PPC planning industrial tariff discounts, reflecting lower cost

Power utility PPC intends to offer discount tariffs, as generous as its finances can permit, to industrial consumers in a move that would represent key complementary support for the government’s plan to reduce industrial energy costs.

PPC’s ability to deliver on this industrial energy discount plan will very much depend on the fate of the corporation’s compensation request forwarded to the European Commission for the utility’s gradual withdrawal of its loss-incurring lignite-fired power stations between 2021 and 2023. PPC has requested compensation of 200 million euros, annually.

A Brussels decision on this request is not expected any sooner than late November. If this PPC initiative fails to produce a positive result, Greece’s ten-year dispute with the European Commission over the country’s continued reliance on lignite for electricity generation could drag on.

Greece cannot be expected to adopt a mechanism offering state-controlled PPC’s rivals access to lignite-based output if the European Commission refuses to approve cost-offsetting measures for the utility, as has been the case in other EU member states, local sources contend. Germany and Dutch energy companies have benefited from such offsetting measures in the past.

Whatever the outcome, state-controlled PPC seems determined to support the industrial sector by minimizing its profit margin for new electricity supply contracts, to come into effect January, 2021. However, the corporation has made clear it will not sell below cost to any industrial consumer.

Industrial enterprises believe a 10 percent tariff increase agreed to in March, 2019 for a three-year period covering 2018 to 2020, can no longer be justified as electricity production costs have since fallen, meaning tariffs must follow suit.

PPC, industrial firms begin talks for new supply deals, limits set

Though still at an early stage, talks between power utility PPC and industrial consumers for new electricity supply agreements to become valid once current deals expire at the end of this year, already appear likely to require plenty of negotiating and time if current differences are to be overcome.

PPC has made clear it will not sell electricity at below-cost price levels to any customer. At the other end, industrial enterprises, each negotiating separately with the power utility, insist that a 10 percent price hike agreed to in March, 2019 for a three-year period covering 2018 to 2020 is unjustifiable as electricity production costs have fallen.

Besides price matters, the two sides also disagree on the duration of new deals. Industrialists are pushing for three-year agreements, covering 2021 to 2023, whereas PPC favors a shorter period. Insiders are predicting months of negotiations.

Industrialists are expected to seek quotes from PPC rivals. Vertically integrated energy groups that have secured competitive natural gas prices in recent months are in a position to offer lower electricity tariffs, regardless of fluctuations in the wholesale electricity market.

In July, wholesale electricity prices registered a level of 41.13 euros per MWh, down 34 percent from the equivalent month a year earlier.

Three industrial consumers, the cement producers AGET Heracles and TITAN and Macedonian Paper Mills (MEL), have been involved in talks with independent suppliers for high-voltage contracts.

PPC’s CO2 cost clause still a key issue for industrial energy consumers

The elimination of a formula applied by power utility PPC to calculate CO2 emission right costs included in industrial electricity tariffs, seen as lacking transparency, represents a key issue for major-scale energy consumers in 2020.

EVIKEN members, at a general meeting held by the association ahead of the festive season, questioned the CO2 surcharge formula applied by PPC to cover its costs resulting from CO2 emission right cost shifts.

Electricity bills issued by state-controlled PPC do not include an analysis of how this cost is calculated, EVIKEN members pointed out during the session.

This is not a new development. Over the past year or so, EVIKEN has demanded details on the CO2 calculation method from PPC. However, this request has not been met.

The issue has generated issues between the energy ministry, SEV, the Hellenic Association of Industrialists, and PPC as an offsetting measure offered to industries has not sufficed to cover this CO2-related cost.

EVIKEN responded by forwarding a series of letters to RAE, the Regulatory Authority for Energy, on the matter, claiming lack of transparency. The authority, an independent body, subsequently ruled that the CO2 surcharge seriously breaches the supply code.

All but two of PPC’s major-scale customers, who signed supply contracts exempting them from the power utility’s CO2 price clause, have been overcharged by a sum of approximately 20 million euros, according to EVIKEN.

