On the other hand, many of these groups have turned their back on the Romanian government, criticizing the lack of a predictable legal framework and the especially the low electricity and gas prices.
World Bank experts, such as Kari Nyman, lead specialist in sustainable development with the institution, urge them to show a little courage and invest because they are the big boys. They should do this to show the government it can trust them and make the required changes, because the government is afraid that even if it does something, they will still not invest.
Nyman’s advice comes at a time when 80% of Romania’s thermoelectric power plants are past their life cycle, 31% of the hydropower plants need replacement and more than half of the electricity and natural gas distribution infrastructure is suffering from advanced wear and tear.
The only notable investments in new electricity generation facilities in the past two decades have been those in the two reactors in Cernavoda, where most of the work had already been done before 1989. Then there is also a EUR500 million power plant to be inaugurated by Petrom in Brazi (southern Romania) this year and about ten wind farms with a capacity of over 1,000 MW. Other than that, Romania is still using the same facilities built over 40 years ago.
The Romanian government has kept on trying to get all energy giants to work with it over the years. For instance, in order to build two more reactors in Cernavoda, worth EUR4 billion, Nuclearelectrica initially set up a project company, EnergoNuclear, comprising CEZ (Czech Republic), GDF Suez (French-Belgian group), RWE (Germany), Iberdola (Spain), Enel (Italy) and ArcelorMittal Romania. Only the latter two stayed with Nuclearelectrica, while the rest backed out of the project.
The two reactors in Cernavoda are not the only examples, though. The EUR1 billion Tarnita-Lapusesti hydropower plant or the Braila, Galati and Borzesti thermoelectric power plants are all major projects, which cannot seem to get past the blueprint stage.
Cernavoda is an eight to ten year project and companies can easily sell the power after completion, Nyman told foreign investors.
On the other hand, the reluctance of foreign investors to become involved in major energy projects is due to several reasons: the delay in the application of the power and gas price deregulation by the govenrment, the uncertainties surrounding the reorganization of the energy market and the lack of transparency. Even so, a solution has to be found or else Romania risks finding itself with a power shortage on its hands in a few years from now.
Most of the generation equipment is obsolete; therefore there is a significant risk of a capacity deficit on medium term. About 5,000 MW should be taken offline by 2020, which might cause a shortage of production facilities as of 2016. If supply does not meet demand, then the power price will go up, said Eric Stab, member of the board of directors of the Foreign Investors Council and chairman and chief executive officer of GDF SUEZ Energy Romania, owner of Distrigaz Sud.
Stab added that the 5,000 MW translated into about EUR7 billion investments and in the absence of investments Romania would lose its advantage of a production mix.
Frank Hajdinjak, chief executive of E.ON Romania, which controls the former Electrica Moldova and Distrigaz Nord, says that whereas in 2004 energy companies had huge piles of cash available, things have radically changed in the meantime and every market competes with all the others to get the dwindling amounts of cash available.
Asked whether they planned an involvement in important energy projects in Romania, the representatives of the two European groups said they would keep a practical approach to the issue.
In his turn, Nyman said that the public budget cannot afford such investments so that private projects are needed. Energy should normally be a growth factor but in Romania it is a burden for economic growth and tax-wise, because taxes are not paid and dividends are not granted, he added.
(English version by Loredana Fratila-Cristescu)