PPC, industrial consumers nearing 2021-23 supply deals

Power utility PPC’s ongoing negotiations with industrial consumers for new two-year supply deals covering 2021 to 2023 are making progress in a number of cases, where deals are close to being finalized, while, in others, work is still needed to bridge gaps.

Tariff increases of approximately 20 percent are expected, while discounts for punctual payments by customers will not be incorporated into the new two-year deals, it has become apparent.

The talks are now focused on other matters, still unresolved, including the method applied by the power utility to shape customer profiles influencing respective tariff levels.

The percentage of a take-or-pay clause to be applied on monthly electricity consumption levels, or discrepancies from agreed consumption levels, is another matter that remains unresolved.

At this stage, PPC appears likely to accept a more flexible solution compared to its initial proposal.

PPC has already reached an agreement, until 2023, with the vertically integrated Mytilineos group’s Aluminium of Greece, the final deal in a 60-year association.

As of 2023, PPC’s pricing policy for energy-intensive consumers will change as tariffs will no longer be fixed but linked to wholesale electricity costs.

PPC-Aluminium of Greece agreement paves way for other major consumers

The forthcoming end of a long-lasting business association between Aluminium of Greece, a member of the Mytilineos group, and power utility PPC, announced at the former’s general shareholders’ meeting yesterday, marks the end of an era in the energy ties between the country’s biggest electricity consumer and the Greek market’s dominant supplier.

In 2023, Aluminium of Greece will no longer depend on PPC’s supply, a development concurrently marking the beginning of its goal to become the first eco-friendly aluminium producer.

The latest PPC-Aluminium of Greece agreement promises to pave the way for solutions in negotiations currently in progress between the power utility and other energy-intensive industrial producers.

Other than the fact that the duration of Aluminium of Greece’s new supply agreement with PPC will run until 2023, no other details have been disclosed. Its expiration in two years’ time will mark the end of a 60-year association between the two companies.

One thing already clear is that Aluminium of Greece, beyond 2023, will receive electricity from the Mytilineos group’s new natural gas-fired power plant being developed in the Agios Nikolaos industrial zone in Viotia’s Agios Nikolaos area, northwest of Athens, to be direct cable-linked to the Aluminium of Greece facility, as well as through RES production.

The combination of these two electricity sources will offer Aluminium of Greece greater energy-source flexibility, the group’s chairman and CEO Evangelos Mytilineos noted yesterday.

PPC’s administration, headed by chief executive Giorgos Stassis, displayed realism that will “help industry, as a whole, move ahead with the energy transition that is inevitably approaching,” Mytilineos acknowledged. “We can establish PPAs at good price levels, and we will play a significant role in this domain,” he added.

 

PPC hold of industry ending, energy groups entering picture

The approaching end of a 60-year business association between power utility PPC and Aluminium of Greece, a member of the Mytilineos group, announced yesterday by the group’s chairman and CEO Evangelos Mytilineos, marks the end of an era with wider implications, as all the country’s energy and industrial groups are heading in the same direction.

“In 2023, Aluminium of Greece will no longer depend on PPC. It is moving into a new era as, for the first time since its establishment, the company will be freed from PPC in terms of electricity supply,” Mytilineos announced at a general shareholders’ meeting.

The future belongs to the vertically integrated groups, smaller versions of the power utility, set to enter and cover market needs.

Some enterprises have already prepared and positioned themselves for the new era, in which major-scale electricity consumers will no longer depend on PPC, instead covering needs through PPAs.

Companies that have been slower to incorporate Greece’s energy transition into their strategies must now move fast if they want to remain on the map.

The developments offer a glimpse of the energy sector’s new era. A more efficient PPC will no longer be weighed down by dependencies and compromises, private-sector groups will be structured for greener policies, RES investors will not depend on tariffs at RES auctions, but, instead, establish PPAs with industrial consumers, and competition will intensify through the many changes coming into play, such as the target model markets and the Capacity Remuneration Mechanism (CRM).

Green-energy investments, breaking one record after another, now appear likely to achieve a 2030 objective aiming for eco-friendly energy coverage of the country’s total energy demand at a level of 63 percent.

This essentially means that RES facilities offering a total capacity of 17 GW will be operating by the end of this decade, lessening the need for natural gas-fired power stations, which will become unsustainable, in market terms, as a large proportion of energy exchange transactions will be covered by increasingly competitive RES units.

