By Stephen Jewkes
MILAN Oct 3 The troubled Italian smelter of
aluminium group Alcoa will be able to continue using
special contracts allowing it to buy electricity at lower prices
until 2015 following a decision on Wednesday by the European
The Commission ruled that the so-called interruptibility
power contracts on the islands of Sardinia and Sicily did not
constitute state aid, giving a green light to the schemes being
used by heavy-energy users there for the next three years.
Alcoa has decided to shut its aluminium smelter in Sardinia,
blaming high power prices for undermining its competitiveness.
"This is good news for the government though the extension
is only for three years and that might deter potential buyers of
the Alcoa plant," an industry source said.
The Italian government is looking for a possible buyer for
the plant to avoid job losses on an island that already has a 15
percent unemployment rate.
"It is not a final solution but it is part of a mosaic we
need to piece together to give a future to the workers," the
president of the Sardinia Region Ugo Cappellacci said.
Swiss commodities trader Glencore recently
suspended talks over a possible offer for Alcoa after Italy
rejected its request for sharply discounted power prices.
Glencore is one of a series of companies eyeing the Alcoa
"Other companies that have expressed an interest are (Swiss
company) Klesch, two foreign groups and Turin-based Kite Gen.
But I wouldn't totally rule Glencore out quite yet," a source
close to the situation said on Wednesday.
On Tuesday, Cappellacci also said the region had not lost
hope in Glencore.
A newspaper report in La Repubblica on Saturday said German
investment company Bavaria Industriekapital was interested.
Bavaria Industriekapital, a Germany-based holding company
specializing in manufacturing and service industry investments,
did not reply to an email sent by Reuters on Tuesday.
Italy has some of the highest electricity prices in Europe
with a price of around 70 euros/Mwh and some Italian companies
have threatened to relocate to find cheaper energy costs.
The situation is particularly critical on the islands of
Sicily and Sardinia because of the less developed power
connections compared to the mainland.
Glencore had asked for a power price at the plant of no more
than 25 euros per megawatt hour for 10 years compared to a price
of 35 euros/MWh proposed by the government.
"At this point we need to use these 3 years to complete the
interconnections with abroad and press ahead with an industrial
policy that keeps steel, aluminium, cement, glass, paper and
ceramics businesses in Italy," member of parliament and former
industry junior minister Stefano Saglia said On Wednesday.
Under interruptibility contracts, big companies accept that
their power supplies can be halted by the grid operator if
needed to re-balance the electricity network or avoid blackouts.
In return the companies are offered discounts on the price
they pay for power.