The short-term challenges for the companies in this business are the fact that the renewable energy sector, a growth driver in the last few years, is frozen by the legislative changes, power consumption is down for the third year in a row and new industrial projects are really few.
“The focus was on solar and wind segments of the renewable energy sector in 2013. We are concerned about instability on the renewable energy market this year,” says Tomasz Wolanowski, country manager of ABB Romania, one of the leading providers of equipment and services in Romania. ABB posted EUR42.7 million revenue in 2012.
Other reasons for concern are the decline of energy consumption and flat investments in the electricity transmission and distribution sector. Moreover, industrial companies are not making new investments, they are only developing existing facilities, Wolanowski added.
Last year was a record year for solar park investments, which went from a nameplate capacity of 49 MW in 2012 to 1,159 MW in 2013 after investments of more than EUR1.7 billion.
Investors directed more than EUR1.1 billion towards wind farms, too, so the total capacity of operational plants stood at 2,593 MW at the end of last year, according to the National Authority for Energy Regulation (ANRE).
The problem is that the Romanian government modified the support scheme in mid 2013 that had driven the green power boom in Romania and introduced even more changes this year, which confused investors in this business.
On top of that, electricity consumption fell 4.5% last year, according to national grid company Transelectrica, and should go down at the same rate this year.
Under the circumstances, what are companies in the energy equipment and service industry relying on to drive their business?
“We estimate the market of equipment, solutions and services for the energy sector will continue development in the coming years. Our estimates are based on the fact that the European Union is putting more and more pressure on the energy efficiency of buildings, where Romania is lagging behind other European countries,” said Florentina Totth, country president of Schneider Electric, a company that posted EUR43 million revenue in 2012.
“Romania will, therefore, have to make significant progress in the area to comply with the EU requirements.”
Another factor that helped the stability of the market and will continue to is the increase in power prices and the need for consumption efficiency, among households and companies, Totth added.
Another long-term growth opportunity for the companies in the business is Romania’s need to invest in upgrading or replacing energy, transport and medical infrastructure.
“GE has confidence in the long-term economic potential of Eastern Europe and Romania. The crisis won’t last forever and economic growth will return,” says Cristian Colteanu, chairman and chief executive officer of General Electric for Romania, Bulgaria and Moldova.
“There are many investment opportunities in Romania because of the ‘age’ of the (road, rail, energy and medical) infrastructure, which requires complete upgrade or replacement. Romania must set is investment priorities, and the sector that needs a clear strategy the most is the energy sector.”
General Electric is one of the leading suppliers of equipment and services for the energy industry in Romania and its major projects in recent years include the delivery of 240 wind turbines to CEZ for the EUR1.1 billion wind farm in Fantanele-Cogealac (SE of the country) and the delivery of equipment for 860 MW power plant OMV Petrom (SNP.RO) built in Brazi for EUR530 million.
The market of equipment and services for the energy industry amounts to more than EUR3 billion, according to the data centralized by ZF, based on the revenue of the 50 largest companies in this business.
(English version by Loredana Fratila-Cristescu)