Greece’s electricity company has signed a long-awaited energy supply agreement with the country’s biggest industry customer – Aluminium of Greece – ending a conflict over the pricing of electricity that had been raging for almost sixteen years.
Aluminium of Greece, a subsidiary of Mytilineos group, and the state-owned Public Power Corporation (PPC), reached a long-term electricity supply deal, which analysts say opens a “new era” for Greek industry and the country’s economy.
In a statement, Mytilineos group said the negotiations took place in a constructive and positive climate, driven by the need “to consider the financial interests of the two companies, the amicable settlement of problems in the energy market and, of course, the competitiveness of the Greek Industry”.
A solution on pricing between the PPC and the country’s biggest electricity consumer has been a constant requirement of Greece’s international lenders.
According to the memorandum, the PPC was obliged to negotiate with its largest customers and adjust pricing to each consumption profile, a prerequisite for completing the evaluation of Greece’s bailout programme.
High energy costs for energy intensive industries have been a hot potato for the left-wing Syriza-led government in Athens. Industry representatives have repeatedly urged the Greek government to find a solution on energy costs in order to decrease production costs and ultimately avoid the loss of thousands of jobs in the energy sector.
Panos Skourletis, the new Greek energy minister, is tasked with a heavy reform agenda that could help revive the cash-strapped Greek economy and make the country return to growth. But the stakes are high.
Energy analysts told EurActiv.com that this “balanced” agreement offers mutual economic benefits for the two companies. It enhances the PPC’s liquidity at a challenging juncture and, at the same time, acknowledges the specific consumption profile of Aluminium of Greece, as the biggest high voltage industry.
In August, the total outstanding debts toward PPC exceeded €3 billion and represented over 50% of its annual turnover.
Particularly, the deal foresees the immediate payment by Mytilineos group to the PPC, without interest, of an advance of €100 million. In addition, at the start of each contractual year the company will pay to the PPC an advance equal to 30% of the annual value of electricity.
“The final commercial clause was also agreed in favour of the PPC: in the event of an increase in Aluminium prices on the London Metal Exchange (LME), the PPC will receive a bonus on the MWh price; yet in case of a price decline PPC will incur no penalty,” Aluminium Greece noted.
A new era
Industry sources told EurActiv that the PPC’s “strategic” decision to make a competitive offer on pricing indicated the government’s intention to back domestic industry.
“With such deals the Greek industry will manage to enhance its export-driven profile and return the value back to the Greek economy.”
The same sources explained that this move was a positive sign for the Greek economy in general, as international creditors see the business environment in the debt-ridden country changing.