Croatias HEP cancels Bosnias Aluminij status of privileged electricity buyer.

By bne IntelliNews August 31, 2012
Croatian power utility HEP and energy regulator HERA have unilaterally cancelled the temporary status of privileged electricity buyer, which was granted by the Croatian government to Bosnias Aluminij in February 2012, via raising the agreed price paid by the Bosnian company nearly 11% to EUR 47.46/MWh, Aluminij said in a statement. The management of Aluminij has been shocked and extremely concerned by the unilateral action of HEP and HERA, the statement said. The Bosnian company believes the Croatian government has not been consulted on the move, considering the immense consequences of the price hike, which automatically disable Aluminij to continue buying power from Croatia as it now becomes more expensive than buying it at home. Under the contract signed in the beginning of 2012, Aluminij was to buy 100 MWh of electricity at EUR 42.86/MWh from Croatia by the end of 2012 and in return manufacture 60,579 tonnes of aluminium billets and slabs for Croatian firms TLM-TVP and TLM-TPP, because these products are not produced in Croatia but are used as raw materials in the production process of the two companies. They both import 60,579 tonnes of these products annually, and their manufacturing is economically equivalent to 100 MWh of electricity. Aluminij is already paying more than it can afford for electricity produced in Bosnia, which has deteriorated not only its finances but also hit its operations. The company said in June it posted a loss of BAM 22.5mn (EUR 11.5mn) in the first four months of 2012 due to higher electricity and falling metal prices. Furthermore, its electricity bill over the period rose BAM 3.1mn after a power price hike. In July, the company shut down 12.5% of the production capacities as a result of continuous financial constraint. The company has projected to end this year with a BAM 10mn loss after recording a slim profit of BAM 1.2mn in 2011. Yet, these projections were made in line with previous, lower levels of power and import materials prices. Since in the meantime it came to a new wave of price hikes and destabilistaion of metal prices on the global market, Aluminij has already plunged into a bigger than expected loss.

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