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Increase in cost of subsidized energy could threaten existence of some companies

Daniels Pavluts. Photo: Lita Krone/LETA.
 RIGA, Jan 22 - The current situation at the joint-stock metallurgical company "Liepajas metalurgs" shows that the concern in regard to the increase of subsidized energy prices and the consequences for Latvia's economy are serious and justified. These costs could not only threaten the competitiveness of Latvian companies, but also their existence, Economy Minister Daniels Pavluts believes.

As Pavluts told the business information portal ''Nozare.lv'', the situation regarding the increase in the price of electricity is very unpleasant, and is felt by some of the country's largest
companies who employ thousands of persons, pay substantial amounts of tax and help the country's economic development.
''Due to unfavorable market circumstances, ''Liepajas metalurgs'' has been put in a tough situation, as the increase in the cost of subsidized energy has put additional pressure on the company's finances,'' Pavluts said.

He emphasized that previous government which decided on support measures for gas and renewable energy producers should have evaluated and taken into account these risks. ''Unfortunately, we are in such a situation at the moment, and we are once again forced to put out the fire,'' Pavluts said.
According to the economy minister, these decisions made by previous governments must be re-evaluated, and this is the reason an inter-ministry task force has been set-up to help deal with this situation.

''The government will most likely have to make some tough decisions which will not satisfy all the sides involved. But we must make the right decision for Latvia's economy,'' Pavluts emphasized.

As reported, last week, the board of joint-stock metallurgical company "Liepajas metalurgs" decided to temporarily cease payments to joint-stock power utility company "Latvenergo's" feed-in tariff system, which acts as a support mechanism for electricity manufacturers.

The company's board chairman, Valerijs Terentjevs, said during a Saeima Economic, Agricultural, Environmental and Regional Policy Committee meeting: "I understand that this is an unfortunate step on our part, but we do not have any choice."

"Liepajas metalurgs" chief economist Benita Imbovica admitted that the increasing feed-in tariff system payments are truly leading the company towards bankruptcy, thus it has been decided to pay suppliers instead of "Latvenergo". She added that another problem has arisen - banks are not extending lines of credit.

Describing the substantial payments made to the feed-in tariff system, Terentjevs informed that from 2008 to 2012, the company has paid a total of LVL 10.9 million, but in 2013 this payment alone will be over LVL 9 million. "You must agree, this increase is not normal," he said.

Terentjevs added that due to the feed-in tariff system payments, "Liepajas metalurgs" has not been able to increase salaries for employees, and that employees could be forced to leave the country to find other work.

The company has made the decision not to make any more payments into the feed-in tariff system until this matter has been solved.
leta.lv

22-01-2013
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