Greece's PPC threatens to ditch top client Aluminium in price row


ATHENS, Nov 7 (Reuters) - Greece's dominant electricityproducer PPC threatened on Thursday to ditch itsbiggest customer, Aluminium SA, upping the ante in a five-yearrow between the two firms over power supply prices.

The dispute, which threatens to disrupt production atAluminium, southeast Europe's biggest aluminum smelter, isemblematic of the confused state of Greece's power market, oneof the problems Athens needs to fix as part of its bailout bythe International Monetary Fund and European Union.

State-controlled PPC's management board unanimously decidedon Thursday to scrap its contract with Aluminium, effective Nov.18, it said in a statement.

"We don't want them as clients any more," a company officialtold Reuters on condition of anonymity.

PPC said on Tuesday it would take a 109 million euro ($146 million) charge on third-quarter earnings after an unfavourablearbitration ruling that it said forces it to sell power toAluminium below cost.

The arbitration ruling might also set a precedent andunhinge PPC's existing contracts with other industrial clients,who account for about a quarter of its total sales volume.

A spokesperson for Aluminium's owner, Mytilineos Holdings, declined to comment on the PPC board decision and onwhether there was a possibility production could be disrupted.

PPC generates about two thirds of all power produced inGreece, with the rest being provided by new private-sectorcompetitors operating in the wholesale market. Greek users canalso import power from Bulgaria and Italy.

Aluminium SA has an annual production capacity over 170,000tonnes of aluminium and 810,000 tonnes of alumina. It employs1,100 workers.

Greece is currently overhauling its energy market rules tomeet one of the conditions of its 240-billion-euro bailout.

Greek power prices are semi-regulated and PPC is at the sametime the competitor and the power supplier to several companies,including Mytilineos Holdings.

This situation sows confusion in the market and is a factorcausing gyrations in Greek energy companies' profitability. Theindustry's problems have been aggravated by the country'seconomic depression, which brought the energy system close tocollapse last year.

Canadian investment fund Fairfax Holdings acquired a 5 percent stake in Mytilineos last month, becoming itsthird-biggest shareholder.

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