The term “smart guys” is used for energy traders, who bought energy directly from Hidroelectrica at less than the market price.
Some of the 500 contracts, in addition to those for selling energy to traders, have started to be terminated, with others to follow. Despite these measures, the currently insolvent Hidroelectrica, one of the largest energy producers in Romania, will most likely end the year with a loss of 384 million lei (around EUR85 million). But the company promises once again a record-high profit of EUR100 million for 2013. This is similar to the one the company was supposed to make this year.
“The ‘smart guys’ are just the tip of the iceberg. Once the contracts were terminated, many wanted us to cover the whole thing up and get Hidroelectrica out of insolvency. But in fact there are 500 smart guys. We have over 500 commercial contracts, but all 500 of them, to a larger or smaller degree, have overvalued prices,” said Remus Borza, the lawyer who controls Euro Insol, the judicial administrator of Hidroelectrica, at Thursday’s edition of the ZF Live show.
The company controlled by Borza was designated by the Economy Ministry as judicial administrator of Hidroelectrica even before the company was declared insolvent, which came as a surprise to the market.
The head of Euro Insol is a lawyer from Baia Mare, who graduated from the Bucharest Law School at the same time as Romanian Prime Minister Victor Ponta.
The company Borza runs, Euro Insol, handles several insolvencies, among which are Asmita Gardens, UCM Resita and Plafar.
Next contracts to be terminated
Hidroelectrica, one of the Romanian state’s most valuable assets, went insolvent on June 20 of this year, after years of disadvantageous contracts, unjustified salary policies and overpriced acquisitions.
As Hidroelectrica went insolvent, 6 of the ten major direct energy sale contracts were terminated, with hydropower now being sold directly only to 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 from the source of energy after they had caused a loss of around RON3 billion (around EUR700 million) between 2006 and May 31 2012. According to ZF calculations, the overall loss from the signing of these contracts in 2003-2004 and up to the present could amount to around EUR1.5 billion.
But they are not the only ones to “suck” money out of the company.
“One contract was terminated three days ago. Several more are set to be terminated, where the value of services is twice as high as the market value,” Borza specified. The head of Euro Insol did not wish to give company names, but said behind each of them there was someone with a vested interest.
He did, though, give some examples of companies: The Ramnicu Valcea branch of Hidroelectrica signed a fiber optics cable contract worth RON10 million when in fact works were not supposed to cost more than RON4.3 million.
“Hidroelectrica bought fiber optics cable for EUR11, when on the market there were also offers of EUR3. For printers it paid three times their price. They are HP printers, but the company didn’t get them directly, but through an intermediary,” Borza specified.
The head of Euro Insol also says out of the around 500 contracts, 421 have been renegotiated, and a EUR93 million discount resulted.
“No-one had any objections. This leads us to believe trade margins were 50%, 60% or 100%,” the lawyer also said.
(English version by Daniela Stoican)