Slovak aluminium producer Slovalco, power producer SE agree on electricity supply deal

Slovak aluminium producer Slovalco and the country's dominant power producer Slovenske Elektrarne (SE) have reached an agreement on a new electricity supply contract, an important step towards keeping the aluminium smelter afloat, Pravda daily reported.

Under the new contract, SE will supply a total of 19TWh of electricity to Slovalco for a period of eight years starting from January 2014 at discount prices, which were not disclosed. Slovalco's current electricity supply contract at fixed prices with SE expires at the end of 2013. The aluminium producer has previously said that if it buys electricity at market prices this would threaten the viability of its operations.

Slovalco is majority owned by Norwegian aluminium supplier Hydro with a 55.3% stake, while Slovak company ZSNP SCO holds the balance of 44.7%. Its aluminium production plant based in Ziar nad Hronom, central Slovakia, employs about 3,000 people.

The Slovak government, which owns a 34% stake in SE (the controlling 66% stake is owned by Italy's Enel) is in the process of completing several other steps in order to prevent a closure of the aluminium smelter. It will pay about half of the plant's electricity transmission charges, contributing EUR 36mn annually, but the amount could grow to more than EUR 50mn annually if Slovalco decides to boost production and use more energy. The cabinet is also due to approve a proposal to grant Slovalco a EUR 5mn discount on its annual payments to the National Nuclear Fund which was established to finance the decommissioning of nuclear installations and disposal of spent fuel and radioactive waste.

Slovalco has become the fourth company that the government of Robert Fico is supporting in order to avoid large job losses after steel mill U.S. Steel Kosice, electronics maker Samsung and pulp and paper manufacturer Mondi SCP.