As a result of the EVIKEN pressure, PPC appears likely to eliminate this CO2 clause from major-scale supply contracts.

Additional energy costs a big concern for mid-voltage manufacturers

CO2 emission cost charges have developed into a major concern for mid-voltage manufacturers following recent market changes such as electricity tariff hikes and a reduced punctuality discount, offered when bills are paid on time.

The operating details of a CO2 emission cost adjustment mechanism, prompting charges that do not reflect actual costs, are seen as the main problem by manufacturers.

These charges are revised when CO2 emission right cost increases are greater than 10 percent and remain unchanged when the emission charge change is less than 10 percent.

As a result, the current system is leading to charges that do not reflect actual costs.

Electricity tariff changes for medium-voltage manufacturers, especially the termination of a CO2 emission cost discount, have increased their energy costs by 11 to 12 percent, making them less competitive.

The majority of these manufacturers are exporters and risk losing foreign markets, which would decrease production levels and place jobs at risk.

The issue is a concern for some 30 Greek manufacturers employing thousands and needing to overcome energy costs that represent between 30 and 40 percent of total production cost.

“Authorities need to understand that a measure prompting 10 percent electricity price increases or decreases is of little significance to an enterprise whose electricity cost represents just 2 percent of production cost, for example, but, on the other hand, is huge for an enterprise whose electricity cost represents 40 percent of production cost,” a leading industrialist told energypress.

PPC requested to improve CO2 surcharge transparency

RAE, the Regulatory Authority for Energy, has requested greater billing details from the power utility PPC on its CO2 emission surcharges for medium and high-voltage consumers.

RAE president Nikos Boulaxis informed PPC’s chief executive Manolis Panagiotakis of the authority’s transparency request in writing several days ago.

This had been preceded by complaints from EVIKEN, the Association of Industrial Energy Consumers, on the CO2 emissions formula applied by PPC for medium and high-voltage consumers.

The lack of billing information does not ensure transparency for industrial consumers, EVIKEN had noted in a letter forwarded to RAE in February, while urging the authority to intervene.

Viohalco electricity deal with PPC sets standard for industry

Leading metal processing company Viohalco, Greece’s second-biggest electricity consumer, has reached an electricity supply agreement with the main power utility PPC following many months of negotiations, achieved following concessions by both sides and the constructive role of two crucial factors that set standards for the wider industrial sector.

Viohalco accepted a 10 percent tariff increase in exchange for an extended three-year agreement, from 2018 to 2020, offering clarity and foreseeable electricity costs until the end of this period, the biggest benefit of the deal. The industrial enterprise’s electricity consumption reaches 1.2 TWh, representing a considerable part of its overall expenses.

A government pledge, expressed publically, ensuring Viohalco energy cost-savings and competitive electricity tariffs through an extension of Greece’s demand response mechanism (interruptability), was a second crucial factor leading to the industrial player’s three-year deal with PPC.

The measure compensates major-scale electricity consumers when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system’s needs.

PWC study for PPC industrial tariffs expected in March

A PWC consulting firm study on main power utility PPC’s industrial tariffs is expected to propose incorporating CO2 emission right costs and determine an average high-voltage revenue figure that ensures a fair profit margin for the utility while also serving as a base for tariff negotiations with industrial consumers leading to new supply agreements.

The plan should be ready by mid-March but the full list of criteria to be applied in the the calculations determining the average revenue figure remains unclear.

The PWC study, requested by the country’s privatization fund, according to PPC’s chief executive Manolis Panagiotakis, is expected to include a proposal for a two-year extension of a volume-based and punctuality discount, while the prospect of a 10 percent industrial tariff increase remains possible.

Early this year, PPC’s boss had made clear the utility’s intention to increase industrial tariffs, adding these revisions would be accompanied by a “small gift”, without elaborating further.

Energy costs have already risen considerably for industrial consumers as CO2 emission right costs, which have been on the rise, are added as a separate cost to mid and high-voltage electricity bills by the utility.

