€30 billion needed for energy sector

Economy and Finance Minister Varujan Vosganian said that state-owned electricity producer Hidroelectrica and energy complexes Turceni and Rovinari could issue bonds to obtain funds for investments. He added the ministry will discuss with consultants to determine whether bond issues are a short-term solution to obtain money for environmental expenses, prior to companies being privatized.

Vosganian also said that Hidroelectrica and other state-owned companies, such as natural gas producer and supplier Romgaz, gas transportation company Transgaz, and nuclear energy producer Nuclearelectrica are to be listed on the stock exchange. The moves are part of the revised energy strategy for 2007-2020, according to which energy and mining companies are to issue bonds that could later be turned into shares and listed on the Bucharest Stock Exchange (BVB). The strategy targets mainly Hidroelectrica, the largest domestic electricity producer. "Until SC Hidroelectrica SA is ready to be listed on the stock exchange, the company will issue bonds on the domestic capital market, convertible in shares, with a 5-10 years yield," according to the strategy.

As for privatizations, energy complexes Rovinari, Turceni and Craiova are to be sold to private investors. For Nuclearelectrica, the state plans to erase outstanding historic debts and to attract private investments to finalize units 3 and 4 of the Cernavoda nuclear plant. Some 10-15 percent of the company's shares are to be listed on the stock exchange by 2008. The measure is not

however supported by the entire business environment. Valeriu Binig, Director for Energy and Utilities of the Romanian-American Enterprise Fund (FRAI) said that "bond issues by energy and mining companies are not lucrative," while stock exchange listing would put pressure on the companies' management and promote more performance.  "It all depends on what are the major goals of the state; if one wants performance from management, then one lists the company; if one wants privatization, one sells to a strategic investor, and then the share package is listed," said Binig.

Analysts are also reluctant about the energy strategy. The Executive Director of the NGO Applied Economy Group (GEA), Liviu Voinea, said the strategy is "still unrealistic and involves major costs." GEA analyst Emanuel Rauta said Romania still lacks a map for investments in wind, solar and biomass energy. "There is no market for this. We rely on things we cannot control," he said.