November 27, 2022

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energy price |  The electric company is in danger of bankruptcy - offering customers money in exchange for a contract

energy price | The electric company is in danger of bankruptcy – offering customers money in exchange for a contract

Electricity company Meløy Energi of Meløy municipality in Nordland was able to offer a lucrative fixed-rate agreement at 97 øre per kWh this spring. Overnight, the company gained a number of new customers – there was only one problem.

They have gained more than 800 new clients in southern Norway.

It turned out to be too expensive for the electric company, which after the third quarter lost a total of NOK 17 million.

The reason is that the customers are from a different area than the one where we produce the electricity ourselves, and we have to pay the spot price in the south to deliver the volume of these fixed price agreements. As is well known, this rate is much higher than that of fixed rate agreements, and the difference is a loss, Meløy Energi’s president, Rolf Inge Sleppens explains to Nettavisen.

Nettavisen him previously I wrote about Meløy Energi وضع. Since then, the company has found it necessary to extend the deadline for responding to customers.

bankruptcy risk

The losses caused by the fixed price agreements are so great that the company is now on the verge of bankruptcy. The CEO says a new fall and winter with higher prices could mean hanging up the company’s door.

He explains that according to Sections 3-5 of the Norwegian Companies Act, a company is obligated to take measures to ensure continued operation, or to submit a bid, if equity or liquidity is not justified based on the risks and scope of the business.

– If the price of electricity in the south is higher in the coming months, the company’s liquidity position can quickly reach such a level that other operations will become threatened because it will not be able to service the continuing obligations due to the fact that it exceeds the available liquidity. Slippens explains that this is the serious truth that the board of directors must deal with now.

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The company is owned by the municipality of Milloy. Mayor Sigurd Stormo (AP) asserts the opposite Nordland newspaperThe company is in a dangerous situation.

– Now we must focus on saving the company from bankruptcy. The company from which we usually receive profits has incurred significant losses, and this will negatively affect the municipality, says Mayor Milloy.

Offer compensation

Therefore, the company is now offering to pay customers compensation in exchange for switching to spot rate agreements.

– In any case, customers get their insurance against high prices through the state electricity subsidy scheme, which means that 90 percent of this increase is covered by the state. The company has no such insurance. So we set up an individual offer of compensation as well as switching to a spot product for each individual fixed-price agreement in the South based on their consumption and the remaining term of the fixed-price agreement.

The company can afford it, despite the specter of bankruptcy hanging over the company, we have to believe Slippens.

– What we invest in payouts to these fixed-rate clients, we have liquidity, and we will remove the risk of new losses – which is why we offer it, says the Chairman and adds:

– If a large portion of fixed-price customers in the south say yes to our offer, the company will not go bankrupt

Too few answers

The deadline for accepting the compensation has already passed, but the company has now pushed back the deadline until tomorrow, Sunday.

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There simply weren’t enough customers to make up their mind.

The reason for the extension of the deadline is that very few people answered either yes or no within the first deadline, but many asked to be given more time to evaluate the offer, explains Slipnis.

It further shows that the company does not lose much from that.

– Prices are now in the spot market in the south so low that we do not lose much by delaying the deadline. This week the experiences are the same for customers. There is still great skepticism among clients about whether they should answer yes or no, which we understand, says Slippens and adds:

– Yes, prices are lower in the South, and the more we offer our customers a fixed price the more advantageous.