wednesday i.e.) Elsid and Electrocabon, on Friday Energy Holding and then we will have the last round with EFT. On July 16 we will see who the winners are,” Borza concluded.
(English version by Daniela Stoican)