Hidroelectrica and 10 partner companies fined EUR 37m by the Competition Council for cartel. Hidroelectrica’s administrator hails the decision

The Competition Council has sanctioned with fines amounting to RON 165.8 million (EUR 37 million) Hidroelectrica and 10 partner companies, mainly energy traders, for concluding a cartel on production and sale of electricity, digi24.ro reports.
After four years of investigations, the Competition Council gave the second-largest fine in the history of the institution after the one to oil companies. Thus, 11 companies have been fined by up to 10% of their turnover for agreements on the sale of electricity.
The largest fine was received by energy trader Energy Financing Team of EUR 16 million. The fine was applied to the turnout of the parent company in Switzerland, since the company no longer has an office in Romania.
Large fines were given to Agro Slatina, the largest energy consumer in Romania, i.e. of EUR 4.7 million, to Alpiq Romindustries of EUR 4.8 million and to Hidroelectrica of EUR 4.6 million. Hidroelectrica has benefited from a reduction of the fine because it admitted the guilt for these agreements.
Elsid and Electrocarbon have also benefited of reductions in the fines. These companies are among those who have received finesof less than EUR 1 million.
During 2003 to 2012, the traders of energy, also called ‘smart guys’ of electric power, have concluded long-term contracts of up to ten years with the state company through which they bought all the cheap energy from Hidroelectrica and resold it at higher prices on the stock exchange. These contracts brought total damages of EUR 1.1 billion to Hidroelectrica and losses as large to household consumers who have not benefited from the cheapest energy in the system.
During the investigation, several companies have sued the Competition Council, challenging the decision.
A difficult task will have the tax authority, which is to collect the fines. Many companies have no assets that can be seized, being companies that have only offices that trade electricity.
President of the Competition Council, Bogdan Chiriţoiu, explained that there were years during which these contracts totalled more than Hidroelectrica had produced.
“Hidroelectrica, for example, was in the position to reject 450 applications for power purchase as all its production was blocked by these contracts. There have been years when contracts totalled more than Hidroelectrica produced and had to buy from other producers on the market in order to honour those contracts. Hidroelectrica had the cheapest energy on the market and, being locked by these contracts, the regulated energy market by which energy is sold to consumers did not include hydropower, but energy from other more expensive producers. So there was a disadvantage for household consumers as opposed to now, as the basket consists of power from Hidroelectrica and Nuclearelectrica, so from the cheapest sources. During the period when these contracts were valid, such a basket could not be done,” the President of the Competition Council said.
The fines are as follows:
Hidroelectrica – sanctioned by RON 20.43 million (EUR 4.5 million)
Alpiq Romindustrie – RON 21.72 million
Alpiq Romenergie – RON 87,821
Alro – RON 21.23 million
Electrocarbon – RON 864,203
Electromagnetica – RON 9.02 million
Elsid – RON 2.55 million
Energy Financing Team, Switzerland – RON 71.37 million
Energy Holding – RON 12.35 million
Luxten Lighten Company – RON 5.45 million
Menarom – PEC, successor of Euro-PEC – RON 724,950.

The Competition Council’s decision will help us in the disputes with the ‘smart guys’, Hidroelectrica administrator says

The decision taken by the Competition Council will help Hidroelectrica in the lawsuits we have with the ‘smart guys’, since it shows that those contracts were illegal, said on Monday Remus Borza, Euro Insol representative, Hidroelectrica’s insolvency administrator.

“This decision proved that the contracts are illegal, so can not constitute grounds for law. The smart guys demanded damages of EUR 600 million when we terminated the contracts with them in 2012 and the Competition Council’s decision basically cancels any chance for them to receive money from Hidroelectrica,” Borza said.

According to him, of the 75 complaints registered initially against Hidroelectrica, nine of them are still ongoing.

“I’d rather pay EUR 4.6 million to the Romanian state (the fine received from the Competition Council) than to pay money to some people who have never worked in their lives and who have outsourced all profits from the country,” Borza added.

He said that the decision facilitates the quick resolution of disputes with the ‘smart guys’ so that Hidroelectrica gets out of insolvency before June 20, 2016, the deadline for reorganization, otherwise risking bankruptcy.

He argued that such long-term contracts were the main cause for which Hidroelectrica was brought to insolvency, since they caused damages to the company amounting to more than EUR 1 billion during 2003-2012, representing the difference between the very low prices of contracts and the market prices. Borza said that in some contracts the price was even below the production costs.