IN 2011 AS WELL "Hidroelectrica" sold more than half of its energy directly

More than half of the volume of energy sold by "Hidroelectrica" last year was based on direct contracts with private providers, the representatives of the company told us, in an interview. According to them, in 2011 "Hidroelectrica" sold about 10,591 GWh of electricity directly to provders. Last year the company sold 18,270 GWh.

The representatives of "Hidroelectrica" did not disclose the prices stipulated in the direct contracts, nor on what basis this amount of electricity was sold.

By mid-2011, the company had sold 59.9% of the total volume of electricity sold during that period, to private providers, the company's officials told us at the time. On the same occasion, the management of "Hidroelectrica" told us that the energy sold directly between January and June 2011 was sold on the basis of long term contracts concluded in the previous years.

The contracts through which the makers of electricity owned by the state sell electricity directly to providers or consumers, rather than through tenders on the regulated market, as required by a ministry order, are skirting the law.

On principle, in order to sell electricity directly, a derogation from the Minister's Order is required, the representatives of the Ministry of the Economy said.

The energy traded in a nontransparent manner is sold through secret ("confidential") contracts, or, as the energy makers call them, which do not disclose the names of the private providers or the price at which that energy was sold outside the regulated market.

However, last year, the Proprietatea Fund (FP) published the reports of the most important companies in which it owns shares, including "Hidroelectrica". According to data from the 2010 statement of "Hidroelectrica", published on the website of the Proprietatea Fund, in the year in question, the company sold over 66% of the energy it delivered throughout the year to consumers and electricity providers, at a lower price than it could have obtained had it sold it through the OPCOM. In 2010, the direct customers of "Hidroelectrica" were "Alro" Slatina (ALR), "Luxten Lighting", "Energy Holding", "Europec", "Electromagnetica", "Electrocarbon", "ArcelorMittal Galaţi", "Alpiq Romindustries", "Alpiq Romenergie", EFT Romania, "Electrica", "Salrom", CHN Petroşani and CLMB Patinoar Braşov.

Aluminum maker "Alro" Slatina, controlled by Russian group "Vimetco", agrees to desecretize the contract for the purchase of electricity from "Hidroelectrica", but Marian Năstase, the vice-president of the Board of Directors of the company, said that this would place it at a disadvantage to its competitors: "We would agree to make the contract with Hidroelectrica public, but not to put it on the internet. We are on a competitive market of aluminum makers. This practice of putting commercial contracts on the internet isn't used anywhere in the world. This disclosure will affect us. The question is who will pay for those damages? We have remitted the contract with Hidroelectrica to all the Romanian and international authorities who asked to see it, including to the European Commission. We are willing to make it available to the IMF as well".

"Hidroelectrica" is in its final negotiation stage, in order to increase its delivery prices by 20% to 25%, when it comes to companies which have concluded direct contracts for the sale of electricity, according to Dragoş Zachia, the general manager of the company. He said that this year, the price hikes would be applied only to electricity providers, with which it had agreed to the higher prices, which would amount to 160 lei/MWh on average and would be applied retroactively, starting from January 1st, 2012. Also, "Hidroelectrica" is negotiating with these companies a 10 to 20 percent reduction in the volumes sold. Any energy left following that reduction of the volumes sold to the providers with which "Hidroelectrica" has direct contracts, would be traded on the energy exchange. The representatives of "Hidroelectrica" have also requested the reduction of the duration of the contracts, but their negotiation partners have refused this right from the start.

The management of "Alro" said that they were flexible when it came to renegotiating the price of electricity bought from "Hidroelectrica", but less so when it comes to the reduction of the volumes of electricity: "The nature of Alro prevents it from reducing its volume of electricity. Any reduction in the amount of electricity leads to a drop in output. I think that industrial consumers need to be treated differently than the others. Industrial consumers, due to the manner in which they are organized, have a different profile. We do not want to be treated differently. For us, energy is a commodity. We are willing to renegotiate prices and take on more risk".

In fact, the companies which have direct contracts concluded with "Hidroelectrica" have agreed to pay the higher prices, and most of them have also accepted the 10-20% cut of the volumes, as well as the reduction of the duration of the contracts, according to sources involved in the negotiations, quoted by Mediafax.

The renegotiation of these contracts and the cancellation according to the law of the agreements which could not be renegotiated were demanded by the IMF.

The deadline set by the IMF was February 15th, but the authorities did not conclude the talks by that date.

Such direct contracts have been concluded by "Hidroelectrica" starting with the year 2000, and half of those agreements have been extended until 2018.

At the end of last year, Hidroelectrica cancelled the direct contracts for the sale of energy which it had with SNLO, "Salrom" and CLMB Patinoar Braşov, whereas "Luxten Lightning" abandoned the agreement "to protect its image". The issue of the direct contracts for the sale of energy is also being analyzed by the European Commission.

The management of "Hidroelectrica" told us that, by selling electricity through bilateral contracts, which include certified providers and industrial consumers ("AlroSlatina", "Arcelor Mittal", "Elsid" SA, "Electrocarbon" SA etc.) it managed to raise the revenues needed for the company to continue its operations - the compliance with the mechanical treatment programs agreed upon with the ANAR; ensuring the system services needed for th safe operation of the National Energy System (SEN); ensuring the power reserve required by CN "Transelectrica" SA, under conditions of profitability .

Out of the total volume of electricity sold in 2011, about 21% was sold through the regulated market, with approximately 1% being sold through the day-ahead market and about 9.5% on the centralized market for bilateral contracts (PCCB).

The representatives of "Hidroelectrica" said that this year, the price of electricity is being influenced by the evolution of the price of natural gas and of coal, by the output of wind farms and by the evolution of domestic and European consumption alike.