“Romania currently lacks a vision and strategy to develop its national energy system. Demand for electricity is the main element in determining the type of investments the country requires. (…) In these circumstances, bilateral contracts are a necessity, they are a solution to financing investments. Blocking bilateral contracts is blocking investments in the energy sector,” Vatra said.
Current legislation bans electricity trading through bilateral contracts since state-owned power producer Hidroelectrica went insolvent in 2012 after selling electricity through this method at underrated prices.
Vatra said energy operators cannot make investments from their current revenue alone and need considerable financing, which cannot be accessed unless energy producers can ensure a predictable, long term cash flow that is little affected by market fluctuations.
Long term electricity trading deals have been replaced by very short term deals, which distort prices.
Vatra added investments in the energy sector started under previous legislation are no longer sustainable after major changes adopted over the past year and the legislative instability of recent years has deterred foreign investments in Romania. She said large energy companies looking to leave the Romanian market should have been a major concern for the government. Italian utility giant Enel is looking to sell its electricity distribution operations in Romania and Czech CEZ planned to sell the wind farms it operates in the southeastern region of Dobrogea.
“We will likely find out soon whether this decision (Enel’s – e.n.) was determined by Romania’s precarious legislation. (…) Initially very confident in the Romanian market, CEZ made impressive investments which now bring immense losses to the mother,” said Vatra.