“This year is the worst after 1989 for the construction business. No one is investing. There is economic growth, but it’s not showing in our area,” says Liviu Florea, general manager of TIAB.
The company, which has 700 employees, is part of the energy division of France’s Vinci group, which has four companies with about EUR60 million revenue and some 1,200 employees in Romania. TIAB gets about 20% of its revenue from infrastructure works, such as voltage transformation substations, electrical lines and automation projects for state-run companies like railroad carrier CFR, subway operator Metrorex or Bucharest’s public transportation corporation RATB, whose cash flow problems cause them to rarely make investments and to pay subcontractors late.
Infrastructure works depend on the investment budget of the government, which shrank by 40% in the first four months of the year to 5.9 billion lei or 0.9% of the gross domestic product, according to Finance Ministry data. The volume of infrastructure works dropped 27% in the first four months, according to the National Statistics Institute.
TIAB has worked on a number of projects in the agricultural sector, building electrical installations and automation projects for the grain silos of InterAgro (Ioan Niculae) and TCE 3 Brazi (Culita Tarata).
“We are very active on the irrigation segment,” TIAB’s general manager says, who expects an inflow of European funds for the rehabilitation or development of the irrigation systems. The National Rural Development Program stipulates that farmers will be able to get EUR1 million funding per project, with the money coming from the European Agricultural Fund for Rural Development (EAFRD).
The resumption of irrigation systems development is also a solution for the production overcapacity in the energy system. Remus Borza, the lawyer running insolvent Hidroelectrica, has repeatedly said the hydropower producer is forced to slop the water in the reservoirs instead of using it to generate electricity because national consumption is too low.
The energy sector generates some 30% of TIAB’s revenue, which stood at RON190 million (EUR43 million) last year, up from the RON144 million in 2012. Florea says the revenue did not increase because of something ‘spectacular’ but because of more contracts signed with a greater number of clients. The strategy offset the drop in orders from renewable energy companies, a sector that declined last year as a result of the support scheme reduction.
“We felt a 10% to 15% loss in the renewable energy business. (…) some of our competitors turned their attention to the markets abroad,” TIAB’s general manager says.
Before the end of the wind and solar power boom, TIAB built the grid connection infrastructure for a number of photovoltaic parks, including one for Enel Green Power, and for a wind farm in Tulcea. The company now expects opportunities to come from the electricity transmission and distribution infrastructure upgrades.
“There’s a tremendous potential on the distribution segment. We want to become electricity exporters and do not have the necessary infrastructure.”
Transelectrica (TEL.RO), the national grid company, alone budgeted more than RON2 billion in investments between 2014-2017 in order to rehabilitate the grid and expand its capacity to interconnect with the energy systems of the neighboring countries.
Other electrical installation and automation projects might come from the oil and gas exploration and drilling as the major players want to upgrade their infrastructure, TIAB official says.
OMV Petrom (SNP.RO) plans to invest more than EUR1 billion in exploration and production, while state-owned Romgaz (SNG.RO) will allocate RON600 million for exploration in all of its blocks this year.
(English version by Loredana Fratila-Cristescu)