The European Commission has kept its distance from a loss-making state-owned enterprise that has derailed energy competition in Greece.
General Mining and Metallurgical Company (Larco) is a state-owned company that was established in 1963. It is currently the biggest ferronickel producer in Europe, and one of the five largest producers worldwide.
Despite high international demand for nickel, the company has ended up being a heavy burden on the cash-strapped Greek economy.
According to the latest data provided by the Greek ministry of finance (15 December), in the first 11 months of 2015, Athens created a €1,309 billion revenue hole.
Larco’s main debt burden is toward another state company, the Public Power Corporation S.A. (PPC), which owns up to €200 million shares in the firm.
A financial dead-end
Press reports in Athens suggest that Larco will suffer record high losses in 2015, currently estimated at €100 -120 million, or €8 million per month.
Analysts attribute Larco’s financial deadlock to the lack of modernization and investment in the nickel industry, neccessary to attract new investors and make the company viable. As a result, despite its market potential, Larco is unable to react to the international commodity crisis. The company’s production cost is almost double the sale price.
Another influential factor has been the stance of Greek governments toward Larco’s powerful trade union, which assured an “opt-out” from the wage cuts imposed on all other state-owned companies in terms of Athens’s bailout deal.
PPC’s President, Manolis Panagiotakis, recently said that Larco has even stopped paying its monthly debt to Greece’s state electricity supplier, under an installment plan agreed upon by both sides.
Greek industry under pressure
PPC recently decided to abolish a 20% discount for the industry, triggering strong reactions, and raising concerns about the long-term viability of the sector.
Greek industries are struggling due to a high energy cost mainly caused by the state-monopoly nature of the Greek electricity market.
Reports in Athens suggest this decision could raise Greek industry’s energy bill to €68 MWh, well above the European average, thus crippling already struggling Greek companies.
In this context, LARCO seems to enjoy an almost favorable position, without paying PPC.
In March 2014, the European Commission concluded that public support gave Larco an undue advantage over its competitors, in breach of EU state aid rules. In total, capital injections and public guarantees it received are worth €136 million.
Queried by EURACTIV, DG Competition chose not to comment.