CO2 emission right costs rose to 14 euros per MWh in December from half this amount six months earlier, and increased to 18 euros per MWh in January.

 

PPC terms for Larco to guide new tariff talks with other industrial producers

Two basic terms included in the main power utility PPC’s power supply agreement with troubled nickel producer Larco promise to guide new tariff negotiations between the power utility and other industrial producers, beginning next week.

Larco, for one of these two terms, has been offered a fixed high-voltage 2 tariff and, furthermore, a volume-based discount of 18 percent for consumption of up to 75 GWh per month, or 900 GWh annually. Fixed high-voltage 2 tariffs (YT2) are reserved for a small number of industrial enterprises.

PPC’s agreement with the ailing nickel producer offers temporary protection to the power utility against any new credit misadventures by Larco, owing over 300 million euros to PPC. Both companies are state-controlled.

PPC’s main concern is to ensure Larco’s ability to cover all its electricity consumption costs from now on, and, looking ahead, reduce its existing debt amount owed to PPC if market conditions, or nickel price levels, allow.

Demands faced by Larco, in its agreement with PPC, include the need to drastically reduce output, cover – on time – the full cost of electricity consumed on a monthly basis, provide letters of guarantee, and also supply PPC 24,000 tons of lignite extracted from its mines in Kozani, northern Greece, to cover power utility fuel needs at its Kardia and Amynteo power plants.

PPC-Larco agreement offers 24% discount, conditions strict

Troubled nickel producer Larco’s new power supply agreement with the main power utility PPC, approved yesterday by the utility’s board, offers the producer a 24 percent discount and sets stric terms and conditions.

Larco will need to drastically reduce its production, cover – on time – the full cost of electricity consumed on a monthly basis, provide letters of guaranteem and also supply PPC 24,000 tons of lignite extracted from its mines in Kozani, northern Greece, to cover power utility fuel needs at its Kardia and Amynteo power plants.

Should Larco fail to fully cover its monthly electricity costs, PPC will have the right to disrupt electricity supply to the producer without any further action or notice, according to the agreement.

Also, Larco will need to reduce its annual energy consumption to a level of 900 GWh, or 75 GWh per month, a level the producer believes it can cover. If this upper limit is exceeded by up to 10 percent, then Larco will need to provide PPC a letter of guarantee worth 600,000 euros if the latter is to continue supplying electricity.

It remains to be seen how firmly the agreement will be enforced. PPC and Larco are both state-controlled enterprises. Larco’s debt to PPC exceeds 300 million euros. Pundits view the agreement as yet another life extension ahead of elections, due later this year.

 

 

PWC industrial tariffs plan for PPC echoes minister’s rejected proposal

A PWC consulting firm study requested by the country’s privatization fund on main power utility PPC industrial tariffs proposes a two-year extension of a volume-based and punctuality discount, while the prospect of a 10 percent industrial tariff increase remains possible.

This plan echoes a similar-minded proposal presented by the alternate minister of economy and development Stergios Pitsiorlas last November, which was rejected by industrial consumers. Subsequently, it remains unclear if industrial consumers will accept the new PWC-shaped proposal.

Less than a fortnight ago, PPC’s chief executive Manolis Panagiotakis suggested a 10 percent tariff increase would be accompanied by a “small gift”, without elaborating further.

These matters will be presented for approval at a PPC shareholders’ meeting expected to take place late in February.

The terms of a new electricity agreement reached between the troubled state-controlled nickel producer Larco, owing PPC over 300 million euros, and the power utility, also state-controlled, will also be presented for approval at this meeting. Industrial producers will be watching closely.

Larco has accepted a production cutback of approximately 20 percent as a means of lowering its monthly electricity costs. According to sources, Larco has been offered an 18 percent volume-based discount and , as was the case in the past, no discount for punctuality of electricity bill payments. The two sides are expected to sign their agreement by no later than January 31.

