OPCOM SEES FEWER ENERGY CONTRACTS AMID FINANCIAL CRISIS; SEE PAGES 20-21 RETAIL
The electronic product and home appliance market is reeling, with shoppers tightening their belts since the consumer loan freeze See pages 8-9
INTERVIEW
Liliana Solomon, CEO of Vodafone Romania, tells BR the company plans to focus on developing network and broadband services this year See page 14
CAPITAL MARKETS
Last year’s losses on the local stock market have made players more cautious, and long-term investors have started to mark short-term profits See pages 18-19
BUSINESS REVIEW www.business-review.ro
ROMANIA’S PREMIERE BUSINESS WEEKLY
MARCH 23 - 29, 2009 / VOLUME 14, NUMBER 10
SMALL, THE NEW BIG
The lack of financing, lower number of active players and falling investment sums have shrunk the local property market, with modest buildings rather than behemoths like the Charles de Gaulle Center now the norm. But real estate is not poised to become a niche market, say industry insiders LAURENTIU OBAE
See pages 12-13
VIEWPOINT
Honoring the survivors In what has become a great tradition for the international business community, we are proud to organize the fourth edition of the Business Review Investment Awards Gala, which will be held at the JW Bucharest Marriott this Tuesday night, March 24. Some 250 top members of the Bucharest business community will be in attendance, as we honor the best companies across ten different categories. These are challenging times for everyone, and those of us in media are no exception. Every publishing group on the market is feeling the pain right now. While at our event last year we were celebrating 10 years on the market and looking for a soft landing after a couple of red-hot years fueled by the real estate bubble, what we got instead was a global financial meltdown beginning last September, that is still playing out in Romania. For us at BMG that meant a rapid restructuring and downsizing so that we were able to grapple with the immediate challenges and hopefully weather the storm that’s coming. I am sure it is the same for many of you reading this too. Despite everyone’s concerns about the future of Romanian investment, the crisis, and their own personal financial security, we believe the Investment Awards are critical to help bring the business community closer together and share our experiences. We’re all in this together and no one has to feel alone. True, we won’t be honoring deals on the scale of 2007’s EUR 2.7 billion Rompetrol/KMG deal, but there was plenty of activity out there across different sectors. And the companies that we will be honoring are all strong survivors – ones that would be great partners for you and examples to all of us. We’ve been publishing Business Review continuously since 1998, so we’ve seen our share of ups and downs. In 1998, there was the Asian/Russian crisis. In 2000, the whole Romanian market was frozen due to upcoming fall elections. Beginning in 2001, business started to claw back and would eventually overheat with EU accession. But now we just have to adjust our expectations and keep trying. As always, the ones with the long-term perspective will be the ones that survive and prosper. Bill Avery Founder/Publisher
BMG
BUSINESS MEDIA GROUP
Don’t miss your chance to join Romania’s most dynamic media group! We are looking for experience and passion.
B USINESS R EPORTER Requirements: • At least one year of relevant experience in journalism (news reporting and editorial features) • Journalism or business degree, good knowledge of the business/economic environment • Strong English-language skills (speaking and writing) • Strong ability to analyze and communicate • Personal integrity • Good PC use Job description: • Prepares editorial coverage of foreign investments, covers events and press conferences, conducts interviews. Please send your CV together with a letter of intent to fax: (021) 335.34.74 or e-mail: simonafodor@bmg.ro.
BUSINESS REVIEW ROMANIA’S PREMIERE BUSINESS WEEKLY
MARCH 23 - 29, 2009 / VOLUME 14, NUMBER 10
Publishers BILL AVERY • RACHAD EL JISR Founding Editor BILL AVERY Editor-in-Chief SIMONA FODOR Senior Journalist CORINA S~CEANU
Managing Director RACHAD EL JISR Sales Manager GIUSEPPINA BURLUI Advertising Sales IULIAN B~BEANU ANA MARIA MARDAN Events Manager OANA MOLODOI
Journalists
Marketing Consultant
DANA CIURARU
GABRIELA ENESCU
OTILIA HARAGA MAGDA PURICE Copy Editor DEBBIE STOWE Contributor MICHAEL BARCLAY Photographer LAURENTIU OBAE
BUSINESS MEDIA GROUP
STRATEGYSTUDIO Layout BEATRICE GHEORGHIU Production DAN MITROI MARIAN NEAGOE Distribution GEORGE MOISE Subscription ANDREEA NUNU Research ANDA BACIU
Bd. Regina Maria 1, bl. P5B, sc. 1, ap. 10-11, Bucharest - Romania Phone: +4021 206-0680 (10 lines), Fax: +4021 335-3474 E-mails: editorial@bmg.ro - sales@bmg.ro - subscribe@bmg.ro ISSN No. 1453 - 729X Tiparit la: MASTER PRINT
BUSINESS REVIEW / March 23 - 29, 2009
Audited 2H 2006
BMG is a founding member of the Romanian Audit Bureau for Circulation (BRAT)
3
NEWS
BRIEFS
ECO POWER ENERGY PRODUCTION TO BUILD EUR 130 MLN WIND POWER PARK IN ROMANIA é Romanian privately-owned company Eco Power Energy Production plans to build a wind power park costing EUR 130 million in the region surrounding Ramnicu Sarat, following a partnership signed with local company MA&D Power Engineering. The park is estimated to be completed by year-end and will cover 500 hectares, where the company will plant over 40 windpowered turbines, based on a contract signed with Vestas company in Denmark. So far, the park is awaiting authorizations, according to the company’s general manager, 4
Rasvan Radu, GM of UniCredit Tiriac
change the regulations on lending provisions, as well as decrease minimum reserves of foreign currency, which would allow banks to use the additional resources for lending. He expects the imminent financing from
the IMF to prompt BNR to lower the mandatory reserves level. Currently, BNR asks banks to keep 40 percent reserves of the foreign currency they attract. Radu believes a 20 percent drop would make a difference. “We prefer to transfer assets and give loans from our mother banks to reduce the capital requests. […] We will probably see changes in big banks' balance sheets because many loans are externalized,” Radu said. While the Romanian subsidiary posted a growth in profit, its mother bank saw a drop of 38 percent in its net profit last year, and is planning to ask for financing from both the Austrian and Italian governments to recapitalize. The bank's fourth quarter profit dropped by 56 percent, to EUR 505 million. Corina Saceanu
KPMG: Doing nothing could cost businesses The local subsidiary of Big Four audit firm KPMG has had lenders asking for accurate and audited financials from firms, fueling demand for audit and accounting services. “In the past days of easy credit, neither companies nor lenders looked too closely at the financial statements. Now lenders take care to require in many more cases that companies prepare timely and correct financials, and have them audited by an audit firm they know,” Bill Bowman, deputy senior partner with KPMG, told BR. He expects the firm's core services
COURTESY OF KPMG
FARMACEUTICA REMEDIA DEVA PLANS MERGER WITH DORNAFARM SUCEAVA é Farmaceutica Remedia Deva has announced a potential merger with Dornafarm, the pharmaceutical chain based in Suceava, according to a statement forwarded to the Bucharest Stock Exchange (BSE). Farmaceutica Remedia Deva posted losses of EUR 823,000 in 2008. It runs 45 standalone pharmaceutical units concentrated in the western part of the country. The company's plans involve opening two logistic centers and spreading countrywide. Farmaceutica Remedia has a market value of EUR 3.9 million.
The local subsidiary of UniCredit Bank posted EUR 97 million in profit last year, up 37 percent on 2007, while its assets reached EUR 4.3 billion, a 36 percent growth. Together with the other companies in which the bank holds stakes, UniCredit Tiriac's assets on the market reached EUR 5 billion. The bank decided to use its entire profit for capitalization, with its board soon to approve no dividends for this year. Its portfolio of loans reached EUR 4.19 billion, and included those outsourced to its mother bank, some EUR 1.1 billion. UniCredit is planning to allot more financing to its local subsidiary, if needed, and is not planning to cut back on its Romanian activity, according to the bank's general manager Rasvan Radu. Radu said the Romanian Central Bank should
COURTESY OF UNICREDIT TIRIAC
MEGA IMAGE BUYS FOUR LOCAL SUPERMARKETS é Belgian retailer Delhaize has signed an agreement to buy four Prodas Holding supermarkets in Romania through its subsidiary Mega Image. The value of the transaction was not disclosed. The four stores posted EUR 12 million in revenue last year, and will re-brand as Mega Image. At the end of 2008, Mega Image’s network consisted of 40 stores, 37 in Bucharest, two in Constanta and one in Ploiesti. The number of employees at that time was approximately 2 000.
UniCredit Tiriac posts EUR 97 mln profit, no dividends in 09
Bill Bowman, deputy senior partner at KPMG
of audit, tax and advisory to continue to be in healthy demand, as companies always need them, whatever the economic environment. “I encourage companies to come forward with their problems as solutions may be straightforward. Do not pretend to yourselves that they will just go away. The cost of doing nothing could be the loss of your business,” says Bowman. For accounting, KPMG is seeing increased demand from companies to give assistance to prepare accounts using International Financial Reporting Standards (IFRS). Corina Saceanu
Morgan Stanley returns controlling stake in HTI Valori Mobiliare to initial seller Bank holding company Morgan Stanley has exited local brokerage company HTI Valori Mobiliare, by selling its 51 percent stake to the former majority shareholder Daniel Tepes. The National Securities Commission (CNVM) has already approved the transaction, following which Tepes will become the majority shareholder again, with 99.89 percent of the shares. The value of the transactions was not made public, nor how much Morgan Stanley could have put into the firm in the meantime. Morgan Stanley has also put its share package in the Bucharest Stock Exchange up for sale, without a buyer yet. Currently, it owns 2.7 percent of the BSE and 0.031 of the Sibex stock
exchange. It also owns share packages in several companies listed on the local stock market. According to the latest data, Morgan Stanley had a 20 percent package in Romcab Targu Mures, having acquired more shares in the company in February, over several trading sessions. It also owns under five percent in Imotrust Arad. The firm acquired shares in the BSE following two deals last year, from brokerage companies H&C Securities in Iasi and WBS Romania. It has put up for sale its share package for RON 40 per share, below what it paid for the shares, RON 150 and RON 160 respectively. The former investment bank's BSE exit would mean a 60 percent loss on the entry price. It
paid around EUR 5.5 million for the stake, while the exit asking price is RON 8.28 million (EUR 2.1 million). HTI Valori Mobiliare was ranking 14th in the list of brokers active on the Romanian market, having intermediated transactions worth EUR 105 million. The firms now ranks 29th for the transactions it has intermediated since the beginning of the year. Morgan Stanley, a former US investment bank, became a bank holding company in September, following the bankruptcy and near collapse of Lehman Brothers, Bear Stearns and Merrill Lynch investment banks. It posted some USD 2.2 billion in losses in the 2008 fiscal year. Corina Saceanu BUSINESS REVIEW / March 23 - 29, 2009
NEWS
ArcelorMittal Galati sheds 1,000 personnel so far BRIEFS
COURTESY OF ARCELORMITTAL
ArcelorMittal Galati, Romania’s biggest steel producer, has announced that it will end its voluntary redundancy program in the coming months. “At the end of last year we had 13,500 workers. As a result of the voluntary redundacy program, which started at the beginning of this year, we now have 12,500. The program finishes at the end of this month so at the beginning of April we will have a clear idea of how much we have shrunk in terms of personnel,” ArcelorMittal Galati representatives told Business Review. According to company information, each worker receives compensatory salaries. The poor market conditions drove the plant’s Indian management to implement its rolling restructuring plan.
1,000 ArcelorMittal employees have left the firm
The company, owned by Indian magnate Laksmi Mittal, reported for last
year a net profit of more than USD 200 million, a 50 percent increase on the year before, when it stood at USD 133.6 million, according to the Economy Ministry. The price of steel on the London Metal Exchange has reached USD 300 per ton over the last few months, three times lower than in the middle of last year. The demand for steel has also decreased, as a result of low sales of cars and homes, both on the domestic and international markets. Due to the economic conditions, market representatives say that ArcelorMittal Galati will report a 2.5-3 million ton steel production this year, half of the average over the last three years. Dana Ciuraru
EUROMEDIC ROMANIA EXPANDS NETWORK WITH 8TH IMAGING CENTER AT COST OF EUR 2 MILLION é Medical company Euromedic Romania, part of Dutch chain Euromedic, has announced it will open a new imaging center in Focsani, its eighth so far. The investment in the center has been estimated at EUR 2 million, according to the medical company’s representatives. So far, the firm runs centers in cities such as Arad, Constanta, Bucharest and Petrosani. The group’s total investments in
Carrefour expands supermarket chain to Winmarkt locations
LAURENTIU OBAE
French retailer Carrefour has signed an agreement with shopping center operator Winmarkt to open supermarkets in three Winmarkt centers, in Cluj, Bistrita and Turda. Carrefour introduced its supermarket format in Romania after acquiring the Artima supermarket chain and rebranding its stores as Carrefour Express. The three new units, which will be opened in spaces leased from Winmarkt, will cover between 925 and 1,200 sqm. Carrefour will take over the space in the Turda unit in July this year, but those in Cluj-Napoca and Bistrita are still being leased to other tenants, with the existing contracts poised for termination or tenant redistribution elsewhere in the same building. Carrefour now operates 21 supermarkets in western Romania. Winmarkt, which runs 15 commercial cen-
Carrefour will open three new supermarkets
ters, want to partner supermarket operators throughout its entire chain in Romania. The shopping centers, owned by Immobiliare Grande Distribuzione (IGD), were acquired last year for EUR 182 million from Ivington Interprises
Limited and Broadhurst Investments Limited. The buyers were planning to make a EUR 23 million investment in the recently bought properties, so as to increase the value of yearly rents. Carrefour sales exceeded the EUR 1 billion threshold in Romania last year, growing 37.4 percent on the previous year to EUR 1.19 billion, the company has announced. In 2007, the firm posted EUR 866 million. It was the biggest sales increase among all Carrefour's countries of operations. The French retailer runs 18 hypermarkets in Romania, six of them in the capital city Bucharest. Carrefour bought Romanian retailer Artima in 2007, paying EUR 55 million for the 21 supermarkets in the chain. Corina Saceanu
Xerox posts 18 percent growth to USD 72 million in 2008 Xerox Romania and the Republic of Moldova, the local branch of the US-based corporation, has reported revenues exceeding USD 72 million in 2008, an 18 percent growth compared to the previous year, even though profit in the fourth quarter was lower due to the economic and financial decline. The main generators of growth were document management services, which the firm said had yielded very good results since 2007, and large capacity multifunctional laser equipment. “We were right to count on added-value products and we concentrated our efforts to expand the range BUSINESS REVIEW / March 23 - 29, 2009
of document administration services by opening up new locations of archiving and processing,” said Marius Persinaru, country general manager of Xerox for Romania and the Republic of Moldova. According to Persinaru, the company obtained its expected results on the local market last year. “Thus, following the EUR 500,000 investment we made in Pipera Imaging Center in 2007, we expanded our document production and communication services in our Faur unit,” said Persinaru. Revenues from the department of document management services increased by approximately 28 percent
over the average growth of the company in 2008. Revenues from office equipment sales increased by 51 percent, helped mainly by sales of multifunctionals and laser devices. According to IDC data, Xerox is leader on the market of multifunctional devices with a 34 percent share. The company’s market share on the segment of laser devices also increased by 3 percent in 2008 to 29.4 percent. On the segment of wide format printing, the company posted 58 percent higher revenues compared to 2007. Otilia Haraga
Romania amount to USD 25 million. CAPITAL & ALLIANCE DEALS EUR 2.7 MILLION PREMIUMS IN 2008, UP 10 PERCENT é Romanian broker Capital & Alliance posted managed premiums of EUR 2.7 million in 2008, up 10 percent over 2007, according to company representatives. In 2007, the broker increased its premiums by 30 percent compared with the previous year to EUR 2.45 million, according to its report. MARRIOTT CHAIN TO EXPAND WITH UNITS IN BUCHAREST, CLUJ AND TIMISOARA é JW Marriott Bucharest Grand Hotel chain plans to open three new local units in Cluj, Timisoara and a second unit in Bucharest, according to general manager Kurt Strohmayer. The size of the investment is not yet known since the potential markets are still being researched. He thinks that Romanian lacks a hotel portfolio of two- and three-star facilities, while the luxury segment is oversupplied. Recently, the Dutch Golden Tulip hotel operator announced plans to open three hotels in Bucharest, Cluj and Moieciu de Sus and another three affiliations are scheduled during 2010, according to Paul Marasoiu, regional manager of Golden Tulip in Eastern Europe. 5
3Q Roman Foeckl
How many employees does CoSoSys have in its Cluj R&D center and what are your strategic plans for this year? CoSoSys has over 30 employees in the Romanian HQ in Cluj. The team covers all business operations, from research, development, testing and support to business development, marketing and sales. We aim to expand the team to 40+ people and are looking to hire developers, marketing staff and sales representatives. In 2009 we’ll have three major product releases, development-wise. We also plan to expand our business in CEE through sales offices. We’ve already started with Poland and either the Czech Republic or Slovenia will follow. We also want to expand our partner and distribution network throughout the world.
What turnover and profit did the firm post in Romania in 2008 and what are the estimates for 2009? The 2008 turnover was about USD 1 million, with a 20 percent EBIT. Other than reaching our 100 percent growth estimate, we’re also focusing on increasing profitability. Romania generates a little under 10 percent of our revenue. Of this figure, about 2-3 percent represents the consumer segment, and the rest the business sector. We have international and Romanian customers from fields such as bank and finance, IT&C, health (hospitals) and pharmaceutical, educational and governmental institutions etc. Otilia Haraga 6
Supermarket operator Billa Romania, part of German group Rewe, plans to open at least 10 more units in Romania this year, and is also interested in acquiring shops and networks that are put up for sale. In 2007, the retailer opened six supermarkets, adding ten more countrywide in 2008. Last year, the company announced a EUR 20 million investment in a warehouse in Brazi, near Ploiesti. The site delivers 17,500 sqm. Besides this investment, Billa has 5,000 sqm of storage space in Targu Mures. The retailer reported a turnover of EUR 74.6 million (calculated at the current RON/EUR exchange rate) in 2008, a boost of 10 percent compared with the previous year. Its number of customers grew by the same percentage throughout the year.
The retailer is also looking at acquisitions
German retail group Rewe posted an increased turnover of 27 percent in 2007 in Romania, totaling EUR 1.34
billion, according to the company's representatives. The retailer was established in Romania 10 years ago and has 34 units so far countrywide. “We were one of the first companies to start modern retail operations in Romania,” said Wolfgang Janisch, CEO of Billa Romania. As a group, Rewe posted increased turnover of more than EUR 45 billion in 2007, a 3.7 percent improvement over the previous year. Its EBT result increased by 22.2 percent to EUR 735.4 million in 2007, according to the group’s annual financial report published in May 2008. In Romania, Rewe Group operates Selgros Cash & Carry, Billa Romania, and Rewe Romania, which manages a network of 55 Penny Market and Penny Market XXL discount shops. Magda Purice
Verbund in negotiations over wind energy project in Romania Verbund, the Austrian electricity company, is in negotiations with Winstar Trading International to acquire a wind power plant project of 100 MW in the Tulcea region. “Verbund is exploring the investment opportunities in Romania. With regards to the specifics of a transaction, the company doesn’t comment on projects during the negotiation phase. If and when a transaction occurs we will be able to say more on this,” Florian Seidl, communications manager at Verbund, told Business Review. This would be the first concrete
STOCKEXCHANGE
What sales do you expect by the end of the year for the Endpoint Protector 2009? The estimates for 2009 are for about USD 2 million and we expect the business segment (endpoint security software, comprising Endpoint Protector and Secure it Easy) to bring in 50 percent of that amount, the rest being generated by the consumer product segment (the portable device software).
