Slovakia’s SPP still in talks with Gazprom on prices, agreement looming

By bne IntelliNews November 26, 2013

Slovakia’s dominant gas utility Slovensky Plynarensky Priemysel (SPP) said it is still negotiating with Russia’s Gazprom a revision on its long-term gas supply contract and hopes to reach a price reduction agreement, SITA news agency reported. An expected discount will help SPP reduce its increasing losses accumulated from the sales of gas supplies to households. SPP has said it was selling gas to households below the purchase price, incurring losses worth tens of millions of euros a year.

SPP’s spokesman Peter Bednar said the company cannot comment on the course of the negotiations due to an agreement both sides have signed, but the Slovak company hopes for a positive outcome.

SPP is currently in negotiations with Gazprom regarding gas prices, as there is a negative spread between the contracted gas purchase price under the previously signed long-term take-or-pay contract with Gazprom and current global wholesale gas prices. The latter have fallen in the wake of the economic slowdown and due to a jump in shale gas production in the USA. The Slovak company said in October it may turn to international arbitration if Gazprom does not agree on an acceptable reduction of the price of gas supplies.

SPP signed a 20-year contract with Gazprom in 2008. At the end of 2011, SPP managed to agree with Gazprom on a reduction in the gas prices originally stated in the contract. The size of the discount was not officially announced, but according to media reports it was about 20%. Under the contract, details about which are not public, price changes may be negotiated every three years.

At the beginning of September, the Slovak government decided to buy out the 49% it does not already own in the parent company of SPP in exchange for assuming about half of SPP’s debt, equal to EUR 59mn, aiming to gain full control over gas prices for households. 

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