Troubled Larco’s delayed tariff discount likely this month

A cash shortage problem at troubled state-controlled general mining and nickel producer Larco has contributed to the delayed implementation of an electricity tariff discount agreement reached with the main power utility PPC in January.

Latest reports have indicated the agreement, a conditional offer expecting punctual payments by Larco to PPC, is likely to be implemented within the current month.

The boards at PPC and Larco have both endorsed the tariff discount agreement but the power utility is still waiting for a pledge from Larco ensuring that the industrial firm will hand over to the utility payments expected from certain major clients. Once this pending issue has been settled, PPC and Larco are expected to sign a finalized agreement actvating the electricity tariff discount offer.

Larco, a loss-incurring enterprise that stands as the country’s second-biggest electricity consumer, currently owes PPC an amount estimated at 210 million euros.

The terms of the provisional agreement reached between Larco and PPC offer the mining and nickel producer include a 21 percent discount for high-voltage electricity.

To be applied retroactively as of January 1, 2016, the agreement will be valid for five years, until December 31, 2020.

Larco has been offered an average tariff level of 37 euros per MWh through the agreement, but the industrial producer will need to remain punctual with its payments to PPC if this rate is to be maintained.

The electricity tariff discount offered to Larco is part of a wider business plan orchestrated by the government with the aim of rescuing the mining and nickel producer and steering it towards sustainability. The plan includes wage cuts estimated to be worth 16 million euros, according to union representatives.

Even so, certain pundits support that the involvement of a private-sector investor appears to the only viable solution for Larco’s survival.