In the lead-up to the PPC shareholders’ meeting, the PPC board will need to summon high-voltage industrial electricity consumers to negotiations, during which the power utility will present specific proposals based on the PWC study.

 

PPC, troubled Larco reach deal, ministry to balk closure threat

Troubled nickel producer Larco has accepted terms set by the main power utility PPC including a production cutback of approximately 20 percent as a means of lowering its monthly electricity costs from a current level of 5.5 million euros to 4.1 million euros, regarded as manageable by the industrial producer.

The two sides, both state-controlled, are expected to sign their new electricity agreement within the next few days, no later than January 31. Requiring the approval of shareholders at both companies, the new agreement will enable Larco to continue being a recipient of electricity at favorable industrial tariffs.

Larco, which owes PPC over 300 million euros, has also committed itself to a 4.1 million-euro payment to be covered by customer-related cash inflow.

If the plan to limit Larco’s monthly electricity cost to 4.1 million euros fails as a result of extraordinary cost increases, such as a sharp rise in CO2 emission right costs, then the nickel producer will need to provide letters of guarantee, updated monthly, according to the new PPC-Larco agreement.

On a negative note, Greece, as of yesterday, faces a new state aid challenge that threatens to take the country to the European Court if Larco does not return 135.8 million euros to the state within two months, by late March or early April. The amount is currently unavailable. Greece will need to return this amount to the EU or face hefty fines and financial sanctions.

Continuing to favor a state-controlled version of Larco, the government and energy ministry can be expected to try and buy as much time as possible for the return of the 135.8 million-euro amount and extend the matter to May, at least, with the objective of keeping the debt-laden nickel producer afloat ahead of national elections, due later in the year.

The government wants to avoid any political fallout of a company closure that would lead to 1,200 or so job losses.

 

 

PPC set to issue Halyvourgiki €32m payment order

The main power utility PPC, on the front foot for solutions concerning its major-scale debtors, is preparing to issue a payment order to Halyvourgiki for a debt amount of 32 million euros after having already condemned the steel producer for breaching its agreement with the electricity corporation.

State-controlled PPC has ceased representing Halyvourgiki as an electricity supplier and, just weeks ago, criticized the industrial enterprise for having continued to benefit from lower-cost tariffs reserved for steel producers despite not having produced steel and related products since 2015.

PPC claims the Halyvourgiki company owner, the Aggelopoulos family, has, for years, leased the enterprise’s steel production plant, in Elefsina, west of Athens, to a third party for gas liquefaction purposes.

On another major debt front, PPC is believed to be close to reaching a payback program agreement with ELFE (Hellenic Fertilizers and Chemicals) for a debt amount of around 15 million euros.

In the lead-up, PPC was reinforced by a favorable court decision enabling the power utility to disrupt its electricity supply to ELFE, which drew the fertilizer and chemicals producer to the negotiating table with proposals.

A PPC-ELFE agreement would end an unusual payback method enforced on PPC by a Kavala court in August, 2017. The verdict issued by the court in northern Greece required PPC to keep supplying electricity to troubled ELFE and receive payments through one of a number of associated enterprises established by ELFE’s owner, the Lavrentis corporate group, headed by Lavrentis Lavrentiadis, a failed businessman who acquired ELFE in 2009.

Elsewhere, a debt agreement between PPC and state-controlled nickel producer Larco, a huge problem for the power utility, has yet to be found. A new payback program for a Larco debt amount of approximately 90 million euros accumulated since the most recent – yet ultimately unsuccessful – payback program established between the two sides is pending. Larco now owes PPC over 300 million euros in total.

Larco recently agreed to cut output by 20 percent. PPC holds an 11.45 percent stake in Larco, TAIPED, the state privatization fund, controls 55.19 percent, and the National Bank of Greece has a 33.36 percent stake.

Besides clamping down on major debtors, PPC is working on an industrial tariffs study demanded by the country’s privatization fund. It will aim to both maintain discounts and also introduce certain hikes, PPC’s chief executive informed yesterday without elaborating.