EBRD Interested in Buying Romanian Hidroelectrica Shares

Feb. 28 (Bloomberg) -- The European Bank for Reconstruction and Development is interested in buying shares in Romanian hydropower generator Hidroelectrica SA as the Balkan nation plans to sell a minority stake in the company this year.

The EBRD may be interested in government plans to sell 10 percent of Hidroelectrica by October through an initial public offering on the Bucharest Stock Exchange, or lend investment funds to the company, Louis Borgo of the EBRD’s power and energy department said today at the Ziarul Financiar energy conference.

“We would be interested in potentially buying shares” in Hidroelectrica, though “never the entire stake,” Borgo said in an interview today. “The EBRD’s participation in an IPO-type of environment is basically to send a signal to the market that we believe in this IPO, that it’s been well structured and ultimately that it’s a reasonable investment.”

Romania is selling stakes in energy and transport companies this year to raise funds to cover its budget deficit and aid state-owned companies’ investment in outdated plants and infrastructure to meet the terms of its precautionary international agreement.

‘Informal Talks’

The EBRD is in “informal talks” with another state-owned utility Transelectrica SA, in which the government plans to sell a minority stake this year, to grant loans to fund an investment program in the country’s power grid, Borgo said. Transelectrica needs to expand its power grid to accommodate a surge in power generation stemming from rising investment in wind farms.

“It’s a possibility that we’ve been discussing with Transelectrica for a while,” said Borgo. “We’re interested in assisting them in upgrading the grid or building new lines” or “assisting them in financing,” he said.

The EBRD is considering loans to fund six renewable projects in Romania with an installed capacity of more than 500 megawatts, Borgo said. Wind and biomass projects would require investments valued at “hundreds of millions euros,” he said.

The loans are “under consideration, we’re only at the initial due diligence,” Borgo said. “We’re hoping two or three would make it to the finish line this year.”

--Editors: Alan Crosby, James Gomez

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

Romania Reopens 10-Year Dollar Bond Sale at Lower Yield

Feb. 28 (Bloomberg) -- Romania sold more 10-year dollar- denominated bonds four weeks after it raised $1.5 billion in its first sale of debt in the U.S., taking advantage of falling yields.

The country raised $750 million in the reopening of bonds due 2022 priced to yield 6.45 percent, the Bucharest-based Finance Ministry said in an e-mailed statement. The initial yield for the notes that drew $3.2 billion in bids was set at around 6.5 percent, lower than the 6.875 percent for the bonds sold last month.

“We reopened the issue because there was still demand for Romanian bonds, as investors wanted exposure to Romania, so we decided to take this opportunity to raise funds at a lower cost,” Finance Minister Bogdan Dragoi said in the statement.

The dollar-bond sale is part of a medium-term note program valued at 7 billion euros ($9.4 billion) that's designed to help the government sell debt quickly anytime as it seeks to benefit from lower borrowing costs as the European sovereign-debt crisis eases.

“We see the decision to reopen the sale as positive, since it's consistent with the government's commitment to improve the liquidity,” said Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London. “The timing is ideal.”

The cost of insuring against a default by Romania has declined 46 basis points to 353 basis points today from 399 on Jan. 31, below the five-year credit-default swaps of 513 for neighboring Hungary, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

ECB Liquidity Boost

The sale comes as the European Central Bank prepares to allot 470 billion euros in a second round of three-year funds tomorrow to boost liquidity of the single-currency region's banks, according to a Bloomberg News survey. Using the longer- term refinancing operations, banks can borrow from the ECB at around 1 percent and invest the proceeds in higher-yielding securities.

The yield for Romania's dollar bonds issued in January and due in 2022 reached a record low yesterday of 6.279 percent and increased 10 basis points today to 6.373 percent.

The country plans to borrow as much as 2.5 billion euros of bonds on foreign markets in 2012 through two debt issues after it stopped relying on international bailout funds. The sales will help to narrow the budget deficit, which the government wants to shrink to 1.9 percent of gross domestic product this year, from 4.35 percent in 2011.

Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc managed the dollar-bond sale.

--Editors: James Kraus, Fergal O'Brien

Romania flexes muscle at EU meeting on Serbia

28.02.12
BY ANDREW RETTMAN
http://euobserver.com

BRUSSELS - Romania caused confusion and annoyance with last-minute demands at an EU meeting on Serbia in Brussels on Tuesday (28 February).

Member states in the end endorsed giving Serbia EU candidate status, but not before extensive discussions with Romania, which threatened until the the very end to block the decision on grounds that Serbia is mistreating a Romanian minority group in the country.

The European Commission also drafted a special declaration to keep Bucharest happy.

"The commission is of the view that, while the legal and institutional framework for respecting and protecting minorities is in place in Serbia, implementation needs to continue to be further improved. It will continue to closely monitor Serbia's efforts in this regard," it said.

Romania had flagged up the minority issue at a meeting of foreign ministers in the EU capital on Monday.

But the doggedness of its opposition on Tuesday took colleagues by surprise, given that it had never made a big deal of it before and that the commission, in its series of extensive annual reports on Serbia, had never identified it as a serious problem.

The prevailing theory is that it wanted to show the Dutch how strongly it feels about the EU's passport-free Schengen zone.

Romania had hoped to join Schengen last year after fulfilling technical criteria. But the Netherlands blocked it on grounds it is too corrupt, causing national embarrassment. For its part, the Netherlands has invested a lot in Serbia's EU bid, helping to make sure in 2011 that it handed over its top war crimes fugitives to the international court in The Hague.

A decision on Romania's Schengen entry is now expected in July.

The Dutch delegation said Romania did not make any kind of Schengen-Serbia link. The Danish EU minister, Nicolai Wammen, who chaired Tuesday's event, also said: "The issue of Schengen was not raised."

But other diplomats and officials in and around the event said the Schengen fiasco was in the air.

One EU diplomat told this website: "It was about the Netherlands and the Schengen bid. The Romanians did not say anything like that today publicly, but there were one or two little comments about it at the Fac [the foreign ministers' meeting on Monday]. It's definitely part of the reason."

An EU official said: "A lot of time was devoted to this today and we were supposed to be preparing for the EU summit on Thursday, which has some serious business on its agenda about the financial crisis."

He added that EU presidents and prime ministers at the summit are now set to rubber stamp Serbia's candidate status. But he did not rule out that Romania's leader, or someone else, might come up with more last-minute objections. "After all, this is the EU," he said.

For his part, Romanian foreign minister Cristian Diaconescu, responsible for the fuss on Tuesday, cancelled his scheduled press briefing and flew back home citing time pressure.

FT: Romania: OMV and Exxon in gas find

February 22, 2012

by Stefan Wagstyl

Good news for Romania – a “potentially significant” offshore gas disovery in the Black Sea.

It’s far too early to say whether it is a commercial proposition, but investors were excited enough by Wednesday’s announcement by project partners ExxonMobil and Austria’s OMV to move the markets. OMV shares rose by nearly 6 per cent before falling back to trade 4 per cent higher. ExxonMobil stock barely moved – perhaps even a big Black Sea find may not look that big in Texas.

The partners said in a stock exchange statement:


ExxonMobil Exploration and Production Romania Limited (EMEPRL), an affiliate of Exxon Mobil Corporation and OMV Petrom SA, the 51% [Romanian] subsidiary of OMV Aktiengesellschaft, today confirmed a potentially significant gas discovery offshore Romania.

Operated by ExxonMobil, the Domino-1 well is the first deep water exploration well offshore Romania and has a total depth of more than 3,000 m below sea level. The Domino-1 well is located in the Neptun Block, 170 km offshore in water approximately 930m deep.

The exploration well encountered 70.7 m of net gas pay, resulting in a preliminary estimate for the accumulation ranging from 1.5 to 3 trillion cf (42 to 84 bn m³). Drilling operations started at year-end 2011 and are in the process to be finalized.

