Moreover, statistical data show 120,000 companies have entered insolvency in the past five years and bankruptcy has already been pronounced for 108,000 of these. In the past five years, reorganization plans have been approved for only 3,500 companies, including Hidroelectrica.
Beyond the issues Hidroelectrica now needs to solve to exit insolvency once again, at this moment prices are higher than market ones. For instance, in mid-2012 Hidroelectrica got from EFT AG a price of 182.6 lei/MWh. Now, it gets RON167/MWh and since the start of the year it has not managed to seal any long-term direct contract on the energy bourse.
Despite the context, the government still says it will get the company out of insolvency in due time to float it in June, according to the letter of intent sent to the IMF. Unofficially, though, the listing of Hidroelectrica is unclear.
“I’d be very cautious with this deadline for Hidroelectrica listing. I do not believe there are any chances for this to happen in 2014,” say Energy Ministry sources.
Hidroelectrica has ended up in this situation under the “supervision” of eight ministers, from all the political parties that ruled in Romania. The only move to punish those responsible for Hidroelectrica’s fate was made in August 21, 2006, when anti-corruption authorities initiated a court action against 11 persons, including two managers, Traian Oprea, former general manager of Hidroelectrica, and George Asan, deputy general manager, for damages of EUR1.8 million caused to the company. No final decision has been issued, yet.
Hidroelectrica entered insolvency for the first time in June 26, 2012, exit proceedings one year later and on February 25 re-entered insolvency after the Court of Appeal approved the challenges submitted by several companies that had direct energy purchase contracts with the state-owned producer.
Just like in 2012, the company entered insolvency overnight, taking even Hidroelectrica management by surprise.
The question now is how was this possible without the people handling the energy system knowing about it? Another question is how was Hidroelectrica’s exit from insolvency possible in June 26, 2013, if certain processes were still unsolved.
Market sources say the company’s exit from insolvency as soon as one year after it entered proceedings was primarily a politically assumed objective.
According to Remus Borza, the lawyer controlling Euro Insol, the company handling Hidroelectrica insolvency once again, the Court of Law initially rejected the challenges expressed by companies having contracts with Hidroelectrica. Now, these challenges are re-analyzed, but this means Hidroelectrica re-enters insolvency.
The first time, to take Hidroelectrica out of insolvency, Borza got a EUR2.2 million fee. Another question is whether this fee paid by the Romanian state can now be justified in the context where Hidroelectrica is again in insolvency.
According to official information, what mainly drove Hidroelectrica to insolvency are the direct electricity sale contracts sealed during the 2003-2004 period and guaranteed by all the governments.
Since their sealing and until insolvency, through the direct contracts the company could have gained around EUR1.5 billion, according to calculations ZF made in the spring of 2012, 3 months before the company entered insolvency. The sum accounts for the gap between the price Hidroelectrica got for these direct contracts and the price the company would have got on the market.
Once the company entered insolvency, six of the ten direct contracts were cancelled.
The contracts, doubled by the unprofitable investments the company made in projects with no energy value, the sale of energy below costs to the population and contracts sealed with 500 suppliers are among the main factors that led the company into insolvency.
The problem is that beyond the legislative hurdles Hidroelectrica needs to overcome to exit insolvency, the market is not favorable at all to Romania’s largest energy producer.
Prices are continually falling, both on the spot market and on the market of bilateral contracts. Energy demand shrank by 4.5% last year and a 4% decline is forecast for this year.
Thus, even if it won’t last long until Hidroelectrica exits insolvency again, the market conditions the company will have to cope with are highly adverse.
(English version by Catalina Apostoiu)