Private managers and stock market floatations are another plans left only on paper.
The private sector, however, was quite busy in 2012. OMV Petrom (SNP.RO) and ExxonMobil struck gas deep down in the Black Sea. Czech-held CEZ completed the Fantanele-Cogealac wind farm (SE Romania), a EUR1.1 billion investment that makes it the biggest wind farm in Europe.
Petrom completed work on the Brazi power plant running on gas, the only such facility completed in Romania in the last 22 years. Therefore 2012 was the best year for new energy generation projects since 1989.
1. Hidroelectrica’s insolvency
On June 15, one of the largest energy producers in Romania, Hidroelectrica, filed for insolvency. Five days later, what nobody could have seen coming did happen, as the Bucharest Court of Law granted the company’s petition for insolvency.
The news came as a shock to the entire economy, and bankers that had lent Hidroelectrica money over the years or those who were working with the company with EUR700 million in revenue were left speechless.
The years of loss-making contracts, of unjustified salary policies or overpriced acquisitions brought one of the most prestigious state-run companies down to its knees, with two years of severe drought compounding the problem.
Once the company became insolvent, six of the ten biggest direct electricity sale contracts were terminated. The only companies that can still buy power directly from Hidroelectrica are Alro, Elsid, Electrocarbon and Electromagnetica.
Euro P.E.C, EFT AG, EFT Romania (Energy Financing Team), Alpiq Romindustries, Alpiq RomEnergie and Energy Holding were cut off after causing about 3 billion lei (some EUR700 million) loss in from 2006 through May 2012.
According to ZF’s calculations, total losses since the signing of those contracts in 2003 and 2004 could reach about EUR1.5 billion. They are not the only ones to have hurt the company’s bottom line, as Hidroelectrica had 500 such more or less loss-making contracts signed.
2. Deepwater discovery in the Black Sea
In February, Petrom and ExxonMobil announced the results of the first deepwater exploration well ever drilled in the Black Sea. The Domino-1 made a discovery of about 42 billion to 84 billion cubic meters of gas.
Romania used about 14 billion cubic meters of gas in 2011, which means the discovery in the Black Sea alone could sustain its domestic demand for about four years, taking into account a recovery factor of 70%. On the other hand, the same amount of gas, about 60 billion cubic meters would translate into independence from Russian gas imports for about 20 years.
The not so good news here is that production might start as late as ten years from now and that the deposit cannot be recovered in full. The Domino-1 drilled by ExxonMobil is the first deepwater exploration well in the Romanian sector of the Black Sea and is over 3,000 deep below the sea level. Domino-1 is located in the Neptun block, 170 kilometers from the shore, in waters with a depth of 930 meters. The discovery prompted Ukraine and Bulgaria to start similar projects in the Black Sea.
3. First new power plant in two decades
In August, Petrom, the largest company in Romania, completed work on the gas-powered plant in Brazi, an 860-megawatt project, whose capacity is higher than a nuclear reactor of the Cernavoda plant. The new power plant cost the company EUR530 million. This is the only new thermoelectric power plant built in Romania in the last 22 years and put Petrom in the big league of electricity producers of the country, with a contribution of 8% to 9%.
4. Romania has Europe’s largest onshore wind farm
In November, the Czech-held CEZ completed the wind farm in the two towns of Dobrudja, Fantanele-Cogealac. Once the EUR1.1 billion investment completed and the 240 turbines hooked up to the grid, Romania became the country with the largest onshore wind farm in Europe.
The total capacity of the new farm is 600 megawatts, almost as much as a reactor in Cernavoda. Wind power was the star of the energy sector again, going from 826 megawatts installed at the end of 2011 to almost 2,000 megawatts by the end of 2012.
The sector attracted EUR3 billion total investments and was one of the few to have seen constant growth during the crisis.
5. Oltenia power holding or what’s left of all the energy system reorganization strategies
Early in June, Complexul Energetic Oltenia (Oltenia Energy Holding) was created by the merger of the major thermoelectric power plants in Oltenia (southern Romania), Turceni, Rovinari and Craiova with the coal mines of Societatea Nationala a Lignitului Oltenia (National Lignite Company Oltenia).
The newly formed company has 18,800 employees and generates about EUR1 billion revenue, which makes it Romania’s largest power producer. The creation of CE Oltenia is what is left of the plans to reorganize the national energy system, which should have been rebuilt around an energy mix using the CEZ model instead of the current model built around resource types.
Oltenia energy holding does not solve this problem but creates a single large actor solely operating on the thermoelectric power market.
6. New arrivals on the fuel market
The year 2012 saw the expansion of Azerbaijan’s SOCAR on the fuel market in Romania, with the state-run oil company announcing it planned to open 37 gas stations by the end of 2012 after EUR50 million investments. Serbia’s NIS controlled by Gazprom took its first steps on the local market this year, as well, when it bought three private gas stations. NIS plans were to expand to 40 gas stations in 2012 and to reach 120 by 2014.
7. Energy law
Energy and natural gas law was published in the Official Gazette on July 16, 2012. One of the most controversial provisions of this law is the requirement to all the market actors to trade power solely via the OPCOM energy exchange, which traders feel would freeze the market.
Then there was also the ordinance modifying the green energy support scheme to reward the solar power producers with six green certificates for every megawatt generated until January 1, 2014 at least.
The schedule for the deregulation of the electricity and natural gas prices paid by both household and industrial consumers was announced this year.
The electricity price deregulation for household consumers should be completed by 2017, while industrial consumers will see it done faster, by 2014. Natural gas price deregulation for household consumers should be completed by 2018, while for industrial consumers the process should end by 2014.
8. EnergoBit takeover
EnergoBit, one of the most important Romanian suppliers of energy sector equipment and services, was acquired by Polish investment fund Innova Capital. The European Bank for Reconstruction and Development, too, bought a stake in it. EnergoBit was expected to generate EUR160 million revenue this year and employs 900 people.
The business started in 1990, when three people in Cluj (NW Romania), Peter Pal, Stefan Gadola and Ioan Socea, then employees of the state-run power company RENEL, established EnergoBit. The group now comprises 16 companies and two production facilities and customers include CEZ, Verbund (Austria), Energias de Portugal Renovables, ButanGas and Petrom.
9. Private management, floatation and big projects – all on paper
Private management for state-run companies is nothing more than a fairy tale, as no company in the energy business is now run by professionals chosen based on performance criteria. Although the idea has been discussed for more than two years, the process has not yielded any results yet but cost the government EUR300,000.
This year’s floatation list included Romgaz, Hidroelectrica and Transgaz, yet nothing happened. Only an additional 15% in national grid company Transelectrica (TEL.RO) was sold for EUR37 million. The rest of the floatation plans were pushed back for 2013.
As for major energy investment projects, the government was unable to find an investor interested in the reactors 3 and 4 of the Cernavoda nuclear power plant and the Tarnita-Lapusesti hydropower plant project did not make any progress, either.
10. A wasted year for solar power business
Although many experts said investments in solar power would take off in 2012, the results at the end of the year do not look that encouraging for the most favored of all the clean energy types. Investors in solar projects get the most generous support scheme of all renewable energy investors, but the legislative changes of 2012 caused significant anxiety in the sector. After a not so successful 2012, however, those in the business expect EUR650 million worth of projects in 2013.
(English version by Loredana Fratila-Cristescu)