Romania’s Competition Council issues EUR 37 mln fines for anti-competitive deals in the energy sector

Romania’s Competition Council has decided to fine state-owned electricity producer Hidroelectrica and ten of its former clients for anti-competitive contracts closed between 2003 and 2012. The total value of the fines is about EUR 37 million. The Competition Council’s decision targets the direct contracts Hidroelectrica closed with ten local and foreign companies, most of them electricity traders, for the delivery of electricity below market prices. Hidroelectrica was fined EUR 4.6 million, as the company cooperated with the Competition Council and admitted its guilt. The investigation started in early-2012. The Competition Council issued the highest fine against Swiss electricity trader Energy Financing Team AG (EFT) – some EUR 16 million. Electricity trader Alpiq Romindustries was fined EUR 4.8 million and aluminum producer Alro Slatina will have to pay EUR 4.7 million. Another electricity trader, Energy Holding, was fined EUR 2.8 million while local electric equipment producer and electricity supplier Electromagnetica was sanctioned with a EUR 2 million fine. The list also includes public lighting company Luxten Lighting (with a EUR 1.2 million fine), local companies Elsid Titu, Electrocarbon Slatina, Menarom P.E.C., and Alpiq Romenergie. Starting 2003, Hidroelectrica has had direct deals with these companies which covered its entire output. These contracts have distorted the competition on the electricity market. The contracts have been assigned preferentially, without a prior selection process. The prices for the electricity Hidroelectrica sold through these contracts has been constantly under the average prices on the free electricity market, according to the Competition Council. “Basically, all of Hidroelectrica’s power output has been delivered based on long-term contracts and thus the other market participants didn’t have access to this source of cheap electricity,” said Bogdan Chiritoiu, the Competition Council’s president. Moreover, the contracts sometimes forced Hidroelectrica to buy electricity from the market at higher prices to sell to its long-term clients at lower prices just to be able to keep its part of the deal, when the company couldn’t produce enough energy due to the drought. All these contracts were canceled in June 2012 when Hidroelectrica filed for insolvency. In fact, these contracts were the main reason the company went into insolvency, as they caused big losses. After going into insolvency, Hidroelectrica started selling its electricity on the free market, which helped it get higher prices and return to profit.The company had record results in 2014. However, Hidroelectrica is still in insolvency, as the clients who lost their privileges in 2012 have gone to court against the company and contested the insolvency procedure. The trials may end this year, which would allow Hidroelectrica to get out of insolvency and start working on an initial public offering (IPO).