ExxonMobil and OMV plan new 3D seismic acquisition during 2012. The evaluation of the Domino-1 well results and the new seismic will determine next steps. It is too early in the data evaluation and exploration process to determine whether the Neptun block will ultimately prove to be commercially developable or not.

However, should further work confirm the technical and commercial feasibility of deep water gas production from the Neptun block, further investment during both the exploration and development phases could reach several billion USD with the potential for first production towards the end of the decade at the earliest.

It’s all very technical but the clue to the find’s importance is at the end – the reference to “several billion USD”. Even groups the size of Exxon don’t throw around such numbers loosely.

For Romania, it is particularly significant that Domino-1 is the first deep water exploration well in the Black Sea. While nothing is certain, it raises the possibility of further discoveries. That will be good for one of the European Union’s poorer economies and for the Romanian oil industry, which has a proud history going back to the 19th century.

The discovery comes at an opportune time for Petrom, the former state oil company where OMV has 51 per cent. Reuters reported that Petrom missed analysts’ forecasts in its fourth quarter profits – posting 838m lei net ($255.3m), compared to predictions of 901m lei. Petrom recorded a profit of 781m lei in the year-ago quarter.

Petrom said its full- year net profits jumped to 3.76bn lei from 2.2bn lei in 2010, thanks to a 40 per cent rise in benchmark crude prices and a 1 per cent output increase. But, as it admitted, it was held back by a 504m lei fine imposed by the Romanian Competition Council, for alleged collusion with rivals in the withdrawal from the market of petrol type called Eco-Premium. It is challenging the fine in court.

OMV itself published fourth quarter net profits of €326m (excluding inventory revaluations), up from from €216m a year earlier. For the full year it made €1.069bn, a decline of 4 per cent. The dividend is going up 10 per cent to 1.10 euros a share.

Benchmark crude was 26 per cent higher in the quarter than a year earlier. But output was down 9.7 per cent, due to the effects of the crisis in Libya, which accounts for about 10 percent of OMV’s normal volumes.

But there was good news on Libya. OMV said Libyan output was at 50 per cent of pre-uprising levels at the end of the year and is now at 85-90 per cent. OMV will need that revenue as it implements plans to increase its focus on exploration, development and production – not least in the Black Sea.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://blogs.ft.com/beyond-brics/2012/02/22/romania-omv-and-exxon-in-gas-find/#ixzz1nBiZ7SkX

Romania's president bets on Putin plan Romania's president bets on Putin plan

(Reuters) - The president of a former communist country in economic turmoil anoints a security service chief as his successor. Sound familiar?

Romania's Traian Basescu has named old ally Mihai Razvan Ungureanu prime minister and he is now the likely party candidate for the presidency when Basescu's term expires in 2014, senior party members said, a move that would echo Boris Yeltsin's promotion of Vladimir Putin in Russia more than a decade ago.

Since winning parliamentary approval earlier this month, the 43-year-old former foreign minister and intelligence head Ungureanu has restored the mood of the unpopular centrist Democrat-Liberal Party (PDL) before a November parliamentary election in the European Union's second poorest member.

His predecessor Emil Boc put the economy back on track by enforcing austerity measures but the resulting slide in popularity left him little chance of posting a decent electoral result after anti-government protests swept the country.

"He (Ungureanu) is seen as the one able to revive the party, given his experience and his age," said a PDL deputy, who took part in the talks which led to the prime minister switch and did not want to be named as Boc is still party leader, for now.

"He stands a strong chance of winning the presidency of Romania two years from now."

PARALLELS LIMITED

The rise of a security service chief to run a country still traumatized by the communist regime's feared Securitate has troubled some, but the parallels with Putin are limited.

Whereas Putin served in the communist-era KGB and helped launch a new war against Chechen separatists on his rise to power, Ungureanu is too young to have worked in the Securitate and unlikely to crack down on minorities; ethnic Hungarians, the largest group, are a key coalition partner.

