Romania's Hidroelectrica announces force majeure on electricity contracts
Romania's hydro electricity generator Hidroelectrica has declared force majeure on all its delivery contracts, slashing its August production to a historical minimum, according to a statement sent to the press on Monday.
Hidroelectrica said it would cut its production to 700GWh from the planned 1.1TWh for August, the lowest production levels since the company was set up in 2000.
The decision will be become effective for all its 23 bilateral contracts on Tuesday, and on 10 August for the six contracts concluded as part of a tender held on the OPCOM power exchange last month.
The company said in the statement that the contractual deliveries will be reduced proportionally with the decrease in production.
"July 2012 has had the highest temperatures recorded in the last 60 years and low hydro levels in all production areas owned by Hidroelectrica," the company said.
"If we had not decided to call force majeure this month, we would have had to buy on the free market at prices well above those in the bilateral contracts," the company stated. Hidroelectrica insisted that it would seek to keep the force majeure period to a bare minimum.
The announcement coincided with a spike in the daily outturn on OPCOM, which jumped to a seven-month high of Romanian New Lei 357.88/MWh (€77.14/MWh), according to ICIS data collected during working days. Participants said the spot is driven by the hydro shortage as well as the above-seasonal temperatures across the region.
Traders have been concerned about such a move for some weeks (see EDEM 1 August 2012), but September '12 Baseload was reported dealing at New Lei 237.00/MWh on Monday, also the highest traded level recorded on the contract and the highest traded level for a front-month contract since 26 January, according to ICIS data.
Prices for Calendar Year 2013 Baseload had also risen, reaching New Lei 226.00/MWh on 3 August, the highest closing level since ICIS began to assess the contract this year.
Last month, the state-owned generator decided to cancel six long-term contracts that were renewed last year with a number of customers at prices nearly half the official market price (see EDEM 24 July 2012).
The energy freed up to the market as a result amounts to 6.5TWh annually. However, the company added that its August production obligations are as high as 926GWh.
Hidroelectrica's force majeure announcement on Monday is the second in less than a year (see EDEM 27 September 2012). The producer had to take a similar decision last September after it was compelled to buy electricity on the free market to honour its long-term contractual obligations.
The prolonged drought as well as the low prices charged under the long-term contracts renewed last year dried up its finances and forced it to declare insolvency (see EDEM 18 June 2012). AS
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