Now expertise accumulated in the past is their only trump card.
The lack of quality workforce is another problem because the engineers churned out by faculties at present have little chances of accumulating practical experience on the local market considering that there are very few major energy projects that have been completed in the last 20 years on the Romanian market.
“The bulk of our business comes from the general contractor segment, says Valentin Chiser, general manager of Romenergo since the end of last year.
Romenergo was initially set up as a trader to foreign markets, after which it started operating as a general contractor to foreign markets. Romenergo used to buy the equipment it needed in the manufacturing process at a good price from the local market and would then come up with a competitive offer for the foreign markets.
“But now that industry has been largely shut down, we buy products from others [abroad] and our cost-related competitive advantage as Romanian companies is basically gone. In the general contractor business the way you defined your past is fundamental to how you build your future,” Chiser says.
The company’s majority stake was bought in 2008 by a group of British and Romanian investors, one of whom is Dragos Bilteanu, a businessman also involved in real estate, and chairman of the board of directors of SIF Banat-Crisana.
Bridging the gap
The company was bought in a EUR20-million transaction from individual shareholders (who had become owners in a MEBO privatization). The deal, which took place at the beginning of the financial crisis, affected the company’s turnover.
So, from a turnover of over EUR34 million in 2008, last year Romenergo reached EUR18 million, but the company expects a return to growth in 2013.
“Over the next two years we are hoping to make up for what we lost in crisis,” Chiser says.
Apart from its activity as a general contractor, the company also operates in production, distribution and supply of energy, as well as in production of energy equipment.
“For our growth strategy we rely on our ability as a general contractor, on expanding our supply portfolio, on boosting our client portfolio and of our product portfolio for our existing clients on the production segment.”
The company distributes energy on the IMGB industrial platform and also supplies energy to a large part of its distribution clients.
“As far as equipment production is concerned, IMGB owns a 40,000 sq-m production facility, with the bulk of production being exported. Our main client is General Electric.”
Romenergo has 6 micro hydro-power stations bought from Hidroelectrica with a total installed capacity of 2.2 MW.
The company’s growth policy is rather cautious as investments in expanding equipment production and in boosting the portfolio of energy facilities are extremely costly.
“The appetite for investments in production is very low in Romania at the moment.” He explains this is an area where significant working capital is needed, and that if the volume of orders is not very high, the capital needs to come from other business segments.
“But under the current circumstances, cash is difficult to generate on any segment. Basically what is happening now is that the asset base built before ’89 is used.”
As for energy production in small hydro-power stations, financing has become much more costly after the two years of drought that Romania has faced.
But banks were already very cautious, even before the drought, a very different attitude from the boom years.
Those to blame for the crisis preach caution
“The same bankers who turned us into buyers of real estate by artificially inflating the market now teach us about financial caution.”
He says there is a clear gap between the reality that entrepreneurs face and financers’ perception of this reality.
“It is not by chance that banking products are being developed which cater more to banks’ needs than to clients’ needs.”
Aside from the economic context, another delicate problem emerges – the change of generation – and the difficulties of finding well-qualified workforce.
“We are on the brink of a generation change. Seniors in Romenergo have accumulated professional expertise by practically building the country’s energy infrastructure. But how many young faculty graduates have had the opportunity to be part of a complex project?,” Chiser asks rhetorically.
The only major energy investments made in Romania in the last 20 years were the two nuclear reactors at Cernavoda (1996, 2007), which were already largely completed before 1990.
Last year, OMV Petrom (SNP.RO), the largest company in Romania, started operating in Brazi the only new gas-powered station built in the last two decades in the wake of a EUR530-million investment.
The sector that has seen a genuine boom in the past three years has been renewable energy, with wind energy attracting investments of EUR3 billion. But this boom did not also have an impact in terms of the development of a local industry of components.
New energy investments are advancing very slowly, while a large part of Romania’s energy facilities are out of date, with the sector needing investments of EUR40 billion over the next 20 years.
(English version by Daniela Stoican)