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Electricity demand slumps as recession bites

April 27, 2009 - Electricity consumption has collapsed almost without exception across Central and Eastern Europe in response to the economic crisis, according to data compiled by Platts Energy in East Europe (EiEE). (See related chart: Production / consumption 2005-2008 (GWh).)

Monthly consumption figures for the period from December 2008 to this March compared with the same months a year earlier for the nineteen markets covered by the newsletter underline the severity of the recession on the region's economies. (See related chart: Current monthly consumption trends country-by-country (GWh).)

All of the markets bar the Federation of Bosnia-Herzegovina, Bulgaria and Serbia have seen sharp falls in demand growth over this three-month period, ranging from a 22.1% drop in Montenegro in February to a less than 1% fall in Estonia.

Electricity consumption trends would seem to provide a reliable indicator of economic health given that the most significant falls have been experienced in the region's markets that have arguably been the most affected by the credit crunch and subsequent recession: Latvia, Hungary, Romania and Ukraine.

All four have been forced this year to seek financial bail-outs from the IMF.

Nowhere has the economic pain been felt more acutely than in Latvia, which is enduring the worst recession in the European Union.

Output declined 10.5% year-on-year in the fourth quarter and is forecast by Capital Economics to shrink 15% this year.

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Platts Energy in East Europe Platts Energy in East Europe

Platts Energy in East Europe (EiEE) focuses primarily on the region's developing power and gas markets with additional coverage of the coal and oil markets. EiEE provides in-depth project reports, company profiles and reports on policy initiatives and implementation, investment opportunities and renewable developments.

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According to the government's latest forecasts released this month, Latvia's economy will contract 12% this year, compared with a previous projection of 5% last December when the government drew up its proposal for IMF financing.

Electricity consumption in turn is falling in line with the Baltic state's worsening economic outlook - down 6.9% year-on-year in December 2008, 7% in January and 8.1% in February.

Hungary has experienced an equally torrid last six months, culminating in its sovereign credit rating being cut by both Moody's and Standard & Poor's to one notch above "junk" status in early April.

Hungary's economy contracted by 2.3% in the fourth quarter of last year and like Latvia agreed an IMF-led rescue package last year worth $25.1 billion.

The fall in power consumption has mirrored the country's economic woes, slumping by 12% in December 2008, 5.6% in January and 11.6% in February.

Romania, whose sovereign credit ratings has been cut to "junk" status by S&P, became March 25 the third Eastern European member of the EU to be bailed out after Hungary and Latvia, when it secured a €20 billion aid package from the IMF and the European Union in a bid to stabilise its stricken economy.

The loan is unlikely to prevent Romania from slipping into recession this year.

Several major industrial power consumers have announced production cuts in recent months - most recently fertilizer producer Azomures - reducing industrial output and as a result power consumption, down 7.8% in December, 9.6% in January 2009 and 11% in February.

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