Energy supply contracts ENEL / Atel

Stating the changing market situation as ground, Italian state holding Ente Nazionale Energia Elettrica S.p.a. (ENEL) is challenging its long-term energy supply contracts with Atel. In concrete terms, ENEL is demanding a reduction of the contracted electricity prices. Atel resolutely rejects these demands and wishes to continue supplies within the valid contractual framework. The operative power exchange business between Atel and ENEL is proceeding as usual.

Market changes given as grounds for arbitration proceedings

Business relations governing the exchange of energy to satisfy the short-, medium- and long-term demand for electric power in Italy have been in place for many years between Aare-Tessin Ltd. for Electricity (Atel) and the Italian ENEL company. These contracts are a significant factor in Atel's export business. The Italian state-owned utility has now initiated arbitration proceedings against its Swiss supply partner with a view to terminating the existing long-term energy contracts or, respectively,  reducing the contracted electricity prices. Reasons given by ENEL for this step include the lower demand growth coupled with an oversupply, the weakness of the lira against the Swiss franc, the opening of the electricity market in Italy, and the partial cancellation of government subsidies for imported electricity in June 1997.

On the basis of the binding legal situation and the company's performance to date, Atel will require compliance within the existing contractual framework. The Olten-based company views the demands put forward by the Italian state holding - to export investments, made in the form of import contracts to secure the national power supply, quasi as 'stranded investments' to Switzerland - as legally inadmissible and politically questionable.

To meet its contractual commitments, Atel has invested in Swiss production facilities, acquired substantial purchase rights, and has developed its international transport capacities to secure cross-border energy flows and to integrate ENEL more firmly into the European supply network. If ENEL's demands were to be granted this would cause Atel to suffer massive income losses. Atel intends to fight resolutely against ENEL's demands and looks forward to the outcome of the proceedings with confidence.

Aare-Tessin Ltd. for Electricity