Traders question steelmaker electricity deal on OPCOM
ArcelorMittal's Romanian subsidiary has concluded a long-term electricity purchase on the OPCOM exchange below the value of recent sales, reigniting trader complaints on fair energy pricing.
Traders pointed at a deal concluded on local exchange OPCOM's PCCB bilateral platform on Thursday. Arcelor Mittal Galati, the Romanian subsidiary of steel manufacturer Arcelor Mittal, bought 135MW of Baseload electricity for the period between 5 March 2013 and 30 September 2014 from nuclear producer Nuclearelectrica at a price of New Lei 181.00/MWh (€41.24/MWh).
However, some traders suggested that the price of the deal was below the fair market price.
"The 2013 part of the deal is about New Lei 10.00/MWh below the last transaction [for balance of the year] done by Hidroelectrica, while the 2014 part is about New Lei 5.00/MWh lower if you compare it with the Hungarian levels for January-August '14," one source said.
Another one assessed the fair price of the deal at New Lei 192.00/MWh, while a third source considered the deal should have been about New Lei 15.00/MWh higher if it was done at fair price.
"New Lei 181.00/MWh is a very good price for Arcelor Mittal; they need cheap electricity to survive," another Romanian participant remarked.
Previous competition concerns
Traders have previously complained to the Romanian authorities that electricity purchase offers launched by ArcelorMittal could distort the domestic wholesale and regulated markets (see EDEM 14 March 2012 and EDEM 19 March 2012).
In July last year, the European Commission concluded that electricity sold by hydro generator Hidroelectrica to ArcelorMittal Galati in 2009 and 2010 may have involved illegal state aid and distorted competition (see EDEM 25 April 2012 and EDEM 9 July 2012).
Sources also pointed out that the energy law changes which led to the ban of over-the-counter trading last year (see EDEM 18 September 2012) were meant to prevent the so-called "smart guys" deals, but these reforms appeared to be unsuccessful in the light of this deal.
"Now the smart guys are dealing under their noses," one trader complained.
ArcelorMittal Galati has been hit hard by the crisis in Europe and the company has been making efforts to secure the necessary energy for its operations, according to a company statement emailed to ICIS on Friday.
"We placed purchasing offers on OPCOM... We expressed our satisfaction that an offer has been placed on the platform to match our demand," it added.
"The deal fulfilled all power market rules established by ANRE with regard to the market in a transparent manner. The auction announcement, the offer and the proposed contract were public on OPCOM's website for five working days," an OPCOM spokeswoman said on Friday.
Romanian energy regulator ANRE was not available for comment as ICIS went to press.
Other traders polled by ICIS on Friday argued that the price of the deal was actually not unfair, but the way the deal was made raised questions.
One trader calculated that the price itself seemed reasonable compared with the German market level and the fact that the market was generally bearish for the forward curve.
Besides, the Hidroelectrica balance of the year deals averaging New Lei 191.00/MWh were in small quantities, with only three counterparties ready to buy at this price, which showed that the price may not be so representative.
"But the fact that Nuclearelectrica is the responder and not the initiator of the deal is suspicious. So they responded to someone's offer instead of initiating a selling offer that would have allowed anybody to come and bid," he said.
"Before that deal [Nuclearelectrica] were trying to sell at New Lei 195.00/MWh and nobody responded. Now they switched sides and sold at New Lei 181.00/MWh. Nobody could have bid for that price, it would be anti-competitive," he added.
However, another trader said that as Nuclearelectrica had very low production costs, the price was good for the company, especially as Nuclearelectrica needed to find a way to hedge after their New Lei 195.00/MWh offer was not accepted. Irina Peltegova
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