Having studied at Oxford University, Ungareau has a pro-Western outlook. As foreign minister he cooperated with the United States over Iraq and as intelligence head, he worked with other members of NATO. Romania even had a row with Russia in 2010 over spying that resulted in a tit-for-tat expulsion of diplomats.

Basescu, a PDL stalwart until he resigned to take the presidency in 2004, is much less powerful than Yeltsin was.

But he uses his theoretically ceremonial job to push pro-market policies through the divided parliament and since he cannot stand again in the 2014 election, appears to see Ungureanu as the man to help secure his legacy and the fortunes of the party.

"Putin's role is now taken by Ungureanu, chief spy, destined for a presidential career. So, we can say that Ungureanu's appointment marks Basescu's entry into the presidential campaign for the 2014 presidential election," said political expert Cristian Parvulescu at the Pro Democratia think tank.

Ungureanu rallied the coalition to form a new government in just three days, switching the mood from despair to nascent hope the PDL can stage a comeback.

Fluent in four languages and known as a competent administrator who stays on top of his brief, Ungureanu pledged to continue Boc's program - including privatizations, road building and making business easier - and work with the IMF.

He raised the possibility of limited pension and wage rises before elections and members of the PDL were in celebratory mood after parliament backed his cabinet, even though it has less than 20 percent support in opinion polls.

Romania's per capita wealth is still less than half the EU's average and five years after it joined the bloc, some villages and city districts are without running water or electricity.

A deep recession halted progress and was prolonged by cost-cutting under an International Monetary Fund-led bailout. Emigration is such that the population has fallen 12 percent in a decade and even some professionals struggle to make ends meet.

NEW CONSENSUS?

Boc repeatedly passed difficult laws like salary and pension cuts by decree, bypassing parliament in a technique which could be challenged only by confidence vote. That left a permanent - if small - risk of government collapse and angered the opposition, coalition partners, business and many voters.

Ungureanu, not currently a PDL member but expected to take its leadership at a congress in the coming months, indicated he would break from the previous brinkmanship and seek consensus.

"My experience in diplomacy taught me there's no more powerful weapon than dialogue," he told parliament.

Victor Ponta - who leads the leftist Social Liberal Alliance (USL), riding high with support of 50 percent or more - made a conciliatory speech which hinted there may be some easing in the confrontational approach of Romanian politicians.

Ungureanu has vocal backing from the PDL and analysts say he is in a strong position, despite the party's standing.

"He is a professional, a fine diplomat and intellectual who has an impressive power to unite people around him," PDL Vice-President Gheorghe Flutur told Reuters.

"The widespread idea that Ungureanu is now pursuing a 'mission impossible' is in fact a big political advantage for him, because any small success will bring positive points while any failure would be attributed to the context," commentator Alexandru Gussi wrote in weekly Revista 22.

OLD FRIENDS

The often outspoken former sea captain Basescu has a close alliance with the historian Ungureanu from when the latter was foreign minister.

In 2007 Ungureanu resigned after he told Basescu, but not the prime minister who opposed the president, that two Romanian workers had been held at a coalition base in Iraq on suspicion of spying. He also supported keeping troops in Iraq, backing Basescu and against the prime minister's wishes.

March brings his first big test, when the government will try and put a privatization plan - ambitious but potentially unpopular because of job losses - back on track.

It aims to sell a stake in Transelectica and needs a successful sale to show it is serious about reforming inefficient and debt-laden state companies, which still hold the country back more than 20 years after the fall of communism.

A local election is set for June and will give the first clear sign of Ungureanu's chances in the parliamentary ballot.

Basescu nominates the prime minister so if the USL cannot secure a majority or maintain its fragile alliance, the president would be free to name Ungureanu again even if the PDL is not the leading party.

"He is clean and his profile recommends him for president," said a third PDL lawmaker. "I'm pretty sure he will succeed first in pursuing his challenging tasks as prime minister."

