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October 17, 2021

Bucharest might bear the consequences of Sidex contract for cheap energy

The contract by which ArcelorMittal Galati (Sidex) will be supplied with power from Hidroelectrica under the price of the market raises suspicions regarding the existence of a state aid, Bogdan Chiritoiu, the chairman of the Competition Council (CC), stated, quoted by adevarul.ro. The transaction between Hidroelectrica and Mittal would have needed a stamp of approval from Brussels and, as a consequence, Romania is liable to pay a fine for violating the EU Adhesion Treaty.

The deal closed between Christmas and New Year’s Eve on the OPCOM energy stock market, by which Hidroelectrica, a state company, will supply the iron and steel plant ArcelorMittal Galati with 1.75 TWh-worth of power at a price which is 25 per cent below the market average, raises a new problem. Thus, the Economy Minister, Ion Ariton, stated this deal was based on the fact that Arcelor is the second largest energy consumer in Romania, one of the major employers, as well as an important pillar of industry, the sector which largely accounts for whatever economic growth there is.

The only problem is all hydropower had already been contracted for next year, so that Hidroelectrica had to purchase power from the market, from the steam power plants, at a higher cost, thus forsaking a share of its profit. As a consequence, this state aid granted to back production and jobs at Mittal may cost the Romanian state dearly.

Chiritoiu claims that only the General Directorate for Competition within the European Commission is entitled to give a verdict in this case, but only after conducting an analysis of the situation, and the Competition Council acts as a mediator between the Government and the Commission. “We received no notification in this case to forward to Brussels and we were not advised in any way of this transaction,” Chiritiou stated.

The latter added that the deal may be construed as state aid both for the iron and steel plant, which purchased cheap power, and for the steam power plants, if it emerges they were assisted in selling the power produced because of low demand on the market.

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