Billa Romania to expand by 10 units in 2009
LAURENTIU OBAE
GM of CoSoSys
NEWS
The firm registered EUR 3.7 bln in sales last year
step towards investing in the local renewable energy market. According to market estimates, the sum could reach up to EUR 150 million. According to local energy transporter information, Winstar Trading International, together with three other companies, has received approval to connect to the grid 600 MW in the Tulcea area. Austrian energy company Verbund registered EUR 3.7 billion of sales last year, an increase of 23 percent compared with previous year’s results. Dana Ciuraru
Cosmote rumored to be in talks to take over Telemobil Cosmote Group, which operates locally through Cosmote Romania, is in discussions to take over Telemobil (owner of the Zapp brand), according to local media reports. This acquisition would be an opportunity for Cosmote to acquire a 3G license, the firm being the only operator on the local market that has not entered into the possession of such a license. The acquisition would also allow the company to become a more serious competitor for the top two operators on the telecom market, Orange and Vodafone. By taking over Telemobil Romania, Cosmote would compete more vigoriously on the mobile internet segment which is expected to have the highest growth this year. Chris Bataillard, Telemobil Roma-
nia CEO, told Business Review in a previous interview he expected the company to become profitable in at most 18 months. The company has not made public its number of customers but it is thought to be fewer than 500,000. “Right now the coverage of the UMTS network is 23 cities and we are focusing on improving the quality in those cities. On the CDMA network, we have doubled our broadband coverage in one year and we continue to improve. Our broadband data coverage is 11 million right now, and we will increase it to probably around 15-16 million,” said Bataillard. Stefanos Theocharopoulos, who was appointed the head of Cosmote Romania in January 2008, said upon
taking office that one of his main priorities would be to find solutions through which the operator could supply mobile data services. He added that first the company would wait to see whether one of the two operators that were granted the license – Telemobil and RCS&RDS – would lose it through non-fulfillment of the coverage commitments they had made. Cosmote Romania representatives told Business Review they did not wish to comment on the matter of the acquisition, while representatives of Telemobil Romania could not be contacted before press time. Cosmote Romania is the third largest operator on the market with over 5.2 million customers. Otilia Haraga BUSINESS REVIEW / March 23 - 29, 2009
CALENDAR / WHO’S NEWS
EVENTS, BUSINESS AND POLITICAL AGENDA MARCH 23
é 12.00 – Press conference of the B’EST IFF festival takes place at Met-
ropolitan Cultural Center of Sector 1 City Hall.
MARCH 24
é Business Review organizes BR Awards at JW Marriott Hotel. é 11.00 – Re-launch of the brand Somaco, acquired by the investment
fund Oresa Ventures, at Crowne Plaza Hotel, Crowne A room.
é 11.00 – Launch of new Carrefour hypermarket. Press conference takes
place at Grand Arena Mall.
é 18.00 – IEDC-Bled School of Management Slovenia organizes IEDC
MasterClass in Bucharest, entitled "How Managers Create and Destroy Value in Times of Crisis” at JW Mariott Grand Hotel in Bucharest, in Foyer Braila Ploiest.
MARCH 24-26
é Call Center& Customer Care Conference and Expo.
MARCH 26
é 09.30 – Capital Market Conference organized by the Brokers’ Associa-
tion and Bucharest Stock Exchange takes place at IBC Modern.
é The American Chamber of Commerce in Romania is organizing its
2009 Annual General Meeting (AGM), including the elections for the Board of Directors and Auditing Committee at Athenee Palace Hilton Hotel, Regina Maria Meeting Room.
MARCH 27
é Mazars organizes seminar on Transfer Prices.
