CEZ: A supplier cannot fight a producer

Energy traders say the tender organised by Petrom, through which Complexul Energetic Craiova producer won a 110m-euro electricity supply contract, sets a precedent that may affect all energy companies in the future.
“Petrom tender is setting a precedent. A supplier cannot fight a producer. If we want a neutral market, we must all be treated as equals. This is the purpose of the separation on the energy market between producers, distributors and suppliers. By burning down one stage, the risk of a category of players being eliminated arises,” says Mirela Dima, general manager of CEZ Vanzare, the domestic trading company of the Czech group.
In 2006, a ministerial order forced all energy producers to sell their energy exclusively on OPCOM market to prevent direct contracts between producers and suppliers from being sealed, contracts through which neither prices or quantities were publicly revealed. At that time, the three complexes were subject to this order, but once they were transferred under the supervision of AVAS, they no longer have to comply with the order. Moreover, the order referred to bulk energy sales, namely to suppliers or another entity, but not to end consumers. The contract between CE Craiova and Petrom is not part of the wholesale market, but is one that cancels, right from the start, any chance the other suppliers might stand. CEZ Vanzare, together with Enel, E.ON, Electrica, Petprod and EGL all submitted bids for Petrom contract, but a producer eventually won the contract and the price has not been disclosed, yet. Out of these, Electrica voiced its discontent with the tender because it did not receive any explanation on how the winner was selected.
Another problem Dima raises has to do with the fact that some direct energy contracts still exit and the effects these negotiations have on the market. The first impact is the market’s lack of maturity and the second is the other companies’ being forced to forge strategies so that they may successfully cope with competition.
“A mature market is characterised by the existence of acquisitions and mergers. In two years I believe we’ll start witnessing this phenomenon on the domestic market as well, but it will become more visible once long-term contracts sealed with companies such Hidroelectrica disappear. (…),” explains Dima.
She is not ruling out a possible acquisition of a supplier. Another growth possibility for the company is getting its own production facilities. CEZ Vanzare brings around 55% of total revenues CEZ generated from the domestic market, a percentage that shrank once the company lost some customers. In 2007, the company managed to win over three major consumers, said Dima, choosing not to specify their names.