Electrica is short of cash in spite of record profit

The company’s financial difficulties are due to high arrears for electricity supplies from some of Electrica’s top clients, including the state-owned Caile Ferate Romane (CFR) railway company and the Oltchim chemical plant. This is a situation that often occurred in the early 2000s, causing a deadlock in the economy.

Electrica must recover over €110 million from its clients, while increasingly more consumers are demanding lower prices, due to lower electricity consumption because of the economic crisis. Furthermore, four former managers are planning to sue the company, asking for large amounts of money in unpaid salaries.

To cope with the difficult situation, Electrica is preparing desperate measures, including possible sales of assets and layoffs. It has also asked for help from its majority shareholder, the Romanian state, in the form of use of funds obtained after the privatization of some of its branches. “We have a serious problem with liquidity, and with cash-flow. We are affected by the crisis, our sales are dropping, and we have to recover RON 400 million [€97 mln] from CFR alone, and RON 72 million [€17.2 mln] from Oltchim, not including penalties,” the company’s new General Manager, Ioan Folescu, told Business Standard. Another state company, Nuclearelectrica, had Electrica’s accounts frozen for arrears exceeding RON 60 million (€14.4 mln ), but the situation was settled on April 12, according to the company’s Chief Financial Officer, Maria Spandonide.

Besides large consumers, smaller clients are also delaying payments, and these debts are becoming very hard to recover, Spandonide added.

Meanwhile, the company plans to lay off a further 500 employees of its Electrica Serv subsidiary, after firing 1,700 earlier this year. “The decision to lay off these people is a 90 percent certainty. We are considering selling the assets of this branch, buildings and land, in order to secure funds for capitalization. We could also outsource [operations] to privatized areas,” Folescu explained. “The [Economy] Ministry could help us, if it allows us to use the €300 million from privatizations in order to support current operations. So far, the money is blocked in a special account,” he added. According to Folescu, while some clients are demanding lower prices or lower amounts of electricity, due to their own financial difficulties, energy producers working with Electrica refuse to reduce tariffs.

The company has already lost some of these clients, because prices were not cut. Likewise, it has secured new clients, although Folescu declined to provide details of these consumers. However, market sources say that companies with unpaid bills to other electricity traders or suppliers are returning to work with Electrica, because they hope to be able to delay payments to the state company.

Meanwhile, four former managers, removed from their positions last year, when the new government was appointed, are threatening to sue the company for abusive dismissal, and demanding the payment of salaries for a full four-year term.