Rusal, RusHydro draft 10-year electricity contracts for Khakassia
MOSCOW. Nov 30 (Interfax) - Rusal has virtually reached agreement on new long-term contracts for electricity supplies from RusHydro and is holding similar talks with SUEK, but needs to include extra conditions because of existing regulations on the energy market.
"We are already prepared for cooperation with RusHydro. The question is what to do with wholesale market regulations [with regard market compensation for tariff and competitive selection price differences]. The agreement includes supporting terms linked to market regulation amendments," Rusal Deputy General Director Vadim Geraskin told Interfax.
The government at the beginning of the year confirmed resolution No. 1172, which instructed consumers in the second price zone (Siberia), which have free agreements for capacity with inexpensive hydro-generation, to return to the market the difference between capacity price, established through competitive selection, and the price of the free agreement (because the agreement price is a commercial secret, the regulators took the Federal Tariff Service tariff for HPP).
Rusal, which accounted for 30% of electricity consumption in Siberia in 2010, mostly has long-term agreements with hydro power plants - Irkutskenergo and Krasnoyarsk HPP . These agreements were signed in 2009 for 8-10 years and bound to aluminum prices on the LME.
Two sources familiar with the talks told Interfax that the companies are discussing long-term contracts for electricity supplies to the Sayanogorsk and Khakassia aluminum smelters. The terms of the contracts have long been discussed, but a final agreement was reached recently for a 10-year standard period. The price of the contracts, sources say, as with Rusal agreements with Irkutskenergo and Krasnoyarsk HPP are bound to aluminum quotes on the LME.
Both sources were unable to say when these agreements would come into force, but one said this could happen in mid-2012 when the 1172 resolution stipulation, whereby consumers with free agreements on the supply of electricity and capacity have to cover the difference in the competitively selected price and the HPP tariff, is no longer in force.
"Yes, agreements have been concluded for 10 years, but with supporting conditions on their coming into force," RusHydro told Interfax. The contracts will fix upper and lower price limits, "one [price] component is tied to the price of aluminum on the LME," the generating company said.
Rusal and RusHydro are already partners in the Boguchansk Aluminum Smelter and Boguchansk HPP projects. "Such an agreement [on electricity supplies] exists for Boguchansk Aluminum Smelter. The partnership agreement with RusHydro included the cost of electricity for this plant," Geraskin said. "The price is fixed for the entire period of the agreement."
Sibenergy, or Siberian Generating Company (consolidates the energy assets of SUEK, Kuzbassenergo and Eniseiskaya TGK (TGK-13) shareholders) could become another electricity supplier for Rusal on a long-term basis.
"Talks are being held with SUEK and various other companies in the interests of the Novokuznetsk Aluminum Smelter," Geraskin said, without giving any details about the talks.
The aluminum company is interested in increasing the share of long-term direct contracts from the current 50% of consumption to 80%-85%, he said. "Throughout the world the practice is to conclude contracts for 20 years with a mechanism to extend for another 20 years, otherwise it is impossible to plan the introduction of new capacity for aluminum production. This is the most efficient model, it is used around the world and has proved its viability so we will continue to move in that direction," Geraskin said.
The complete interview can be viewed on the Finmarket website at: http://www.finmarket.ru/z/nws/interview.asp?id=2582981&rid=1
