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Differentiated Electricity Tariffs In The Pipeline?

Differentiated Electricity Tariffs In The Pipeline?

6 February 2008

The Industrial Policy Ministry has suggested differentiating electricity tariffs for companies where electricity costs make up more than 30% of their COGS (mainly ferroalloy and aluminum producers). Concorde Capital: The authorities have hinted that the tariffs may take effect in 2Q06. In addition, the government has developed a formula, which will peg electricity tariffs for aluminum producers to LME aluminum prices. Electricity prices for the Zaporizhzhya Aluminum Plant (ZALK: BUY) have been pegged to aluminum prices on the LME since August 2002. We expect this differentiation to solve the electricity price problem for ferroalloy and aluminum companies which have taken a hit from increased electricity tariffs. Earlier, ZALK posted USD 3 mln in net losses due to 52% higher electricity tariffs. The Zaporizhzhya Ferroalloy Plant (ZFER: BUY) decreased its production of electricity intensive FeSi to a minimal level to reduce electricity consumption (see our ZFER report from last week).

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