The European Aluminum Industry is Heavily Affected by Energy Regulation Costs

Thursday, 07/11/2013 - 10:31

• A study conducted by the Centre for European Policy Studies (CEPS) concluded that the impact of cumulative EU regulation costs on price-cost margins was 242% in 2011.
• Romanian factories pay the highest taxes for green certificates and cogeneration in the entire European Union (EU).

Slatina, November 7, 2013 – Alro SA (BVB: ALR, “the Company” or “Alro”), one of the largest aluminum producers in Central and Eastern Europe, welcomes the steps taken at the European Union level regarding the evaluation of the cost burden imposed by EU regulations on the aluminum industry. The Centre for European Policy Studies (CEPS) evaluated the cumulative impact of these costs on the aluminum industry. The study concludes that the impact of cumulative EU regulation costs on the price-cost margin was 242% in 2011. Additionally, it shows that, at the EU level, factories that purchase electricity from the market saw the greatest cost impact in 2012, between 179 euros/ton and 228 euros/ton. For Alro, the renewable energy and cogeneration taxes alone represent 18 euros/MWh this year, equivalent to an impact of about 260 euros/ton.

“The study confirms once again that electricity plays a crucial role in the competitiveness of the aluminum industry,” said Gheorghe Dobra, C.E.O. of Vimetco and General Manager of Alro Slatina. “Moreover, the direct and indirect costs of regulations regarding both electricity and environmental protection further burden an industry already hit by the crisis and affect its international competitiveness.”

The CEPS evaluation considers the cumulative costs imposed by regulations in three main areas: climate change, energy, and the environment. These costs – the price of CO2 included in electricity tariffs, transmission costs, renewable energy taxes, as well as environmental investments – represented approximately 23% of profits in 2006 and 242% in 2011, consistently exceeding profits since 2009.

Although the study reveals that companies with long-term electricity supply contracts benefit from lower legislative costs, Romanian units experience costs similar to those purchasing electricity directly from the market. Romania has high costs related to support schemes for renewable energy, with the study citing an analysis by PriceWaterhouseCoopers, which estimates that support for wind energy in Romania is 224% of the EU average.

The study includes a comparison between 10 aluminum plants within the EU, from France, Greece, Germany, Romania, Slovakia, the UK, Spain, etc. The results show that Romania paid, on average, the highest price for green certificates and cogeneration – 10.7 euros/MWh in 2012, while EU countries introduced merit orders and exemptions for large industrial consumers.

In addition to green certificate and cogeneration taxes, which reach 18 euros/MWh in 2013, Alro may also face other costs, such as indirect emissions included in electricity prices, raising the cumulative impact to a much higher level than the maximum of 228 euros/ton of aluminum recorded in 2012 by EU aluminum producers purchasing electricity directly from the market.

The CEPS document reveals that “although the EU has set mandatory targets for the national quotas of electricity generated from renewable sources, EU policies do not specify the level of support for green certificates, nor how this burden should be shared among different customer segments, including large industrial consumers.”

Therefore, Alro proposes a series of measures to support the Romanian aluminum industry, which produces 10% of the EU's aluminum. The Company welcomes the first step taken by the authorities to include the possibility of exemptions from additional electricity taxes in OUG 57/2013, based on consumption, but urges the authorities to prepare qualification standards as soon as possible, taking the example of EU countries.

Moreover, Romania must implement the EU rules regarding indirect emission compensation and finalize the necessary regulations for the energy platform for large industrial consumers.

Alro is the largest electricity consumer in Romania, consuming approximately 8% of the country’s total electricity production. The company has over 2,400 employees and is responsible for at least another 20,000 jobs. From 2002 to 2012, Alro paid $462 million (355 million euros) in taxes to the state budget.

For more information, please contact:

www.alro.ro
Florenta Ghita
Premium Communication
Bucharest
Phone: +40 (0) 21 411 01 52
Email: florenta.ghita@premiumpr.ro

Note to editors:

Alro is a subsidiary of Vimetco N.V., a vertically integrated global producer of primary and processed aluminum. Alro is one of the largest aluminum producers in Central and Eastern Europe, with an installed production capacity of 265,000 tpa.

The main markets for Alro’s products are the European Union (Hungary, Poland, Greece, Germany, and Romania). The Company exports to the USA and Asia. The plant is ISO 9001 certified for quality management and holds NADCAP and EN 9100 certifications for its aerospace production units. Its products meet the quality standards for primary aluminum of the London Metals Exchange (LME), as well as international standards for flat-rolled products.

The content of the website www.alro.ro is not incorporated and does not form part of this announcement in any way.