 

New target model department at Mytilineos, raising retail, RES goals

The Mytilineos group is assembling a new energy management and trading division, described as a pioneering effort for Greece, in preparation for the forthcoming arrival of the target model.

The new division will be tasked with handling all the group’s electricity production and trading matters, as well as natural gas trading and import activities, the objective being to bring together all the aforementioned concerns under the one management system.

Much is expected of this initiative, Evangelos Mytilineos (home), the group’s chairman and CEO, told analysts during a presentation of company first-half results.

The energy supply market is not yet mature enough for further concentration, Mytilineos noted, making clear his corporation is prepared for this prospect.

He attributed favorable results in the energy sector to low natural gas prices, forecasting a correction in the second half.

The Mytilineos group aims to have captured a 10 percent share of the retail energy market by the end of 2020, its head official noted.

The group has also set elevated RES goals and is aiming for 300 MW of operational wind energy farms and several more hundred MW at various stages of development by the end of 2021, Mytilineos informed.

Negotiations with power utility PPC for new electricity tariffs concerning aluminium producer Aluminium of Greece, a Mytilineos group member, are in progress, he added.

The cost of industrial electricity tariffs is a crucially important issue for the government and power utility PPC.

Mytilineos said he expects metal prices to rebound in the second half of this year, noting the group is not exposed to any price fluctuations for the remainder in 2020 as a result of hedging.

The group’s financial results for 2020 will be close to record levels posted for 2019, analysts were informed.

First-half results have taken the group a step closer to its objectives for the year, while, barring unexpected developments, last year’s dividend level will be maintained, the CEO added.

Mytilineos aluminium division defies crisis, adds to robust performance

First-quarter financial results reported by the Mytilineos group yesterday confirmed, yet again, the resilience of the group’s metallurgy division, which managed to overcome the international price crisis and contribute considerably to profitability.

The corporate group’s uninterrupted operations at all divisions, including metallurgy and energy, without a single COVID-19 case, is, without a doubt, the main achievement at Mytilineos in the first quarter and the ensuing period.

Despite a considerable fall in prices of alumina, down by 26.3 percent to 285 dollars per ton, and aluminium, which fell 8.9 percent to 1,712.75 dollars per ton, Mytilineos managed to post favorable figures as a result of low raw material and production costs.

Natural gas costs for the group’s alumina production dropped by 30 percent compared to 2019. In aluminium production, the group’s overall cost for primary aluminium fell by 22.5 percent compared to 2019.

The resilience of the group’s metallurgical division, at the forefront of global alumina and aluminium production, was attributed to its vertical integration model as well as continual cost-cutting initiatives, the corporate group noted.

The company’s latest cost optimization program, dubbed Hephaestus, now being fully implemented, aims to save a further 62 million euros, 35 million euros of this total concerning the improvement of operating profit figures on a continual basis. The other 27 million euros in prospective savings represent one-off improvements.

Lower gas costs increased the profit margin at the group’s gas-fueled power plants by 55 percent compared to the previous year, while RES production was up 17.5 percent.

 

PPC probed for lower prices to Larco, Aluminium of Greece

A public prosecutor at a Court of First Instance is investigating the main power utility PPC over suspicions that it could be selling electricity at unfair, below-cost prices to its two biggest energy-intensive industrial consumers, the troubled state-controlled nickel producer Larco and Aluminium of Greece, cross-examined information has indicated.

It is believed PPC has been asked to present a series of financial details in a letter forwarded by a financial police authority, which notes, in the letter, that a preliminary investigation is being held based on a Court of First Instance order.

Documents demanded by the financial police authority include financial statements such as balance sheets and financial results from 2013 to 2017, invoices concerning transactions with energy-intensive customers from 2013 to the present, as well as price and supply agreements signed by PPC with Larco and Aluminium of Greece from 2013 to now.

The letter received by PPC does not explain what prompted the investigation, nor does it clarify its purpose, but it is firmly believed PPC’s electricity supply prices offered to Larco and Aluminium of Greece are the concern.

EVIKEN, the Association of Industrial Energy Consumers, recently contended PPC’s electricity supply pricing policy for Larco and Aluminium of Greece and the duration of these agreements are favorable, adding other industrial consumers need to counter demands such as higher CO2 emission right price, end of discount offers, and brief one-year supply agreements.

