Wednesday, September 9, 2009

Romania to set up major power firms by H2 2010

By Luiza Ilie

BUCHAREST, Sept 8 (Reuters) - Romania announced plans on Tuesday to go ahead with a controversial overhaul of its energy sector by integrating its largely inefficient assets into two major companies by the second half of 2010.

The plan aims to lower energy costs for consumers and raise competitiveness with regional power giants such as Czech CEZ (CEZPsp.PR) as Bucharest hopes to become a major energy player in southeast Europe in coming decades.

But critics say the restructuring is likely to protect loss-making companies by merging them with profitable units, while investors complain of an opaque privatisation agenda.The overhaul has been repeatedly postponed in recent years as Bucharest's successive governments struggled to define their sell-off goals and backed away from potential social tensions arising from any job losses related to restructuring.

But time is running out for many energy companies, particularly hard coal mines, which are in dire need of cash to boost environmental standards and avoid being shut down by the European Union in 2010.

Romania must also address its debt-ridden industrial holdings to meet conditions of a 20 billion euro aid package it secured this year led by the International Monetary Fund."I hope we can present the law (that sets up the firms) in the government by October," Economy Minister Adriean Videanu said in an energy seminar. "I hope ... to start implementing it in early 2010."Videanu said implementation should be finished by June.

The ministry will select a financial adviser for the two firms and hopes to pick private management firms instead of political appointees to run them.One company with a market share of 45 percent will include Romania's two nuclear reactors, as well as lignite-fired power holdings and hydro-power plants.The second will comprise of hard coal and other hydroelectric plants, as well as parts of state-owned gas producer Romgaz. Its market share will stand at 40 percent.


To ensure competitiveness, Romania needs participation of foreign cash in the restructuring, analysts say.Romania's energy firms are currently separated into coal, hydro and nuclear power and many European industry majors have expressed interest in buying production assets.

At one point, the government had considered floating chunks of the companies on the Bucharest stock exchange but it is not clear whether this plan is part of the reform. No other privatisation ideas have been made public, keeping potential buyers on the sidelines.

One current investor in Romania, Germany's E.ON (EONGn.DE), which owns a local power distributor and is involved in other energy projects, says it wanted a clear government strategy before making further commitments."E.ON wants to further invest in Romania but it wants to see a good environment," said Frank Hajdinjak, general director of E.ON Romania. He added plans were "not very clear on ... future privatisations and collaborations with private investors".

The World Bank, which has advised Romania on energy reforms since the 1990s, says the restructuring plan lacks credible details and financing ideas and has criticised Bucharest for repeated delays it says discourage investors."We think enforcing this idea is very costly and cannot be done in a short term," said Doina Visa, a director at World Bank Romania and energy expert.

No comments: