Friday, May 14, 2010

E.ON says Romania could lose energy investors

By Luiza Ilie

BUCHAREST, May 13 (Reuters) - Romania's regulated gas prices and a government plan to consolidate its state power producers are hurting market competition and scaring off foreign investors, the head of utility E.ON Romania said on Thursday.

Frank Hajdinjak, head of the Romanian unit of German utility E.ON, also said Romania badly needed to reform its energy sector and open up its markets or run the risk of seeing investors look to other countries in the Southeast European region to develop projects.

Uncertainty over fiscal policies in the European Union state struggling to shore up its finances and keep a 20 billion euros aid deal with the International Monetary Fund alive was also adding to investors' concerns, he told an energy seminar.

"My fear is that in a few years we'll manage to bring this industry which is very healthy right now to a bad situation," Hajdinjak said. "Romania has all advantages to become a major energy player, but there are many things to be done."

He also criticised a controversial government plan to consolidate its power producers into two energy firms, something he said would limit competition.

Officials have said the overhaul could lower energy costs for consumers and raise competitiveness with regional power giants such as Czech firm CEZ.

"It's not very clear for us how it's designed," Hajdinjak said. "We are very afraid this will diminish competition and it's a step backward. Who should invest in an energy market that has no competition?"

His comments are a rare instance of a foreign investor voicing concerns about government policy in a country many see as a potentially lucrative energy market.

CEZ, for example, is building a 1.1 billion euros wind park in southern Romania.
E.ON, which owns local gas and power distributors and is involved in other energy projects, has repeatedly complained over the European Union state's policy to cap gas tarriffs.

The energy regulator has lowered gas prices twice last year in an attempt to cushion the pain of a painful recession on households and help the central bank contain inflation.

"We are currently selling our gas below our costs ... this situation is not sustainable, it does not attract investors, it shows the market is in a bad situation," said Hajdinjak.

"This will affect the whole production chain. This means we will have job losses in Romania."

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