1. Rompetrol Rafinare memorandum
The memorandum of understanding between the Romanian government and the Rompetrol group was published in the Official Gazette on January 23. According to the memorandum, the oil group will only pay $200 million of the total $668 million debt to buy 26.69% in Petromidia from the government.
The parties also agreed to set up an investment fund, 20% held by the government, which should conduct $1 billion worth of projects over seven years. The provisions of the memorandum have not been fulfilled yet and the opposition deemed the document as nothing more than a fraud.
2. Hidroelectrica’s second bout of insolvency
Romania’s largest energy generation company Hidroelectrica relapsed into insolvency on February 25. The company first filed for insolvency in June 2012, driven to it by years of loss-making contracts for energy sale and overpriced investments without any concrete impact on production.
Hidroelectrica came out of insolvency in the summer of 2013 only to relapse into it in 2014. Briefly put, the companies that bought power directly from Hidroelectrica sued it after having their contracts terminated upon its insolvency, demanding the money they were supposed to get if the contracts continued.
The Bucharest Court of Law dismissed their petitions so Hidroelectrica exited insolvency in mid last year. The decision of the court to reexamine the petitions sent Hidroelectrica back into insolvency.
3. Highest gas price hike
On April 1, Romania experienced the highest fuel price hike, with all gas and diesel types becoming 0.41 lei (EUR0.09) more expensive overnight, following the government’s decision to introduce a EUR0.07 excise duty per liter, which caused a 7% increase in prices.
At the time, the most expensive fuel types were close to RON7 per liter, and the major transporters announced they would avoid refueling in Romania. The oil price slump towards the end of the year wiped out this hike, so fuel prices are now back at less than RON6 per liter.
4. MOL buys all the Agip gas stations in Romania
The most important deal on the oil market took place at the beginning of May when Hungary’s MOL group bought all the 42 Agip gas stations from Italy’s Eni. This move turned MOL into one of the most aggressive players on the local oil market put at EUR9.5 billion.
However, it remains fourth largest in its respective industry in Romania. The market leader is OMV Petrom (SNP.RO), with 545 gas stations, followed by Rompetrol, more than 400 stations and Lukoil, about 300. In the wake of this deal, MOL stands all the chances of ending the year with more than EUR1 billion revenue and almost 200 gas stations.
5. Electrica goes public
Electrica, the largest power distribution and supply company in Romania, which serves 3.6 million customers, went public in Bucharest and London on July 4. The IPO helped it raise about RON2 billion for 51% of its shares. This was the biggest capital market operation ever conducted by the Romanian government. Electrica distributes and supplies power to three regions of the country: Transilvania Sud, Transilvania Nord (Southern and Northern Transylvania) and Muntenia Nord (Northern Muntenia, a region in the south of Romania).
6. Enel’s exit from Romania
On July 11, Italy’s Enel, the largest private electricity distributor in Romania, announced it wanted to sell all its local power supply and distribution assets an effort to curb group debt.
Enel has an over EUR1 billion business in Romania, while consolidated operating income stood at EUR289 million in 2013, generated by three regions: Banat, Dobrogea and Muntenia Sud.
It announced it would like to finalize the deal by yearend. Enel was involved in a number of scandals this year. The company was accused of charging too much on electricity bills as a result of a deal with the energy market regulator ANRE and Electroalfa, a EUR38.7 million business controlled by Botosani businessman Gheorghe Ciubotaru.
The Romanian government took Enel to the International Court of Arbitration in Paris in September, seeking payment of EUR521.58 million.
At the end of this year, Matteo Cassani, the 42-year old chief executive of Enel Energie and Enel Energie Muntenia, the supply companies of the group in Romania, died in unclear circumstances after allegedly jumping from his office window on the second floor.
7. Death of Dinu Patriciu
On August 19, Dinu Patriciu, one of the most important local businessmen died in a hospital in London. The business that took him to the top of the list of the richest Romanians was Petromidia, the only refinery in the country with access to the sea, which he bought for $50 million in 2000 and sold for $1.6 billion in 2007.
Other than this business, for which he got significant state aid that he never repaid, most of his other projects failed.
Dinu Patriciu died in a hospital in London, most likely because of an infection he got after going through a liver transplant procedure. He had severed most ties with people in Romania and with former coworkers, going from a high profile to a low profile person. The failure of the businesses he started after Rompetrol in the last few years and his health problems are but some of the explanations for his behavior.
8. Petrotel Lukoil seizure
Early in October, Russia’s Lukoil was involved in a EUR230 million tax evasion and money laundering case through its Romanian refinery Petrotel. For the first time in twenty-five years Romania considered the idea of nationalizing a company that the government had sold to a strategic investor.
President Traian Basescu told the Russians at Lukoil to go home after the second most powerful man in the group had told a news conference in Ploiesti he had negotiated with the prosecutors in Romania a deal over the seizure of the refinery, threatening that if the Moscow did not like the deal, Lukoil would close the refinery it had bought for $53 million in 1998. The authorities later “fine-tuned’ the seizure to allow the refinery to resume operations.
9. Launch of major energy projects
Concrete steps were made towards two major energy projects of Romania this year, the reactors 3 and 4 of the Cernavoda nuclear power plant and the Tarnita-Lapusesti hydropower plant. The two are worth over EUR7.5 billion together.
The Romanian government tried to get several investors for the construction of reactors 3 and 4, but ended up negotiating only with China General Nuclear Power Corporation (CGN). As for Tarnita-Lapusesti, the project company, Hidro Tarnita, at the end of November extended again the deadline for investors to submit pre-qualifying bids for the over EUR1 billion hydropower plant in Cluj county to January 30, 2015.
The decision was prompted by rising interest from investors as requested by them, Hidro Tarnita SA officials said.
10. New royalties postponed again
The government did not do its homework so it chose the easiest way out in the oil royalties’ case, by postponing the decision to change the current system for another year.
Although it had been known for ten years that the deal in Petrom’s privatization contract would expire in December 2014, the decade was not enough time for politicians and the royalties will stay as they are in 2015.
Romania collected RON1 billion lei in royalties from oil and gas production last year. According to the National Agency for Mineral Resources, Romania’s oil production stood at 3.9 million tons and gas production at 11 billion cubic meters. Judging from the prices of the two major producers, Petrom and Romgaz (SNG.RO), the oil and gas production was worth about RON15 billion.
The government collected only 6.6% of this output in form of royalties. Germany for instance, gets 10% of production. In Arab countries, the government owns the oil fields and often uses production-sharing agreements with companies interesting in drilling, getting up to 60% cut from the profits a project.
(English version by Loredana Fratila-Cristescu)