Slovenian book retailer opens outlet in Bucharest Slovenian book retailer Mladinska will open a store in Bucharest on April 2 following an investment of EUR 350,000. The 400-sqm shop will be located in Militari Shopping Center. The opening is part of a wider program to expand on the Romanian market, which will also include other cities outside Bucharest. Mladinska knjiga Group is one of the leading companies in publishing and book sales in Slovenia and is the biggest publisher in Croatia. The firm first entered on the Ro-
manian market as a publishing house in 2005 and has released 40 titles. It has now decided to expand on the retail side. Its retail activity on the local market will be coordinated by Vesna Virant, general manager of the company in Romania. Last year the Slovenian retailer, which comprises a chain of 80 book stores, posted a turnover of EUR 160 million. Mladinska was founded in 1945 in Ljubljana, initially as a publishing house. Otilia Haraga
Tuca, Zbarcea & Asociatii reports EUR 23.5 mln turnover for 2008 Law firm Tuca, Zbarcea & Asociatii has reported a EUR 23.5 million turnover for last year, while revenues stood at EUR 21.5 million. Representatives said the figures did not include the revenues from the secondary office in Cluj-Napoca, which operates in association with the local firm Nistorescu, Somlea & Asociatii. “We had a 45 per cent hike in billing compared to 2007, largely fuelled by the rise in new clients won, plus growth in existing clients’ advisory work,” said Gabriel Zbarcea, managing partner of Tuca, Zbarcea & Asociatii. Most of the firm’s revenue comes from M&A, corporate, litigation and international arbiBUSINESS REVIEW / March 23 - 29, 2009
tration, as well as real estate work. This year, the official said the firm planned to strengthen several practice groups such as insolvency and banking and finance. “Our growth target is being set at zero for this year. We do however expect our breadth of areas of practice to act as a hedge against the areas that are slower. We believe that litigation, concessions and infrastructure, employment, energy and international arbitration practice groups will perform strongly this year”, said Florentin Tuca, managing partner with the firm. Tucam Zbarcea & Asociatii has 83 lawyers, including 16 partners, and 42 support staff. Dana Ciuraru˚
WHO’S EUGEN STOENESCU is the new head of commercial property management for Building Support Services. He has extensive national and international property management expertise. Prior to this, he was head of commercial property management for King Sturge Bucharest. Stoenescu has a BSc degree in engineering and Property Management diplomas from the Sauder School of Business, University of British Columbia, Canada. He is a member of the International Council of Shopping Centers and BC Real Estate Council. ROH PAN OCK was appointed president of LG Electronics Romania. He joined the LG Electronics team in 1990 and has worked for the past 20 years in global strategy and regional marketing. Between 1995 and 2000, he was in charge of the firm’s marketing activities in Austria, and between 2000 and 2008 he coordinated the marketing department of the media division. He graduated from the Faculty of International Relations at the Hancock University, specializing in Economics and French, and obtained an MBA in global management from the Thunderbird university. DANIEL MITEL was appointed chief operating officer of LG Electronics Romania. He has vast experience in sales and business development strategies. From 1992 to 2003, he worked for Coca-Cola (Romania and Russia), Interbrands (the Gillette division) and Brau Union. For the next six years he coordinated Servisair/Globeground Canada. He graduated from the Faculty of Economic Sciences and Informatics Engineering and in 2000 obtained an MBA from the Open University Business School. CATALIN SCARLAT was appointed commercial manager of Euroweb Romania, in charge of coordinating
NEWS the company’s commercial and marketing activities. Scarlat joined the management team of Euroweb Romania in 2004 as marketing & development manager. He will also be in charge of coordinating the firm’s sales department. He has 10 years of experience in telecom. DENISA POPESCU will be in charge of coordinating the support operations of Euroweb Romania. She will also maintain her current position of financial manager, in charge of financial-auditing and acquisitions. As of now, her area of responsibility also includes the firm’s HR department. Popescu joined the managerial team of Euroweb Romania in 2006, with eight years of experience at an important financial auditing company. GABRIEL IONITA was appointed technical director of Euroweb Romania and will coordinate the company’s technical and development operations. He has vast experience in telecommunications and over the last 40 years has coordinated the technical department of another important player on the telecom market as technical director. OANA FARCASANU, 35, has re-joined Danone Romania as HR manager. She first joined the company in this position in 2001 and was also HR coordinator for SE countries such as Bulgaria, Serbia, Croatia and Bosnia. In 2007 she was relocated by the Danone group to Paris as resources development manager and in 2008 she was promoted to HR manager for Western Europe. OVIDIU GHIMAN, 31, was appointed manager for strategy and business development at Romtelecom Romania where he will be in charge of drafting the development strategy, identifying new business opportunities and integrating them in the company’s business model. Previously, he was commercial manager of RCS&RDS Romania. Ghiman graduated from the BabesBolyai University in Cluj-Napoca, the Faculty of Economic Sciences.