The association’s claims were made following the launch of the public prosecutor’s investigation.

Mytilineos to make three major energy sector moves, CEO tells analysts

The Mytilineos group, a key player in Greece’s energy market, intends to make three major moves in the energy sector, Evangelos Mytilineos, the group’s chief executive, told analysts and banking officials, in response to questions, during an annual briefing held yesterday.

Though the CEO did not elaborate, it is widely believed that one of these moves concerns an alternative plan for the environmental upgrade of Amynteo, a lignite unit excluded from main power utility PPC’s the bailout-required sale of lignite units. Local authorities have already submitted a lifespan extension request for Amynteo, in the country’s north.

It has already been reported that Mytilineos is among a number of industrial groups examining the prospect of investing in the upgrade of an ageing lignite-fired power plant currently operated by PPC.

Given the EU’s new environmental standards, the Greek power utility’s older lignite facilities will soon need to be withdrawn if they are not upgraded.

Mytilineos took part in the recent PPC market test staged by the European Commission for investor feedback and queries concerning the power utility’s bailout-required sale of lignite units.

Besides making clear his intentions to pursue plans in the energy market, Mytilineos told participants at yesterday’s briefing that all players, not just PPC, will need to proceed with significant investments if true market competition is to prevail.

Confirming forecasts, the Mytilineos group’s performance in 2017 exceeded expectations, the group’s chief executive informed. A turnover figure in excess of 1.5 billion euros is expected to be posted, the CEO noted, without offering a precise amount.

As for group subisidiary Aluminium of Greece, Mytilineos told analysts that an investment decision on a new unit will depend on the indications offered by related investment performance indices.

Commenting on the group’s METKA subsidiary, providing a complete range of Engineering-Procurement-Construction (EPC) services for energy and infrastructure projects, the chief executive said a new model placing emphasis on RES projects, especially in the photovoltaic sub-sector, would be pursued in the immediate future.

 

Immediate solutions needed at loss-incurring nickel producer Larco

The country’s two biggest energy consumers, restructured Aluminium of Greece, a member of the Mytilineos corporate group since 2005, and Larco, the state-controlled general mining and nickel producer, stand on completely different ground in terms of profit performance.

Spared of financial burdens of the past and now pushing ahead with an aggressive cost-cutting policy, investments and more efficient production management, Aluminium of Greece is already registering record production levels that are expected to generate record profit figures in 2017.

Meanwhile, Larco, unable to rebound as a result of high production costs amid low market prices, continues to incur losses and sink deeper into debt, which is negatively impacting electricity supplier PPC, the main power utility. Larco is having serious problems covering its electricity bills owed to PPC, despite a series of payback program revisions.

In 2013, when nickel prices averaged 15,000 dollars per metric ton, Larco’s turnover figure reached 207 million euros for a loss of 76 million euros. This year, the price of nickel slid to 8,000 dollars per metric ton before slightly rebounding to 11,600 dollars per metric ton.

 

PPC, Aluminium of Greece deal well received in industrial sector

Main power utility PPC’s shareholder approval yesterday of an electricity tariff agreement reached between the corporation and electro-intensive industrial consumer Aluminium of Greece, following a long-running dispute that has included legal battles, has resonated positively throughout the industrial sector.

Besides bringing an end to the power utility’s dispute with one of the country’s biggest industrial players, the agreement also highlights PPC’s willingness to accept a long-standing Aluminium of Greece demand for a long-term industrial electricity tariff agreement, rather than a two-year deal, as has been the case until now. In doing so, the power utility will now need to also be prepared to offer long-term tariff agreements to other industrial corporations.

Based on comments made by PPC boss Manolis Panagiotakis, the utility appears ready to renegotiate new industrial power supply deals with customers beyond 2017, when agreements expire. Some customers could make moves before the end of 2017.

PPC’s recognition of the particular electricity needs of Aluminium of Greece helped the two sides reach a deal. Other industrial players are not expected to demand equivalent terms but, instead, aspects of this deal, including improved tariff levels.

 

 

Mytilineos group reaches Aluminium deal with PPC

The Mytilineos corporate group has announced it will sign a seven-year agreement (2014-2020) with PPC, the main power utility, for electricity supply to the corporate group’s Aluminium of Greece, following a proposal’s approval by the power utility board. The agreement ends a long battle, including legal action, between the two sides over industrial tariff levels.

