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KHPP: Chances to Cheapen Heat Still Exist
2009-06-30
Kaunas inhabitants are already starting to think about the awaiting charges for heating during the coming autumn and winter. Declining prices of oil and gas leave hopes that the heat price to consumers will not rise or maybe will go down even.
About this and other current issues we had an interview with Antanas Pranculis, the Director General of heat-generating Kaunas Heat and Power Plant (KHPP).
- Russian gas concern GAZPROM, which distributes gas to KHPP and the entire Lithuania, informed that the average price of exported gas would reach more than 280 USD for 1000 m3 this year, which is approximately by 129 USD less than the last year. What further changes in the gas price do you predict?
- This statement is the average of statistical data for 2008. Presently, gas price is even lower, i.e. about 21 USD. After a slight increase, oil prices are on the decline again. There are no assumptions in the market to prove the increase in the oil price because there are no indications of rising consumption yet. During the financial crisis it was attempted to invest into raw materials as a result of what the oil prices were on a temporary rise. However, it is probable that during this heating season the gas prices will go up to 250 USD or even 280 USD, just as we predicted.
- It seems that gas is getting cheaper and how will the price of heat, produced by KHPP, change?
- Declining trends of gas prices have markedly adjusted the price of heat produced by KHPP as well. From June heat production price has decreased by 2.28 cents per kilowatt-hour (down to 10.48 cents). Earlier the decline in the heat price occurred in April. From the very beginning of the year KHPP reduced the heat price even by 20 %. From the 1st of June National Control Commission for Prices and Energy approved the lower price to KAUNO ENERGIJA too, which distributed heat to the end user. Alongside with the reduction of gas price we will keep on reducing the price of heat production in the future.
We hope that this will not be precluded by the decisions of the Government and the residents will retain the preferential value-added tax (VAT) rate on heat of 5 percent instead of the rate of 21 percent, as planned.
- Recently many critique arrows of media have been targeted to the direction of KAUNO ENERGIJA. People are unsatisfied with inefficient company’s performance and the establishment of hot water prices. Energy experts say that the companies, engaged in heat production and distribution, must stay in one hands. How do you evaluate such thoughts?
- Reduction in management expenses may predetermine the final heat price to consumers. However, the company should be managed by the specialists and not politicians. In Lithuania a different practice is in force in many spheres, where economic benefit is ignored and consumers suffer because of that. Decision-making chain becomes too long. Modern companies are not able to exist under such conditions.
Advantages lie also in the separation of production and supply; in that case the pricing is more transparent. It is easier to distinguish which price is that of production or that of distribution and supply.
- KHPP declares its plans to construct a new thermal power plant. In what way will it be superior over the current one and how the heat prices are likely to change to consumers?
- Based on modern technologies, the combined cycle combined heat and power plant is significantly better than the current one. Fuel consumption for the production of one energy unit will be reduced in the new thermal power plant. We plan that energy production costs in the new power plant will be lower for more than 20 %. This will allow us to reduce the price of heat production. In case our colleagues from KAUNO ENERGIJA manage to ensure rational heat supply and distributions, it should become cheaper to consumers.
- The value of the new power plant makes up one billion litas. Won’t the hard times both in Lithuania and in the world stop investment plans in Kaunas?
- The hard times will come to an end some day. Financial experts predict that in 2010 the global economic situation will start improving. There are no doubts as regards the necessity of investment into the construction of a new power plant; in the beginning of 2013 the new power plant will come into operation. It is likely that at that time Lithuania’s situation will be considerably better than at the present moment.
- Technologies of what global or European energy companies will be attracted to Kaunas?
- Currently, the tendencies in the global great energy sector are set by two companies, namely “Siemens” and “General Electrics”. Preparatory works under our project are being conducted not for the first year; technical parameters are being revised and feasibility studies are being created. It will get clear after the tender on the basis of which technology the new power plant will be constructed.
- Lately, urban politicians conduct discussions on whether KHPP is obliged to pay the penalty of 17 million litas to KAUNO ENERGIJA in case it intends to invest a billion into the new power plant instead of 350 million and the capacity of the power plant would reach 350 megawatts instead of 80 megawatts. How do you treat this kind of attitude of some politicians of Kaunas?
- Urban politicians should evaluate all the public statements in a pragmatic way. At the present moment Lithuania is undergoing financial crisis. Do we have a lot of investment coming to Kaunas? Are there many production companies under development?
Attempts to make a negative impact on the largest investment project in Kaunas are not far-sighted. After all, shift from one to another financial obligation, which is several times larger, requires a certain period of time. Yes, we are lagging behind the schedule, but after long discussions and coordination with the municipality, the mayor and KAUNO ENERGIJA, we have chosen the project for the investment into Kaunas, which is greater several times. This will be a much more efficient and beneficial option both to the city and to its residents.
Currently, negotiations with KAUNO ENERGIJA are taking place and we hope to find the decision that would be most beneficial both to the urban government and the heat consumers.
- Minister of Energy Arvydas Sekmokas has recently asked the managers of the Lithuanian thermal power plants to search for the possibilities to reduce electricity prices. Do you see any possibility to sell electricity, generated in Kaunas, to the Lithuanian national electricity network at a lower price?
- KHPP produces and sells quota electric power at the price established by the Commission for Prices, as well as addition power, which is exported. Currently, we have no conditions to compete with the price of electric power generated by Ignalina Nuclear Power Plant. Our major goal is to provide cheap heat to Kaunas. KHPP makes every endeavour to reduce the heat production price and lead to the decline in the final heat price to consumers.