Business Review welcomes information for Who’s News from readers. Feel free to contact us on 206 0680 (10 lines), by fax at 335 3474 or e-mail: otilia.haraga@bmg.ro
7
ANALYSIS By Otilia Haraga
COURTESY OF ALTEX
Consumers are less eager to spend on IT&C and electronic products due to FX rate volatility and more expensive loans
Electronic and home appliance players hit by low demand and consumer loan freeze Due to a nosedive in demand and harsher conditions for consumer loans, the electronic products and home appliances market is reeling – especially as local consumers are heavily dependant on consumer loans, which accounted for a large portion of sales. Business Review talked to producer Arctic and retailers Altex and Flamingo International to see how much they have been affected and what plans they have for the future. 8
“As early as last year retailers began to be confronted with cash-flow problems, and were compelled to drastically reduce costs and even close down some smaller, unprofitable stores,” Jiri Rizek, CEO of Flamingo International, tells BR. He says the market is unstable, as the currency exchange rate changes from one day to the next, and purchasing power will decrease as a result. Naturally, this will make consumers less eager to spend, which will also affect the revenues that the industry is grossing. According to data from producer Arctic, over the last two months of 2008, the home appliance market in Romania shrank by 20 percent. Broken down by segment, refrigerator sales dropped by 26 percent, washing machine sales 11 percent and cooker sales 12 percent. “We were able to notice a slowdown in consumer demand as early as the last quarter of last year, when we posted an 18 percent drop in the total sales of electronics, home appliances and IT&C products, compared to the same period of 2007,” says Rizek. LCD and plasma TVs have been the best sold products in the Flanco and Flamingo stores, a trend that has been going strong since last year. “Unfortunately, we cannot say the same about home appliances, where there has been a sharper drop in demand,” added Rizek. Apart from a fall in demand for electronic products and home appliances, there has been a shift in the sales balance, explains Iuliana Marcu, PR manager at Altex Romania. In the Altex stores, for instance, there was growth on the segment of entertainment products and home appliances, but on the other hand a reduction for electronic products. Retailers and producers alike hope access to consumer credit will be eased over the course of this year. “Prohibitive loan conditions have greatly slowed down the development rate of the consumer goods sector and have influenced consumer behavior, generating a pronounced drop in demand,” Monica Iavorschi, general manager of Arctic Romania, tells BR. “Restrictive lending conditions are, from our point of view, the main cause for the decrease in demand for home appliances, especially since 70 percent of these acquisitions were made through loans,” she says. Romanians are definitely more deBUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS pendent on consumer loans than their counterparts in countries such as Germany, but in fact you don’t even have to go that far: shoppers in Poland, the Czech Republic and Hungary also tend to rely less on consumer credit. “The main reasons for this are strictly related to regulation norms and also the proportion of loans in EUR that are confronted with the high risk of currency exchange fluctuation,” says Rizek. In 2008, Altex sales via loans granted through Credex represented approximately 25 percent of total sales, but this figure is going to change for the worse this year. Altex Romania controls the Altex retail network of approximately 60 stores and the Media Galaxy network, which consists of 14 large shops. “Our development plans will continue in 2009 but they will depend on the evolution of our partners’ projects,” says Marcu. The next store to be opened by the firm is a Media Galaxy store of approximately 3,000 sqm in Militari Shopping Center. Meanwhile, at Flamingo International 20 percent of sales on the local market were generated by consumer loans through Cetelem. Flamingo drafted a plan to minimize the effects
of the crisis, which includes a strict financial control program for cost efficiency and preventing unforeseen and counter-productive expenses, with an equally strict stock management. “Moreover, we have taken measures as far as the acquisition policy is concerned, aiming to reduce operational costs. We have cut them by 25 percent,” says Rizek. Flamingo International will slow down the rhythm of expansion that it had set initially for its chains of stores. “Expansion plans will probably be delayed by a year or two depending on to what extent the market and consumption are affected by the crisis.” Currently, Flamingo International has 114 Flanco, Flanco World and Flamingo Computers stores. “Given the current economic situation, we estimate this will be a more difficult financial year than 2008, but we still wish to maintain our retail performance and end the year with positive results,” says Rizek. Meanwhile, Arctic is contemplating two different scenarios for 2009: under the pessimistic one the business would post 10 percent falls; the optimistic one sees growth of up to 5 percent. The company’s investment budget amounts to EUR 5 million, the
same as last year. “However, we decided to postpone the investments that were not absolutely necessary until the second half of the year in order to have a clearer view of the evolution of the market this year. We will continue to invest in product launches and in any case we will strive to reach cost efficiency,” says Iavorschi. One important measure that the company has taken to safeguard itself against the crisis was to re-negotiate contracts with suppliers in RON, to ensure the firm is protected from fluctuations in the currency exchange rate. Secondly, the producer is paying much more attention to enhancing partnerships with distributors and retailers. “We’re monitoring the evolution of sales and orders attentively so as to avoid stock blockages.” Moreover, for the sake of efficiency and lower costs, Arctic has restructured some processes, such as logistics. “We have proposed to evaluate production periodically and adjust it based on the volume and structure of the orders we receive,” says Iavorschi. The target is to continue to export 70 percent of the local production in 2009, not on new markets which could be “more difficult in these conditions”