The agreement is the result of intensive negotiations over many months by both sides and ends, for good, a long-running confrontation between PPC and Aluminium of Greece over electricity tariff levels for the industrial enterprise, the Mytilineos group announced in a statement.

Negotiations were held amid a constructive and positive climate that sought to ensure the financial interests of both corporations, reach a consensual settlement for energy market problems, and enhance Greek industry’s level of competitiveness, the statement added

The Mytilineos corporate group, in the statement, expressed its satisfaction for the specific agreemement, noting it recognizes the unique high-level consumption patterns of Aluminium of Greece, while also bolstering PPC’s cash flow situation amid difficult times.

The corporate group has been committed to supporting PPC as an electricity market would not exist without the utility, the corporate group’s statement added.

The Mytilineos corporate group will soon provide PPC with a 100 million amount, without any interest charges, for electricity consumption, as has been repeatedly made clear by the Mytilineos group’s leadership at shareholder meetings and in public remarks.

The agreement also specifies that Aluminium of Greece will provide PPC with a 30 percent deposit of annual electricity amounts as a deposit payment at the beginning of each year.

 

Appeals court backs RAE tariff set for Aluminium of Greece

An Athens Court of Appeal has rejected main power utility PPC’s challenge of a decision delivered in 2013 by RAE, the Regulatory Authority for Energy, through which the power company had been ordered to sell electrical energy to the industrial enterprise Aluminium of Greece at a price of 36.6 euros per MWh.

The appeal court’s verdict is the latest and possibly final chapter of a prolonged legal dispute between PPC and Aluminium of Greece, a member of the Mytilineos corporate group, that has lasted a decade, the Greek energy market’s longest ever case.

Commenting on the development, market authorities noted that this latest decision brings to an end a series of legal challenges filed by PPC at Greek and European courts. On a wider level, it also bolsters the positions of large-scale industries pushing for fairer electricity tariffs from PPC, based on its actual costs and not those presented by the power utility, the authorities added.

In its verdict, the Athens Court of Appeal pointed out that RAE’s pricing decision for PPC covers the utility’s costs and also yields a profit.

PPC has argued that the price imposed by RAE would force the utility to supply electricity below cost and, as a result, constitutes illegal state aid. The utility did not accept RAE’s decision and presented its position to the European Commission, which rejected PPC’s argument about a year ago. PPC then took the case to the EU’s General Court, before the European Commission once again ruled against the utility.

The dispute between Aluminium of Greece and PPC began in 2006 after an older tariff agreement between the two sides, dating back to the 60s, expired. The battle escalated in 2013 following RAE’s pricing decision.

PPC must acknowledge true cost, an issue now at the fore

The issue concerning the true level of main power utility PPC’s production cost has returned to the fore following a decision announced this week by the Hellenic Competition Commission, a protector of free competition, which lends support to Aluminium of Greece, a member of the Mytilineos corporate group, for the high-cost energy problem it faces.

PPC must reach an agreement with Aluminium of Greece on a new tariff deal for the energy-intensive industrial enterprise within a three-month period, as of today, according to the commission’s decision.

The matter has re-emerged as Greek government officials prepare to finanize talks with the country’s creditor representatives on the NOME auction plan, to offer third parties access to PPC’s low-cost lignite sources and help break PPC’s near-monopoly in Greece’s electricity market. The NOME plan needs to be completed by no later than February.

The local competition commission’s decision tackles the PPC cost issue directly and sets a tight deadline for the measures that need to be taken.

Local officials and the creditor representatives will need to decide on the starting price of NOME auctions within the next few weeks. The government wants to press ahead with the plan and seems determined to not permit any delays by PPC over technical concerns.

Returning to the tariff dispute between PPC and Aluminium of Greece, the power utility’s true cost must be reflected in the agreement that needs to be reached. This is not an isolated case and will influence the power utility’s tariff-related dealings throughout the entire industrial sector.

The cost level presented by PPC has already been doubted by the local competition commission, the creditor representatives and, most recently, the Greek government as well, energypress has been informed.