(Additional reporting by Luiza Ilie; writing by Sam Cage; editing by Philippa Fletcher)

Romania's Prince Paul Recognized as Royal

BUCHAREST, Romania (AP) — Romania's top court has recognized Prince Paul Hohenzollern as the legitimate grandson of former King Carol II, ending a 21-year-legal battle.

Paul has claimed he was illegally excluded from the royal family by his uncle, the former King Michael, who was the Romanian monarch twice.

It was unclear what effect the ruling would have or whether Paul would make claims on royal family property. Paul welcomed the ruling on Wednesday as a matter of "honor for my family."

The 90-year-old Michael, who was forced to abdicate by the communists in 1947, says Tuesday's ruling does not give Paul any claims to the throne.

Romania sends 2 former ministers to prison for corruption

By Associated Press

BUCHAREST, Romania — Two former Romanian agriculture ministers were convicted on Tuesday of corruption and sentenced to three years in prison.

Last month, Romania’s highest court sentenced former Prime Minister Adrian Nastase to two years in prison after convicting him of illegally raising funds for a failed presidential campaign.

The two cases are one reason that Transparency International, a non-governmental organization based in Berlin, has ranked Romania as one of the most corrupt countries in the European Union.

On Tuesday, a court in Bucharest ruled that former agriculture ministers Decebal Traian Remes and Ioan Muresan took bribes and engaged in influence-peddling.

Remes resigned his Cabinet post in 2007 after prosecutors accused him of taking a bribe of $21,000 (€15,800) and the promise of homemade sausages and plum brandy from Muresan, a former agriculture minister who allegedly was acting on behalf of businessman Gheorghe Ciorba.

Prosecutors said the payment was meant to secure favor for Ciorba’s company at a public auction. However, Ciorba reported the bribe to authorities before the auction took place, leading to the prosecution of the two ministers. Given his role in the case, Ciorba was given an 18-month suspended prison sentence.

The January conviction of Nastase was the first time a former Romanian premier has been sentenced to prison since communism ended in the country in 1989. He has said he will appeal.

Romania is under pressure from the EU, which it joined in 2007, to crack down on widespread corruption.

FT: Romanian banks: turning a corner?

By Andrew MacDowall of Business New Europe

Romania’s new government has a substantial in-tray to deal with, not least breathing more life into the sluggish economy. And the politicians know much will depend on whether the banking sector, where business has stabilised recently, agrees to play ball.

Romania’s growth rate is expected to be around 2-3 per cent this year – a far cry from the boom years of 6.5 per cent between 2003 and 2008, but acceptable given the circumstances – while unemployment has fallen and inflation hit a record low in January of 2.7 per cent.

However, the new government under Mihai-Razvan Ungureanu, which was approved by parliament on February 9, knows that it needs the banks’ help to keep the economy from falling back into the recession it only emerged from in 2011.

Thus the comments from the governor of the National Bank of Romania, Mugur Isarescu, following the release of the quarterly inflation report on February 7, who called on the banks to stop raising interest rates on savings in order to increase their liquidity, as this was hurting consumption.

“The prospect of consumption acting as a growth engine depends on the attitude of Romanians and banks who are competing to gain customers, which can be a double-edged sword,” Isarescu told a press conference.

This approach by the banks is a direct result of the difficult years they have endured since the first wave of financial crisis brought to an abrupt end a banking boom that had seen credit growth soar to about 60 per cent annually in early 2008.

The problem was that much of the lending was concentrated in non-productive sectors, particularly real estate, which was inflated by speculation. And when the bust came, Romania’s banks were hit hard, first by exposure to the domestic crisis and the bursting of the real estate bubble, and then by foreign banks withdrawing liquidity in their Romanian operations to shore up their business at home. Foreign-owned institutions account for around 85 per cent of Romanian banking assets (the precise amount has fluctuated slightly during the crisis), and the country’s deep economic funk has been of concern to major European lenders including Erste Bank Group and Volksbank (both Austrian), France’s Societe Generale, Italy’s Unicredit Group, Hungary’s OTP Group, and National Bank of Greece.

