Bloomberg News

EU Probes Arcelor Mittal, Vimetco Romanian Units on Energy

October 21, 2011

(Updates with operator comment in fifth paragraph.)

Oct. 21 (Bloomberg) -- European Union competition regulators are investigating the Romanian units of Arcelor Mittal and Vimetco NV for allegedly buying electricity at below market prices from the country’s hydropower operator, Commissioner Joaquin Almunia said.

The European Commission is looking “into potential aid” given to steel producer Arcelor Mittal Galati SA and aluminum smelter Alro SA through lower electricity tariffs from state- owned company Hidroelectrica SA, Almunia said in a speech in Bucharest today.

“It would not be the first case,” Almunia said. “The problem is that you cannot offer lower prices to some companies without an objective justification and a kind of advantage for some companies without adequate and clear justification in accordance with our rules.”

The EU is urging Romania, its newest member together with Bulgaria, to liberalize electricity and gas prices and overhaul its unprofitable state-owned energy companies as pledged under a precautionary agreement secured by the country in March, which includes also the International Monetary Fund.

Hidroelectrica said the “contracts are not a state aid because the energy delivered to Arcelor Mittal and Alro was priced higher than the production costs, assuring the operator’s profit,” according to an e-mailed statement today. “We sent all the requested documents to the Commission in April and we haven’t received any additional requests since then.”

Gas Prices

Romanian prices of natural gas for industrial consumers such as chemical and steel plants have increased twice this year, 10 percent in July and 8 percent in October. The government approved in June a measure to keep natural gas prices for households unchanged from July until March next year.

“We are right now looking into other cases in other member states and given the existence of these long-term contracts that apparently deserve an investigation from our side, we will work on it,” Almunia also said.

The EU in 2009 prohibited electricity price subsidies given to Alcoa Inc. by Italy and ordered the company to repay some of Italian state aid, saying that special electricity prices granted to the company for aluminum smelters in Sardinia and Veneto from 2006 to 2010 “only contribute to reducing Alcoa’s operating costs and have no other justification.”

--Editors: Douglas Lytle, James Kraus

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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