Slyva Ukraine (a plum for Ukraina) - Lithuanian business - on the verge of a major crisis: work becomes unprofitable, production stops

"With electricity and gas prices rising to new record highs, the country's industry faces huge challenges.

 

 Trying to avoid huge losses, some companies in Panevėžys are already stopping production and see moving to Poland as a way out.

 

Business representatives warn: if the Lithuanian Government does not take measures to curb the prices of energy resources, mass layoffs and corporate bankruptcies will begin.

 

There is no other way to see

 

Soltera, a company registered in the Panevėžys district with over thirty employees, is in a gloomy mood. The last days of work are being counted at the company that produces perlite, a material used in crop farming. "Solteras" director Dainius Spirikavičius does not hide: a critical limit has been reached, when there is no other option but to stop operations altogether from this September.

 

"Costs are such that our production loses competitiveness. Gas and electricity have increased in price about ten times. We used to pay up to 20,000 euros per month for gas and electricity, now the bills are about 200,000. We have no other way but to stop the activity", said D. Spirikavičius.

 

According to the businessman, both gas and electricity are much cheaper in other European Union countries, so Lithuanian production can no longer compete in the international market. And most of the products made by Panevėžys were sold in international markets.

 

"Business has to have some clarity, now everyone shrugs their shoulders and doesn't know what will happen tomorrow." We cannot wait like this, because we are already operating at a loss. Four million euros have been invested in the business, loans must be paid and other financial obligations must be met. We have reached such a limit where it has become unprofitable to work", asserted D. Spirikavičius.

 

The solution is Poland

 

The head of the company says that he sees the only way out - to move the entire factory to neighboring Poland, where the government is extending a helping hand to the business faced with difficulties due to the rising cost of energy resources.

 

Although Soltera has submitted an application to build a solar power plant, it will take at least a year for it to become operational.

 

"We considered the possibility of building a liquefied gas storage facility, but there are such requirements that are practically impossible to implement. We survived the pandemic, but we will not overcome this crisis. The government is not looking for solutions to help business. As far as I know, those who have the opportunity to move their business to other countries are preparing to do so," said D. Spirikavičius.

 

Enables power saving mode

 

The president of the Panevėžys Industrialists' Association, Mantas Gudas, the representative of the Lithuanian Engineering Industry Association LINPRA in the Panevėžys region, also said that the business situation due to the record prices of electricity and gas is extreme. When energy resources on the market become ten times more expensive than the initial price level, companies try to save: they optimize shifts or they work at a time when electricity is a little cheaper.

 

The devices that use the most energy resources are replaced with more economical ones or they are abandoned altogether, other ways to organize production processes more efficiently are sought. It is even being considered that only part of the production premises could be heated in the winter.

 

 "It is not uncommon for a company to face an existential question: what will happen if all this continues. The worst thing is that the business itself cannot quickly change the situation. There are many ways to save, but when you don't have alternative energy sources, like your own solar power plant, you won't do much. The situation is scandalous", said M. Gudas.

 

According to him, a significant number of domestic companies stop production and send employees on vacation in order to avoid losses. However, if these are exhausted and the situation does not change, mass layoffs may begin.

 

"Different European countries behave differently in the face of this crisis - some compensate the rising prices, others, like Lithuania, do not. If competitors receive subsidies from the state and can produce the product much cheaper, it is natural that Lithuanian companies must either raise prices, which is practically impossible in a declining market, or lose customers. It will be very difficult to regain markets, if the business survives at all. We have an interesting economic phenomenon, where the state's intervention is especially necessary," said the president of the Panevėžys Association of Industrialists.

 

Scarier than a nightmare

 

According to M. Gudas, the government's delay in solving the energy resource crisis will turn the other end of the stick. For example, poultry farms, which on average paid about 3 thousand for electricity. euros per month, now laying 30 thousand each. If nothing is done in the future, after the winter there will be no more Lithuanian poultry farms.

 

"It will be necessary to lay off people and import products from other countries, where energy resources are much cheaper. Although I don't like loud phrases, I really agree that the energy industry is in a crisis situation. In the darkest nightmare, it was probably hard to imagine that electricity and gas prices would increase 10-12 times," says M. Gudas.

 

According to the interviewee, it is not only important to make a better conditions for businesses to invest in their own power plants, but also to review electricity prices on the international market - the losers in today's situation are the Baltic countries. To this day, it remains unclear why the price of electricity is determined based on who offered the highest price, instead of the average price, as was the case before the liberalization of the electricity market. According to M. Gudas, due to such a calculation methodology, electricity market intermediaries calculate surplus profits, and consumers - losses.

 

"The men and women in power have to clean up this mess. And you need to act immediately. It is clear that the liberalization of the electricity market has been compromised, which has turned into such an extreme result", - the representative of the industrialists did not spare the criticism of the government.

 

Companies are holding back development

 

General Director of Panevėžys Chamber of Commerce, Industry and Crafts Visvaldas Matkevičius agrees that a huge scandal is brewing due to the crisis in the energy market.

 

Already now, companies that have the opportunity to reorganize their operations, reduce work volumes and costs, are doing so - shortening working hours, reducing electricity consumption in various ways, laying off employees and cutting costs in other ways. All investments that were planned for expansion or equipment acquisition are stopped.

 

"Some companies have ordered new equipment, but don't even install it, because then the bills would grow to unbearable amounts. The business will definitely not operate at a loss, it will simply stop its activity, massive layoffs will begin. It will be cheaper to bring the manufactured product from another country than to produce it ourselves", predicts V. Matkevičius.

 

According to the business representative of Panevėžys county, there is no explanation yet as to why the authorities are not taking steps to curb price spikes or why there was a delay in turning on the thermal power plants in Panevėžys and Lithuania.

 

"It's a scandal! The state looks irresponsibly, and a kilowatt hour of electricity is bought for four euros. It is not clear why the Government is taking such strange steps. Why can't Lithuania buy cheaper electricity just because some European Union directive doesn't allow it? We are completely constrained and we don't know what the perspective will be," V. Matkevičius complained."