GREG KONIECZNY

 | 

FONDUL PROPRIETATEA SA

  |  26.06.2013

Breaking the habit

Investing money in energy projects needs a long-time predictability in energy sector. With frequent political swaps and the companies’ boards changing every six months, it makes it really difficult for key investors to predict a further business impact of their investments.


GREG KONIECZNY

GREG KONIECZNY

FUND MANAGER at FONDUL PROPRIETATEA SA

There are regions in Romania where wind conditions are the best in Europe and also, the solar projects benefit from proper conditions locally. From a perspective of electricity generation, including the renewables, there is also a diversified generation structure in Romania. With the right policies applied, Romania should become a very large exploratory field for various energy projects.

 

Bringing Romania at higher standards in energy and not only is not just a trifle of some people driven by no reason. At the end of the day, all regulations and their correct implementations are purely an exercise to allow financing for energy investments. Without proper boards and management, it has been and it will be very difficult further on to ensure financing especially for the conventional electricity projects. And this is the fact. There have been no real investments lately in conventional projects apart from minor refurbishments in the last years, but no large capacity has been built – hydro, in gas there  was just one built by Petrom.

 

There is a matter of good will at the top of companies’ governance. The main purpose is to separate the companies from political influence because that’s what got the companies down and that’s why now Hidroelectrica faces  insolvency, that is why the costs of production at CE Oltenia are  30-40 percent higher. The main issue is that nobody has been done anything in this matter. And, at the end of the day, these costs come a price that will be reflected in electricity prices.

 

The government is a policy maker and there is no place in the world where the state is a „good owner” of companies. The same situation is stated here in Romania. But the Government has enough tools in order to direct the way that investments are implemented in compliance with the regulatory framework. And this has been especially visible in the last years in renewables and especially wind, with Romania having at this moment large capacity projects in the field. But maybe this policy was too generous in terms of subsidies. Now, the Government has to deal somehow with this problem but no changes should be unilaterally decided.

 

All decisions, especially regarding the energy sector, require a long term impact analysis as all investments in this sector are taken on a long-term, 25 years or more. Romania aligned to EU requirements and planned to prove itself able to secure the green share of this field as part of the EU  directive 20-20-20 and it is fine that Romania has now large operational projects along with others pending. However, at this moment, everyone has to realize that this also comes with price. The generous subsidies has also been applied in countries as Spain, Portugal or others but, any change of the game should be first discussed and agreed with the key investors.  

 

Apart from few companies, most of them are poorly represented on the stock exchange. The Romanian capital market is very small given the size of the country, the liquidity is also low. In order to change it, new IPOs are necessary but also, in the meantime, the regulatory frame of the stock exchange has to change in order to attract more investors. Regarding the listing agenda for this year, Romgaz’s IPO looks doable. The process is the best prepared so far, the most advanced at this stage and October looks like a reasonable time for this. We would like to see also Nuclearelectrica on this list but it looks like the process is being delayed. But in order to capitalize on these listings, the Government should first seriously implement the corporate governance and private management at these companies.

 

We would also like to see more private companies coming on the stock exchange, even SMEs. One or two success stories of SMEs getting the necessary financings would convey a very positive signal for other companies to follow the process and this is what the market has been lacking all these years.

 

 

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