Electrical companies suffocated by soaring raw material prices
30 June 2006
Read by 2781 persons
About fifty companies working within the framework of the generalized rural electrification program are threatened.
Operators want to convince contracting authorities to accept a revision of the prices of ongoing contracts.
China and India's voracious consumption of raw materials is driving up their prices (see table), producing painful consequences across almost all sectors. Electricity companies, and mainly electrical equipment installers, have just sounded the alarm about the difficulties threatening many of them. According to the National Federation of Electricity and Electronics (Fenelec), this threat particularly weighs on companies working within the framework of the Generalized Rural Electrification Program (PERG). There are about fifty of them, each employing between 100 and 500 people, according to estimates by Abdellaziz Taariji, president of the federation.
What exactly is it? The rise in the price of raw materials (copper, zinc, aluminum, oil) used in the manufacture of equipment that these companies supply as part of their various contracts. It turns out, explains Fenelec, that these companies, which buy at market prices, cannot pass on the increase to their contracting authorities, because in 95% of cases, the contracts linking the two parties are contracts of less than one year. The public procurement decree indeed prohibits any price revision for a contract of less than one year.
Mustapha Mouchrek, CEO of Fabrilec, an electrical engineering and installation company, seems completely disconcerted by the scale of the increases affecting his sector. "Many installers are unable to complete the projects they have obtained and yet they continue to bid, but only in order to receive down payments on the new contract, which would allow them to finance the completion of the first. It's a flight forward. The problems are only postponed." Some installers, M. Mouchrek reports, prefer to simply break their contract when it comes to a small client, even if it means having their deposits confiscated. "That gives you an idea of the seriousness of the situation: companies that reluctantly accept losing their deposits rather than losing everything by continuing to execute the contract!"
The Prime Minister's office has been contacted again
Another operator warns that if this situation were to persist, there would probably not be many people left to respond to calls for tenders. "Already today, I can tell you that installers in particular are increasingly hesitant, because responding to a call for tenders under these conditions is to embark on a real ordeal."
For Mustapha Mouchrek, the ball is in the court of the public authorities. "The price revision is an imperative necessity. And moreover, it can be beneficial even for the contracting authorities, in case of a price drop for example. We need to know that we are not speculators, but entrepreneurs. Raw material prices are known worldwide. When we tell our foreign partners that we work with fixed price formulas, they can't believe it."
Therefore, Fenelec is trying to convince the contracting authorities to accept a price revision not only for all ongoing contracts, but also for calls for tenders under consideration or to come, highlighting the "exceptional and unpredictable" nature of the rise in raw material prices. A letter to this effect has also been sent to the main contracting authorities and project owners in the electricity sector.
At the last meeting of the CGEM office (Tuesday, May 16), this issue was examined and the operators in the electricity sector had expressed their wish to meet with officials at the Prime Minister's office to discuss the issue.
La Vie Eco
Operators want to convince contracting authorities to accept a revision of the prices of ongoing contracts.
China and India's voracious consumption of raw materials is driving up their prices (see table), producing painful consequences across almost all sectors. Electricity companies, and mainly electrical equipment installers, have just sounded the alarm about the difficulties threatening many of them. According to the National Federation of Electricity and Electronics (Fenelec), this threat particularly weighs on companies working within the framework of the Generalized Rural Electrification Program (PERG). There are about fifty of them, each employing between 100 and 500 people, according to estimates by Abdellaziz Taariji, president of the federation.
What exactly is it? The rise in the price of raw materials (copper, zinc, aluminum, oil) used in the manufacture of equipment that these companies supply as part of their various contracts. It turns out, explains Fenelec, that these companies, which buy at market prices, cannot pass on the increase to their contracting authorities, because in 95% of cases, the contracts linking the two parties are contracts of less than one year. The public procurement decree indeed prohibits any price revision for a contract of less than one year.
Mustapha Mouchrek, CEO of Fabrilec, an electrical engineering and installation company, seems completely disconcerted by the scale of the increases affecting his sector. "Many installers are unable to complete the projects they have obtained and yet they continue to bid, but only in order to receive down payments on the new contract, which would allow them to finance the completion of the first. It's a flight forward. The problems are only postponed." Some installers, M. Mouchrek reports, prefer to simply break their contract when it comes to a small client, even if it means having their deposits confiscated. "That gives you an idea of the seriousness of the situation: companies that reluctantly accept losing their deposits rather than losing everything by continuing to execute the contract!"
The Prime Minister's office has been contacted again
Another operator warns that if this situation were to persist, there would probably not be many people left to respond to calls for tenders. "Already today, I can tell you that installers in particular are increasingly hesitant, because responding to a call for tenders under these conditions is to embark on a real ordeal."
For Mustapha Mouchrek, the ball is in the court of the public authorities. "The price revision is an imperative necessity. And moreover, it can be beneficial even for the contracting authorities, in case of a price drop for example. We need to know that we are not speculators, but entrepreneurs. Raw material prices are known worldwide. When we tell our foreign partners that we work with fixed price formulas, they can't believe it."
Therefore, Fenelec is trying to convince the contracting authorities to accept a price revision not only for all ongoing contracts, but also for calls for tenders under consideration or to come, highlighting the "exceptional and unpredictable" nature of the rise in raw material prices. A letter to this effect has also been sent to the main contracting authorities and project owners in the electricity sector.
At the last meeting of the CGEM office (Tuesday, May 16), this issue was examined and the operators in the electricity sector had expressed their wish to meet with officials at the Prime Minister's office to discuss the issue.
La Vie Eco
