The crisis is accelerating the shops for the power supply companies

By Harry Floudopoulos

New data is created by the unprecedented energy crisis that has skyrocketed the costs of electricity, burdening not only consumers but also supply companies. It is characteristic that even the vertically integrated companies in the area announced loss-making results for 2021, which were offset by the performance of the manufacturing sector, which was profitable. However, as there are non-vertical companies in the market that can not compensate for the losses of the crisis, it is estimated that the companies’ resilience is running out and it is only a matter of time before acquisitions and mergers or otherwise even padlocks appear. In fact, market information indicates that discussions are already underway between companies on the possibility of acquisition, but they have not been successful due to differences in valuations: although sellers “resist” asking for high valuations for their companies, and buyers invoke due dilligence, which show values ​​well below the amounts demanded.

Official store

In this climate, last week was officially confirmed by the Avax group, the start of discussions with interested investors for the sale of the electricity supply subsidiary Volterra. According to the announcement of the Avax group, the discussions for the sale of the company, which has a share of 2% and is in the 6th position of the supply market, have not yet reached a final conclusion.

In fact, the group describes in a characteristic way the developments in the energy market that led to the decision to divest. According to the management, the increase in the price of gas during 2021 resulted in a significant increase in the clearing price of the domestic energy market. Adherence to the supply code had the effect of delaying the harmonization of customers’ charges, causing significant losses to the Group. The large increase in Volterra turnover and the rise in market prices resulted in a jump in the required working capital to a level that Volterra was unable to manage and needed significant support from the parent company. Due to the situation created, the Company decided to divest out of the energy market and Volterra’s activities, including its profitable RES subsidiaries, in order to enhance its liquidity. It is noted that in the financial results of 2021 the energy activity is categorized as interrupted due to the sale decision, with a participation of 190.6 million euros in turnover and a loss-making result after taxes of 14.4 million euros, producing a negative EBITDA of 7.1 million . euro.

In the past, there was information that several companies wanted to be among the suitors concerned, including some of the vertical players in the domestic electricity market. Some other information would have been submitted to the Avax group primarily for the Volterra RES portfolio which includes 70 MW wind farms in operation, 36 MW ready for construction and another 175.4 MW under development as well as a photovoltaic power 2.65 MW.

Market problems

In any case, Volterra is not the only company facing serious problems due to the energy crisis. The fact that the need for working capital has risen sharply, while at the same time old consumer contracts are accumulating losses, has brought other companies to the brink of collapse. According to information, at least three non-vertical companies appear to owe amounts exceeding 100 million euros to the market managers (HEDNO, IPTO and DAPEEP). The debts of supply companies to municipalities from fees that are collected through electricity bills and have not been repaid are also high. The problem is further exacerbated by the resurgence of the outstanding debt phenomenon as many consumers, whether home or business, are unable to cope with the over-inflated bills they receive due to the energy crisis.

International problem

The survival problems faced by supply companies are not just a Greek phenomenon. On the contrary, since there have already been numerous bankruptcies of electricity companies abroad, starting from England, where a total of more than 20 providers have closed. Similar phenomena have occurred in other markets, such as the Czech Republic, where 16 energy companies have gone bankrupt in recent months. Three companies have also closed in Belgium. According to a recent report by the Commission’s Directorate-General for Energy (DG Energy), from October 2021 until recently almost 2 million consumers in 8 European countries had been affected by the energy crisis. These are consumers in Belgium (90,000), the Czech Republic (1 million), Italy (350,000), the Netherlands (160,000), Lithuania (1,800), Slovakia (290,000), Germany (1,500) and others.

What does the padlock mean for consumers?

In the event that a company goes bankrupt, its customers do not stop being electrified but instead continue to be supplied by the so-called last resort supplier. This service is provided for the period from July 2020 to September 2022 by Elpedison. A consumer can remain in this service for a maximum period of 3 months, during which he will have to choose his new supplier. For the period they will remain in the service of the last shelter, the consumers will be invoiced with a percentage increase of 8% on the basic invoice. If after the end of the quarter the consumer has not found a supplier then he automatically switches to the universal service provider without interruption of electricity supply but with much more expensive tariffs as there is a 12% surcharge on the basic tariffs of each provider.