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Romanian traders against ArcelorMittal deal on OPCOM

19 Mar 2012 17:28:55 | edem

The Romanian Electricity Traders' Association have warned that an electricity purchase offer launched by steel giant ArcelorMittal could produce distortions on the domestic wholesale and regulated markets.

In a letter seen by ICIS Heren and addressed to the Romanian energy minister, the head of regulator ANRE and director of the energy exchange OPCOM, AFEER lays out its concerns regarding the purchase offer for 180MW at a price that could be 10% lower than the OTC value.

If the transactions are carried out on 21 March, they would help ArcelorMittal secure cheap energy over the next two years. AFEER's letter includes the following six points:

The type of offer launched by ArcelorMittal will not trigger a valid (fair) price

The offer does not correspond to good practices as seen on international or domestic markets

The initial price is fundamentally different from the ultimate price of the contract which will be "substantially" lower than the former

The ultimate price may not be known. This fact may contravene the rules of the market, which specify the exact quantity that is for sale, the delivery period and the hours of delivery, bid and offered prices, delivery conditions, payment and guarantees.

Such a transaction (as the one proposed by ArcelorMittal) could have a negative impact on both the wholesale and regulated markets, and could attract a drop in the regulated price for implicit producers.

We suspect that the purchase offer organised through OPCOM aims to legitimise the transaction by carrying it out on a transparent market. This could lead to a drop in the credibility of such a market.

Furthermore, AFEER urged the energy minister and other relevant stakeholders to introduce standardised products on the market in order to stem discriminatory practices.

Last week, the Romanian branch of ArcelorMittal posted a purchase offer through OPCOM for 180MW starting on 29 March and ending on 27 March 2014, implying prices at New Lei 20.00-30.00/MWh (€4.55-6.84/MWh) − around 10% − lower than current OTC values (see EDEM 14 March 2012).

In October last year, the European Commission launched an investigation into a number of contracts for cheap electricity supplies signed by Romania's Hidroelectrica with industrial clients.

One of the clients who reportedly bought cheap energy from Hidroelectrica was ArcelorMittal's steel mill ( see EDEM 21 October 2011). ArcelorMittal was not available for comment by the time the report went to press. AS/IP

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