Energy market set for shakeup

The raging energy rate crisis has not just hurt households budgets, but also corporate balance sheets, leading to a violent restructuring of the local energy market’s business map.

A number of electricity suppliers are showing major losses and serious liquidity problems, with some going on to withhold the cash they are supposed to give local authorities for the council tax that is paid through electricity bills. They are also falling back on their dues to grid operators.

The market’s stronger players are calling on the government and the Regulatory Authority for Energy (RAE) to stop tolerating such phenomena and to enforce the market operation rules before the problem evolves into a systemic risk. They are also calculating whether it makes sense for them to take over the weaker players or to wait and aim at luring their customers when those in trouble end up shutting down.

For their part, the less robust market market players accuse their stronger peers of manipulating the wholesale energy market in order to have them ejected – though they still continue to negotiate with the stronger companies over possible takeovers. As for the government, it is assessing the potential economic and political impact the shuttering of suppliers would have in a difficult period for everyone in the industry.

For three companies in the sector the Energy Ministry and RAE recently sent a clear message: Pay up or get out the market. Whether this clearing process in the industry is done through takeovers or shutdowns will depend on potential buyers, i.e. the three major alternative companies to PPC: They are Protergia, Elpedison and NRG, who along with ZeniTH (that has Italian giant ENI backing it) have received requests from the smaller players. It is those four majors that have called for an end to tolerance by the state and the regulators.

Views converge on a likely drastic concentration of the market, but without causing any serious problems, because of the small size of the companies in a dire situation.

Almost 85% of supply is controlled by robust groups and this renders manageable the crisis in 15% of the market, observers point out.