Kaunas inhabitants are already starting to think about the awaiting charges for heating during the coming autumn and winter. Declining prices of oil and gas leave hopes that the heat price to consumers will not rise or maybe will go down even.
About this and other current issues we had an interview with Antanas Pranculis, the Director General of heat-generating Kaunas Heat and Power Plant (KHPP).
- Russian gas concern GAZPROM, which distributes gas to KHPP and the entire Lithuania, informed that the average price of exported gas would reach more than 280 USD for 1000 m3 this year, which is approximately by 129 USD less than the last year. What further changes in the gas price do you predict?
- This statement is the average of statistical data for 2008. Presently, gas price is even lower, i.e. about 21 USD. After a slight increase, oil prices are on the decline again. There are no assumptions in the market to prove the increase in the oil price because there are no indications of rising consumption yet. During the financial crisis it was attempted to invest into raw materials as a result of what the oil prices were on a temporary rise. However, it is probable that during this heating season the gas prices will go up to 250 USD or even 280 USD, just as we predicted.
- It seems that gas is getting cheaper and how will the price of heat, produced by KHPP, change?
- Declining trends of gas prices have markedly adjusted the price of heat produced by KHPP as well. From June heat production price has decreased by 2.28 cents per kilowatt-hour (down to 10.48 cents). Earlier the decline in the heat price occurred in April. From the very beginning of the year KHPP reduced the heat price even by 20 %. From the 1st of June National Control Commission for Prices and Energy approved the lower price to KAUNO ENERGIJA too, which distributed heat to the end user. Alongside with the reduction of gas price we will keep on reducing the price of heat production in the future.
We hope that this will not be precluded by the decisions of the Government and the residents will retain the preferential value-added tax (VAT) rate on heat of 5 percent instead of the rate of 21 percent, as planned.
- Recently many critique arrows of media have been targeted to the direction of KAUNO ENERGIJA. People are unsatisfied with inefficient company’s performance and the establishment of hot water prices. Energy experts say that the companies, engaged in heat production and distribution, must stay in one hands. How do you evaluate such thoughts?
- Reduction in management expenses may predetermine the final heat price to consumers. However, the company should be managed by the specialists and not politicians. In Lithuania a different practice is in force in many spheres, where economic benefit is ignored and consumers suffer because of that. Decision-making chain becomes too long. Modern companies are not able to exist under such conditions.
Advantages lie also in the separation of production and supply; in that case the pricing is more transparent. It is easier to distinguish which price is that of production or that of distribution and supply.
- KHPP declares its plans to construct a new thermal power plant. In what way will it be superior over the current one and how the heat prices are likely to change to consumers?
- Based on modern technologies, the combined cycle combined heat and power plant is significantly better than the current one. Fuel consumption for the production of one energy unit will be reduced in the new thermal power plant. We plan that energy production costs in the new power plant will be lower for more than 20 %. This will allow us to reduce the price of heat production. In case our colleagues from KAUNO ENERGIJA manage to ensure rational heat supply and distributions, it should become cheaper to consumers.
- The value of the new power plant makes up one billion litas. Won’t the hard times both in Lithuania and in the world stop investment plans in Kaunas?
- The hard times will come to an end some day. Financial experts predict that in 2010 the global economic situation will start improving. There are no doubts as regards the necessity of investment into the construction of a new power plant; in the beginning of 2013 the new power plant will come into operation. It is likely that at that time Lithuania’s situation will be considerably better than at the present moment.
- Technologies of what global or European energy companies will be attracted to Kaunas?
- Currently, the tendencies in the global great energy sector are set by two companies, namely “Siemens” and “General Electrics”. Preparatory works under our project are being conducted not for the first year; technical parameters are being revised and feasibility studies are being created. It will get clear after the tender on the basis of which technology the new power plant will be constructed.
- Lately, urban politicians conduct discussions on whether KHPP is obliged to pay the penalty of 17 million litas to KAUNO ENERGIJA in case it intends to invest a billion into the new power plant instead of 350 million and the capacity of the power plant would reach 350 megawatts instead of 80 megawatts. How do you treat this kind of attitude of some politicians of Kaunas?
- Urban politicians should evaluate all the public statements in a pragmatic way. At the present moment Lithuania is undergoing financial crisis. Do we have a lot of investment coming to Kaunas? Are there many production companies under development?
Attempts to make a negative impact on the largest investment project in Kaunas are not far-sighted. After all, shift from one to another financial obligation, which is several times larger, requires a certain period of time. Yes, we are lagging behind the schedule, but after long discussions and coordination with the municipality, the mayor and KAUNO ENERGIJA, we have chosen the project for the investment into Kaunas, which is greater several times. This will be a much more efficient and beneficial option both to the city and to its residents.
Currently, negotiations with KAUNO ENERGIJA are taking place and we hope to find the decision that would be most beneficial both to the urban government and the heat consumers.
- Minister of Energy Arvydas Sekmokas has recently asked the managers of the Lithuanian thermal power plants to search for the possibilities to reduce electricity prices. Do you see any possibility to sell electricity, generated in Kaunas, to the Lithuanian national electricity network at a lower price?
- KHPP produces and sells quota electric power at the price established by the Commission for Prices, as well as addition power, which is exported. Currently, we have no conditions to compete with the price of electric power generated by Ignalina Nuclear Power Plant. Our major goal is to provide cheap heat to Kaunas. KHPP makes every endeavour to reduce the heat production price and lead to the decline in the final heat price to consumers.
© Kauno diena