ROMANIA: New restructuring of the energy system? Energy Minister talks about a plan to create “energy champions” through mergers between state-controlled energy producers
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Energy Minister Sebastian Burduja has revived the idea of a merger between energy companies in the sector, which could lead to the creation of stronger companies and lower energy prices in the market. The idea has been floated for years.
″It’s a medium- and long-term, perspective idea. I would like, as a strategy, to support, as a country, a few strong companies in the energy sector. I know that the idea was floated several years ago, a few times. It didn’t work before, not because it wasn’t a good idea or because it wouldn’t have brought marginal prices, market prices, lower. There were probably other considerations. From my point of view, if we’re talking about the reform of state-owned companies, reducing waste, exploiting synergies between companies, as well as a functional energy market with better prices for Romanians, we have to take this scenario into account. “And I, personally, will support it,” said the Minister of Energy, responding to a question posed by the press on this topic.
I asked Burduja about the so-called “energy champions” because, in a press conference, in a presentation shown to the room, this provision also appeared as an idea for the future, “Energy champions (consolidation of energy production for a marginal price as low as possible)”.
Burduja explained that the way in which energy companies in Romania were structured, by type of resource, “is not optimal”, and “other states have combined, for example, coal production with hydro production and the result was an average price much lower than the price for coal”. “If you now think that Hidro produces at 150 lei/MWh, and coal at 900 lei, theoretically, if there were only one company, which would enter the market with a price of 400 lei, the market would no longer close at the marginal price of 900, it would close at the marginal price of 400, and energy in Romania would be cheaper. It is an ambitious thing, Romania can do what other states have already done – we are talking about Hungary for example – to have two, three large companies, which are energy champions that can play in the region and also put downward pressure on prices”, said Burduja.
Asked, he said that it is not a problem that some companies are now listed on the Stock Exchange (Hidroelectrica, Nuclearelectrica, Romgaz), and others are not, such as CE Oltenia.
As the minister said, the idea of reuniting the companies (how many remained), resulting from the breakup of the former National Electricity Company (CONEL), in the 1990s is not new and there were several intentions in this regard, but they were all abandoned in the end.
In 2010, for example, 13 scenarios were run with several consultants, so that, in the end, one would advance, with two such companies, Electra and Hidroenergetica. The first would have been to group the Energy Complexes of Oltenia at that time (Turceni, Rovinari and Craiova), Nuclearelectrica, the former National Lignite Company of Oltenia (SNLO), and three branches of Hidroelectrica, SH Vâlcea, SH Slatina and SH Sibiu. The second would have included Electrocentrale Bucuresti, the thermal power plants from Deva and CET Paroseni, the defunct Companie Națională a Huilei, the Portile de Fier hydropower complex and the rest of the Hidroelectrica branches at that time (Sebeș, Buzău, Târgu Jiu, Caransebes, Hațeg, Argeș, Cluj, Bistrița). The idea was abandoned then, but nine years later it returned.
In 2019, after some reorganizations in the thermal sector had already been made, government officials came up with the idea of a merger between Hidroelectrica and Complexul Energetic Oltenia, the former being profitable and the latter in financial difficulties at the time. Representatives of Fondul Proprietatea, which at the time had 20% of Hidroelectrica, criticized the plan quite strongly. “A merger of companies of this nature would raise concerns about possible state aid and would be anti-competitive. Secondly, simply transferring Hidroelectrica’s profits to CE Oltenia is not a solution for the recovery of the latter company. CE Oltenia is in an unfortunate situation, unable to pay for the green certificates and needs a deep restructuring, which should take place as soon as possible. Otherwise, its future will be severely affected”, said FP at the time, who also specified that this merger would cancel the chances of a future listing of Hidroelectrica on the stock exchange.
The idea was abandoned, FP sold its stake in Hidroelectrica through the largest initial public offering of shares in the history of the Bucharest Stock Exchange, and CE Oltenia entered into a restructuring program agreed with the European Commission.