It’s been a hard landing. Asset growth stalled in 2009 and 2010, while non-performing loans (NPLs) rose from 6.46 per cent in September 2009 to 14.18 per cent in the same month of last year. But a series of defensive measures by banks, combined with the Romanian economy’s recovery last year, appears to have put the sector back on a more even keel – for the time being.

Towards the end of last year, the NPL ratio started to fall for the first time in years, to 14.1 per cent in December. This is undoubtedly a high level by most standards – the EU average was just under 5 per cent in 2011, according to a report by Ernst & Young – and the drop was a small one. But Vlad Muscalu, an economist at ING Romania, says the falling ratio is a symptom of recovery and he expects the decline to continue. Capital adequacy ratios average a respectable 14.5 per cent, suggesting that banks are in a position to absorb some further shocks, if not a full-blown crisis.

So bankers are cautiously optimistic about the outlook, with some caveats: 2012 will be a slow year, downside risks exist and banks’ approach will be more guarded than before. “The very modest growth outlook is likely to bring the banking market under pressure in 2012, both in terms of the demand for new loans and the saving potential of the economy, which is already one of the lowest in the region,” Lucian Anghel, chief economist at Erste-owned Banca Comerciala Romana (BCR), Romania’s biggest bank, tells bne. “Since the onset of the crisis, all the players strategically focused on a prudent business and a more diversified funding base with a view to increasing independence from parent banks.”

Banks are vulnerable to the effects of the eurozone crisis on the region’s economies. Around 55 per cent of Romania’s exports go to the eurozone, according to Anghel, and the 35 per cent drop in foreign direct investment (FDI) last year can partly be attributed to the single currency’s travails (as well as investor aversion to volatile Romania). A further worsening to the west will have repercussions for Romanian banks.

The issue of independence has been in the spotlight recently due to recommendations from the Austrian government that the country’s banks limit their exposure to emerging Europe. The proposals call on lenders to ensure that the loans they issue in the region do not exceed 110 per cent of the financing they raise locally. While the plans have caused a stir, Vienna has issued assurances that it does not plan to make them enforceable regulations, something that Manfred Wimmer, CFO of Erste Group and a member of the supervisory board of BCR, insists must only be done with the agreement of the central banks of the countries affected by them.

Wimmer tells bne that he expects Erste’s exposure to Romania (as elsewhere in CEE) to track recovering economic growth and consumer confidence, but that it would focus on local currency activities, taking a more conservative stance towards foreign-exchange lending.

BCR’s Anghel, meanwhile, hopes that Romania’s high reserve requirements (15 per cent on leu and 20 per cent on foreign currency loans) should provide a buffer for banks, while low interest rates could provide a leg-up for lending. Over the medium term, infrastructure projects that are just starting to feed through, improved absorption of EU funds (traditionally, pitifully low), as well as the potential for investment in sectors including energy and transport, bode well for much-needed domestic demand.

As ING’s Muscalu points out, banks have good reason to be optimistic, given the scope for growth in an under-banked economy. “Foreign banks will stay here, as they know things will be different five years from now,” he says. “The lending market is only worth around 40 per cent of GDP, whereas it’s 150 per cent elsewhere in the region – that’s quite some potential.”

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://blogs.ft.com/beyond-brics/2012/02/13/romania-banks-turning-a-corner/#ixzz1mLcBdPsd

Romania May Cut Electricity Exports on Higher Domestic Demand

Romania may interrupt exports of electricity between Feb. 16 and March 15 to cover rising domestic consumption because of freezing temperatures, according to a draft law on the Economy Ministry’s website.

The Balkan nation, which faces a “heavy power deficit” following a drought that kept river-water levels low and increased heating demand, will start cutting power exports from about 500 megawatts per hour, President Traian Basescu said during a speech today.

“There will be no problem in supplying electricity to citizens,” Basescu said. “If we will face problems we can start cutting supplies to companies under a pre-established plan.”

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net