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ATHENS, Nov 7 (Reuters) - Greece's dominant electricity producer PPC threatened on Thursday to ditch its biggest customer, Aluminium SA, upping the ante in a five-year row between the two firms over power supply prices.
The dispute, which threatens to disrupt production at Aluminium, southeast Europe's biggest aluminum smelter, is emblematic of the confused state of Greece's power market, one of the problems Athens needs to fix as part of its bailout by the International Monetary Fund and European Union.
State-controlled PPC's management board unanimously decided on 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 official told 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 unfavourable arbitration ruling that it said forces it to sell power to Aluminium below cost.
The arbitration ruling might also set a precedent and unhinge 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 on whether there was a possibility production could be disrupted.
PPC generates about two thirds of all power produced in Greece, with the rest being provided by new private-sector competitors operating in the wholesale market. Greek users can also import power from Bulgaria and Italy.
Aluminium SA has an annual production capacity over 170,000 tonnes of aluminium and 810,000 tonnes of alumina. It employs 1,100 workers.
Greece is currently overhauling its energy market rules to meet one of the conditions of its 240-billion-euro bailout.
Greek power prices are semi-regulated and PPC is at the same time the competitor and the power supplier to several companies, including Mytilineos Holdings.
This situation sows confusion in the market and is a factor causing gyrations in Greek energy companies' profitability. The industry's problems have been aggravated by the country's economic depression, which brought the energy system close to collapse last year.
Canadian investment fund Fairfax Holdings acquired a 5 percent stake in Mytilineos last month, becoming its third-biggest shareholder.