“Latvian Producers Struggle with High Electricity Prices, According to Financial Director of “Pata” Group Companies”

In order to promote the competitiveness of local producers, the electricity market must be adjusted, including by developing the rules for the production and use of alternative electricity, informs Diāna Suprunoviča, financial director of “Pata” group companies.

As Suprunoviča points out, it is very difficult for Latvian producers to compete with the producers of the Scandinavian countries due to the electricity trade price, especially with Sweden.

According to “Pata” information, in 2022 the average electricity price in Latvia was 1.9 times higher than in Sweden. In Sweden it was 119.37 euros per megawatt hour, while in Latvia – 225.84 euros per megawatt hour. On the other hand, on an annual basis, the price of electricity has increased by 155% in Latvia within 12 months, while in Sweden – by 86%.

Taking into account that electricity is one of the basic costs of production in the wood industry, the competitiveness of the “Pata” group is decreasing compared to Scandinavian countries, emphasizes the financial director of “Pata”, stating that the company is looking for ways to streamline production processes, including adjusting the production schedule and the price of electricity fluctuations.

“In practice, this means that our specialists regularly monitor electricity price forecasts in the Nord Pool system and, as far as possible, plan the production process in hours when the price of electricity is lower. There are situations when it is necessary to work in the evening and at night, if the employees agree, because it is precisely in these during the hours of the day, the price of electricity is lower,” explains Suprunovića.

She points out that in the summer of 2022, there were times when production was completely stopped due to the price of electricity. At the same time, it is not a long-term solution, because electricity prices do not decrease, but the tariff of AS “Sadales tīkls” keeps getting more expensive.

Suprunoviča also emphasizes that part of the problem is the existing rules by which companies from Latvia and other countries purchase electricity from “Nord Pool” – the sale price of electricity is equated to the most expensive offer, thus making electricity more expensive. Taking into account that a sharp drop in electricity prices is unlikely to be expected in the near future, Latvia and the European Union need to find ways to change this system so that companies do not overpay for electricity, which negatively affects their competitiveness, emphasizes Suprunoviča.

She also states that the “Pata” group has applied for some state support programs. With additional financial resources, “Pata” sees an opportunity to increase competitiveness by automating and digitizing existing production processes and improving energy efficiency in order to use this precious resource as efficiently as possible.

“If we talk about this year, then another important support we expect from the state is more relaxed rules that would allow companies to produce electricity for self-consumption. We look at this as a very important solution to reduce dependence on the ever-increasing price of electricity,” emphasizes Suprunoviča , noting that “Pata” is the necessary resource for the production of electricity, but the current regulations make it difficult for entrepreneurs to produce electricity in one place and use it in another, as is the case with “Pata”. However, the Ministry of Economy promises changes in the regulatory acts already this year.

“If these amendments come into force, we will probably also develop the creation of renewable energy resources, solar and wind parks, which will ensure the production of electricity for the needs of our factories. This solution will definitely be a good long-term investment for many Latvian companies that use electricity in production,” emphasizes Suprunoviča .

At the same time, she notes that the situation is worsened by the growing inflation, which is much higher in Latvia than in other European countries.

“In order to keep qualified employees, companies review the salary as much as possible, because otherwise some of them would be forced to look for work in another industry or to leave Latvia in order to ensure the current standard of living for their families. Considering that it is already difficult to find employees in certain professions complicated, salary is not a position that can be reduced,” explains Suprunovića.

It has already been reported that the concern of forestry company SIA “Pata” worked with a turnover of 254.366 million euros in 2021, which is 62.9% more than the year before, while the group’s profit increased 5.3 times – up to 36.612 million euros.

The “Pata” concern currently includes 14 companies, including SIA “Smiltenes MRS”, SIA “Fashion 5”, SIA “Pata Strenči”, SIA “Saldus mežrūpniecības umensas”, SIA “Eco Fungus”, SIA “Pata Board”, SIA “Pata Saldus”, SIA “Pata Jēkabpils”, SIA “Pata Energy”, SIA “Fortus”, SIA “Pata Timber” and SIA “VVP” registered in Russia, SIA “Pata AB” registered in Lithuania and SIA “Pata Asia” registered in Hong Kong.

The parent company of the concern “Pata” was registered in 1999, and its share capital is 16.135 million euros. The sole owner of the company is Uldis Mierkalns.