Fondul Proprietatea said in a statement Friday it was very concerned regarding the government’s intention to cap the gas prices from internal production at around 70% of the current market price, following the recent publication of a draft government decision by the finance ministry.
If adopted, the decision would flagrantly breach already approved legislation, as well as Romania’s obligations as EU member state to observe the free market principles and liberalize the gas market. This will have a highly detrimental impact on the economy and market attractiveness for investors, severely discouraging foreign direct investments in the country. Romania’s energy independence will be put at risk and the country may have to rely on external sources of gas at higher prices that the government will have no control over, FP said.
If such a measure were to be applied to all consumers, including industrial consumers, this would raise again the issue of discriminatory treatment and potential state aid, as well as result in smaller contributions to the state budget from the gas industry, it added.
“As financial investors we are very surprised and worried that the government may be erasing years of building credibility in front of the international community through a single decision. Local individual investors, Romanian pension funds, and international institutional investors invested in good faith in the Romanian capital market, in companies like Romgaz and OMV Petrom and are seeing their value being destroyed by the government with this draft decision. Through the announcement of this ill considered decision the Government managed to erase more than RON600 million in the value of its own investments in Romgaz and OMV Petrom, while the total value destruction for the two companies was over RON1.45 billion in a single day,” said Johan Meyer, CEO of Franklin Templeton Investments Limited and Portfolio Manager of Fondul Proprietatea.
Share prices of Romgaz and OMV Petrom, Romania’s largest natural gas producers, plummeted on the Bucharest Stock Exchange Thursday after the finance ministry announced plans to cap the price of domestic natural gas.
Given the serious and wide-ranging consequences such a decision would have, Fondul Proprietatea urges the Government to withdraw the proposal and safeguard the free market fundamentals of the Romanian economy and the commitments taken in relation to the European Union, which are critical to ensuring sustainable and long term development for the country.