During its long-running dispute with Aluminium of Greece, PPC, in 2013, contended its cost level was 59.1 euros per MWh. RAE, the Regulatory Authority for Energy, had cut the level to 36.6 euros per MWh. To back its claims, PPC had hired multinational professional services firm Ernst & Young to confirm its figures, which the latter did. But this endorsement was based on cost-related figures that had already been published by PPC, not an independent survey of the power utility by Ernst & Young.

Responding to a PPC announcement released yesterday, market authorities have noted the power utility’s management has either not fully understood the importance of the local competition commission’s decisions, which are binding, or has done so and intends to apply defensive delay tactics.

However, in its announcement on the tariff dispute with Aluminium of Greece, PPC did acknowledge any solution to emerge will have a wider impact on consumers in the the local electricity market. “Any agreement reached on the tariff to be offered to Aluminium of Greece, which consumes roughly 5.5 percent of power in the country’s mainland, will impact all consumers,” the PPC statement noted.

PPC’s current management, led by CEO Manolis Panagiotakis, who was appointed earlier this year, has persisted with the cost-related views supported by the power utility’s previous administration. PPC insists its average lignite-based production cost is 59.14 euros per MWh, despite the ruling that undercut the figure to 36.6 euros per MWh and a decision at a PPC general shareholders meeting in 2014 that had set the price at 44.5 euros per MWh.

At the time, authorities assumed PPC would apply the 44.5 euros per MWh level as a base for the NOME auctions. But PPC was not obligated to do so. However, the latest decision by the local competition commission, which has demanded that a fair solution be found with Aluminium of Greece, is a binding one.

The committee’s pressure on PPC to reach a tariff agreement with Aluminium of Greece, and the starting price of NOME auctions, essentially boil down to being the same matter, one that concerns PPC’s actual production costs. It promises to shape the upcoming developments in Greece’s electricity market.

 

New standards set by decision on Aluminium, PPC dispute

A decision announced yesterday by the Hellenic Competition Commission, a protector of free competition, on complaints by Aluminium of Greece against the main power utility PPC intervenes on three levels and sets new standards for the industrial sector’s high-cost energy problem.

Firstly, the decision considers that PPC maintains a dominant position in the electricity production and retail markets. Secondly, the Competition Commission’s decision assumes that Aluminium of Greece and, by extension, all other energy-intensive industrial consumers, are dependent on PPC for energy and, as a result, are unable to seek alternative energy suppliers. If no changes are made, the dependence of industrial consumers on PPC will continue to shape ties between the two, the committee noted.

Thirdly, the Competition Commission stressed that PPC must agree to individualized tariff agreements with its industrial consumers and not proceed unilaterally. This detail establishes a serious issue with regards to recent decisions reached at a PPC general shareholders meeting, as it gives major industrial consumers the right to dispute PPC’s tariffs. The Competition Commission noted PPC’s tariff levels need to take into account the respective profiles of industrial consumers and comply with market regulations.

PPC maintains a monopoly in lignite-fired and hydropower electricity production, both lower-cost methods that enable the utility to operate without interruption and maintain its market dominance, the commision’s decision noted. On the contrary, independently run natural gas-fueled power stations operate for shorter hours, whenever required by the market’s needs, the commission added. The committee’s decision criticized PPC’s policy, which, it noted, seeks to sideline rival independent electricity producers by limiting their market shares and bolstering its own standing in production and wholesale supply.

The commission also pointed out PPC’s dominance in the retail electricity market, where the utility holds market shares of 95 to 100 percent, in the low and high-voltage sectors, respectively.

Commenting on Aluminium of Greece – the country’s largest energy consumer – and, by extension, the energy-intensive industrial sector, the committee made noted of the aluminium producer’s particular needs and traits. The cost of energy for Aluminium of Greece comprises the main production cost for the enterprise, as is also the case for the energy-intensive industry as a whole, the committee stressed. This cost may even exceed that of raw materials, it added. The committee stated that Aluminium of Greece is dependent on PPC as it has no alternative energy supply sources.

The local Competition Commission, an independent body, also noted PPC’s declaration that it will refuse to supply electricity to Aluminium of Greece is unjustifiable.

The committee’s decision comes as the fourth to offer support to Aluminium of Greece in its dispute with PPC, following rulings by RAE, the Regulatory Authority for Energy, a court verdict, as well as the European Commission’s Directorate-General (DG) for Competition.