A long-term contract is a „problem“ of the company, not the customer

Week in Slovakia

Tuesday – 10th May 2011

Starting of next year another subject wants to supply Slovak households with electricity and gas. The company Korlea Invest, a.s wants to focus on all the consumer categories, from households to big companies and the communal sector. The company has already receive and approval from the Regulatory Office.

Wednesday – 11th May 2011

Switching off the power plant in Jaslovské Bohunice should cost more than 1,15 billion Euro. Slovakia will need to receive yet another 425 million Euro to finish this process. This issue was one of the main points of the negotiations of Slovak Prime Minister Iveta Radičová at the European Bank for Reconstruction and Development in London on 10th May. EBRD has promised to finance the process, however the specific amount of money it will allocate to Slovakia was not presented. The amount will depend on the financial perspectives of the budget for the period 2014 – 2020. Another factor is that also other countries will apply for a similar grant including Lithuania and Bulgaria.

It is possible that Slovakia will not be selling emissions any more. The budget proposal was also counting with revenues worth 100 million Euro from selling emission. However, it is more than likely that they will not be sold after the negative situation on the market due to the situation in Japan. If they will not be sold, expenditures in the environmental fund should be also lower by 30 million Euro, so the total lost should be around 70 million Euro according to Minister of Finance Ivan Mikloš.

Kamenné square in Bratislava hosted an event entitled „European solar days in Slovakia – an exhibition of electromobile and electro-bicycles, modern technologies that are converting solar energy into electricity. For more information click here.

Heating company Tepláreň Košice (TEKO), a.s. will replace the steam system used for heat supplying with a hydrothermal one in the city district Nad Jazerom in Košice. The investment should reach 8 million Euro and the total length that will be replaced is approximately 6,7 km. The project should be finished in 2014 and it is the biggest reconstruction of the heat distribution in Košice in the last 10 years. The reconstruction should not only bring savings for the company, but it will be also more ecological as it will produce less emissions.

The territory of Slovak republic holds 80 exclusive deposits of energy sources with reserves at a volume of 1,121 billion tons. Slovakia also has geological reserves of gold and silver ore in six deposits at a volume of almost 60 million tons. The statistics were revealed by and analysis of the Ministry of environment. Currently extraction works are carried out at 24 deposits. Most of them are gas deposits.

Companies from the SPP group revealed their economic results for year 2010. Revenues from natural gas distribution increased, but on the other hands revenues from distribution of the commodity and its sales fell. The net profit for natural gas sales was 443 million Euro, which is 22 % less than in 2009.  Revenues from service sales grew by 11,2 % to 826, 47 million Euro and operating costs fell by 8,3 % to 593, 05 million Euro. In 2010 the companies belonging to the group were also successful in maintaining their position as the key gas supplier with a total 82 % share on the market.

A long term contract is a „problem” of a company, not the consumer. This is one of the conclusions of the debates at the expert conference PRO-ENERGY forum that took place in Podbanské in mid May. Although the prices of natural gas in the long-term contracts are currently much higher than the prices on the spot market, the customer should not bother about it as he is buying gas from all the suppliers at prices, which are reflecting the prices on the spot. The decreasing price trend on the spot markets with natural gas is a logical result of the fact that there is more natural gas than oil, stated Jaromír Fajman (United Energy Trading). According to him, if the prices in the long term contracts are reflecting prices of oil and oil products, it is inevitable that they will rise in the future. On the contrary Ivan Weiss (SPP) believes that long term contracts are necessary that is mainly due to the reason that they are able to accumulate financial resources for building and developing gas infrastructure. „The customers do not have to care about the prices in the long term contracts,” he emphasized.  Igor Nagy from ČEZ Slovensko thinks that a supplier can be able to secure a sufficient amount of the commodity even without a long term contract. As an example he said that if trading is conducted in a foresighted manner on OTC platforms, anybody is able to secure enough gas for three years. Hugo Kysilka from the Czech company Vemex was on contrary in favour for long term contracts.

Electricity as a commodity will also become more expensive in the long term according to René Grebeň from České Energetické Centrum. He also added that if it happens, those selling electricity on the market will have to anticipate a more intense effort from the public institutions to regulate price setting, including the commodity component. Today, deregulation is helping to push price down on the Czech market according to Grebeň. Taking into consideration also the Slovak market, Grebeň believes that the current model and regulatory practice are keeping the end price of electricity for households and small and medium enterprises at an artificial high level. „Regulation in Slovakia is only a political instrument that is increasing the prices,” he stated.

If we are to speak about wholesaling on the electricity market, according to Pavol Šramko (OKTE), currently there are two topics that are being discussed: creating a balancing market with electricity and opening the so called intra-day trading.

Friday – 13th May 2011

Another topic that was discussed at the PRO-ENERGY forum was the question of privatization of the six biggest heating companies in Slovakia. The experts agreed that every investor that will buy any one of the 6 state companies will be interested in having good relations with the town municipality. On the other hand, the municipality perceives the heating sector as its instrument for social policy. Participation of towns can also bring another problem in the question of investments and whether the municipalities will be able to co-finance the investments into ecology and renovation of the infrastructure.

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