The company will look for contracts in the Baltic and Scandinavian areas, while getting less work on its home market because of the low investment appetite of its traditional clients, the coal-fired thermoelectric power plants and hydropower producer Hidroelectrica.
It will carry out its plan via the branch in Estonia, where it has been working for France’s Alstom on building a new thermoelectric power plant since 2012. The beneficiary is Eesti Energia, a state-owned integrated company.
“We want the branch in Estonia to become a center of operations for the Baltic countries and Scandinavia. We now have 300 people there and 15% of our revenue came from Estonia last year,” says Horia Stefanescu, deputy general manager of Energomontaj.
Alstom hired Energomontaj for work on the expansion of the thermal power plant complex in Narva, eastern Estonia. The oil shale-fired thermal power plants with a nameplate capacity of 2,300 MW, generate more than 90% of the power Estonia uses.
The expansion will entail construction of two 300 MW generators in two phases, but the second phase is several years behind schedule because the Estonian government was looking for funding.
When Alstom got the contract in 2011, the total value of the investment was put at EUR950 million, EUR540 million for the first phase and EUR410 million for the second, according to Bloomberg. The second phase might begin this year, and Alstom should get the contract and Energomontaj should do the installation.
“It looks like they’ve got the money and Eesti Energia will make its choice when it sees the first generator up and running in September-October,” Stefanescu thinks.
Once its work on the first phase in Narva completed, Energomontaj’s Estonian branch will continue to operate with 50 or 60 people, who will handle smaller projects until the contract for the second phase is signed.
It will also look for contracts at plants in northern Europe, having already done some work for the metal industry in Norway.
“We are in talks with Alstom Sweden to manufacture scrubbers for aluminum plants in Romania and export them to Norway. We had significant operations in Norway in 1997-2004,” says the deputy general manager, who used to run Energomontaj’s export division until last year.
The company is also getting ready for another project in Estonia.
“Next to Narva is another company extracting oil from oil shale. They want to begin construction of a new oil production facility in 2015 and we pre-qualified as subcontractor for Eesti Energia’s oil division.”
Energomontaj’s shift in focus towards exports is because investments in coal-fired power production are low in Romania. The company is working on installing pollution reduction equipment at some power plants to make them compliant with the EU regulations. There are few such opportunities because some power plants have already installed such equipment, while the others do not have the financial strength to sustain tens of millions of euros in investments.
“With consumption in Romania going the way it goes I don’t think people will invest a lot of money in retooling power plants. The thermal power division needs restructuring. It can find projects abroad easier, but the European market is declining, as well. These aren’t the years before 2008 when steel mills, aluminum and petrochemical plants used to expand,” Horia Stefanescu said.
The division working for hydropower plants of Energomontaj has an even gloomier future ahead of it, because it depends on the orders coming from Hidroelectrica. Hidroelectrica was insolvent in June 2012 – June 2013 and the court-appointed trustee slashed investment to direct cash to creditors.
“The year 2012 was the start of the disaster for us (…), due the decline in investments at Hidroelectrica,” says Viorel Popescu, who runs the hydro division of Energomontaj.
Whereas in 2008, Hidroelectrica’s investment program included 51 million lei (EUR11 million) payments to Energomontaj, it 2012 payments stood at RON35 million only to drop further to RON11 million in 2013, Popescu says.
The hydro division’s contribution to the company’s business went down from 30% to 8% in 2008-2013 and the number of employees fell from 1,132 to 263.
Viorel Popescu admits that things are not as bad as they are for the other subcontractors that depend on Hidroelectrica’s budget, particularly Hidroconstructia, the company that built most of the hydropower generation-related structures throughout the country. The builder lost 2,000 employees and almost EUR90 million of its revenue after Hidroelectrica went insolvent.
“Except for Bumbesti-Jiu, for which a tender was held in 2004, all the current investments of Hidroelectrica actually began before 1989. There hasn’t been any progress on them since 2012 and we have very little of our specialized workforce actually busy. We are working on a plant with two 5 MW generators, but that’s a joke compared with our capacity,” Viorel Popescu says.
Hidroelectrica is insolvent again now, even though it should have conducted an initial public offering to sell a 15% stake. The IPO was postponed for next year and the court-appointed trustee Remus Borza says the the company will raise EUR300 million to EUR500 million, which will go towards power plant upgrades.
“I don’t see any retooling in line other than Stejaru (Neamt County, NE Romania i.e.), but I don’t think they’ll sign anything this year. The outlook is really bad, even if the money from the IPO come,” believes Popescu, who estimates that about 40% of Hidroelectrica’s generation facilities are past the date they should have been decommissioned and are due for an overhaul.
While the division working on thermal power plants has found a solution in foreign markets, export could turn out to be a solution for the hydro division, as well, provided that Energomontaj is invited by one of the major European or international companies that hold exclusive licenses over the technologies used in power plants. Such companies get the big contracts and then subcontract work.
“We are on good terms with companies like Voith, Andritz, Alstom and others. We’re expecting offers,” Popescu says.
On the other hand, Horia Stefanescu says there is always the risk that the license holder will turn its back on a company and choose another subcontractor.
“Your only defense is to be competitive in terms of quality and price, and our price is still lower than what Poles and Czechs can quote.”
(English version by Loredana Fratila-Cristescu)