but to consolidate on the markets where the company has already established a presence by focusing mainly on the countries that will be least affected by the crisis. Arctic increased its market share in Romania by 3 percent, to 31.5 percent in 2008. Sales of the Beko brand represented 25 percent of the firm’s total sales on the local market, and Beko doubled its market share last year to 4.8 percent. Still, Arctic sales fell over the last two months of 2008 by 16 percent compared to the same period last year. The company managed to sell 734,000 units last year, 3,000 more than in 2007. “2008 was the first year that Arctic posted a slight decrease in its turnover, amounting to 5 percent, since it was taken over by the Turkish group Arcelik,” says Iavorschi. In 2008, Arctic produced 1.2 million refrigerators, almost a third of which were sold on the local market. In total, it sold 1.5 million units last year. The firm has 2,200 employees in Romania. “Making staff redundant is a measure that we do not wish to take, since it is the last resort. For now, we do not need to make such a decision,” says Iavorschi. ■
Glittering the path in MICE business
BUSINESS REVIEW / March 23 - 29, 2009
accommodate up to 100 delegates for business meetings or social events. Free wireless high-speed Internet access is
available throughout all the hotel’s public areas. Having a beautiful view to the Parliament House and a modern architectural style combined with a loftlike industrial design , Panorama is fit for any type of event: cocktails, product launches, press conferences, symposiums, presentations, trainings, work-shops, cultural exhibitions, TV programs. The modern semicircled construction makes Ronda a perfect place for photo shoots, cultural exhibitions, TV programs, press conferences, cocktails, product launches, symposiums, presentations, trainings, work-shops. If you have in mind a presentation, press conference, a board meeting or a training, work-shop or a limited space event, Belvedere is the right choice. This space with natural day-light offers, in a warm atmosphere, the privacy of the ideal working environment. Last but not least, the top floor Cupola Club offers an unconventional and versatile space, designed for any kind of event. The
Club glitters a glamorous warmth during evening events through its spectacular glass dome and a cozy atmophere due to its built in fireplace. The Golden Tulip Times hotel is also an ideal venue for weddings and special occasions such as an anniversary or a birthday party. For lovers of food and fine dining, the hotel also boasts one of the most fashionable city restaurants - Times and a cozy coffee shop. Times Restaurant has been reffered as one of the best hotel restaurants in the city, due to its carefully created menu and professional team, led by merited Master in Culinary Art Roxana Anghel. „Because we are dedicated to our guests, we do everything in a professional manner. We want you to enhance your opportunities and have a wonderful time. We are the perfect hosts with a positive attitude and guest service oriented”, concludes Mrs. Gandac. For more information on Golden Tulip Times Hotel please visit the website at www.goldentuliptimes.com or telephone 021 316 6518. Also, stay tuned for promotions and special offers at www.timesevents.ro
ADVERTORIAL
Aiming for your event success depends on a few critical issues and one of the most important si obviously the Venue. Find out how one of the leading four starts hotels in Bucharest can offer superior service standards with cost flexibility, for your quest ease... Golden Tulip hotels are among the most modern properties in Bucharest and the Golden Tulip Times Hotel is a prime example. Designed with the business travellers’s needs in mind , the hotel can happily accommodate groups and leisure guests alike, impressing them by excellent standard of services, complemented by a personal touch provided by a careful, pro-active and professional staff. The hotel is located in the heart of the newest and financial center of the city and has open sky views across the Decebal
Bulevard, National Park and the city skyline. Golden Tulip Times is conveniently close to the city centre, which makes it a perfect base for both business visitors and tourists enjoying Bucharest short breaks. Costina Gandac, General Manager of Golden Tulip Times hotel launches a warm and suggestive welcome message for the guests: „Wherever you are in the hotel – she says: in your comfortable room, using one of our conference facilities, sipping a coffee in the coffee shop or indulge yourself with delightful food served by attentive staff in our panoramic view restaurant, you are always surrounded by friends. Our team is focused on our guests providing them a high level of services and a nice hotel experience, whether is a Housekeeper, a Waitperson, a Front Desk staff or an Engineer.” All the hotel's bedrooms are designed to offer a fully equipped and spacious retreat, sparkling bathrooms, have comfortable beds and free wireless high-speed Internet access. Superior and deluxe rooms up to 55 square meters are also available for long stayers who need the comfort of both : a nice bedroom and an efficient office space. For those who seek relaxation or need to turn their business day into a more friendly and casual environment, each Superior and Deluxe room benefit of a „cozy corner”, featuring a sectional sofa, wide screen TV and a generous minibar. Taking advantage of one of the best 4 stars conference venue in Bucharest with natural daylight, the Golden Tulip Times Hotel is ideal for business meetings and seminars. The 9th floor is entirely dedicated to the meeting rooms, which can
9
ANALYSIS By Dana Ciuraru
STOCKEXCHANGE
Investors who have been burned by the stock market collapse are hoping to get their hands on some money via compulsory public offerings
Compulsory public offerings offer minority shareholders chance of consistent returns In the current economic situation, minority shareholders still have the chance to recover their million-euro investments in the stock exchange. A CNVM draft law could make all companies that have owned a 33 percent stake in a firm since January 2007 initiate compulsory public offerings at the share price at the time of takeover. Affected companies include KazMunaiGaz, majority shareholder at Rompetrol, Generali and Sanofi-Aventis. 10
The falls on the local capital market have swept away stock market players’ dreams of high returns on their investments. For minority shareholders in listed companies there is still a chance for consistent revenues this year. Under the current capital market legislation, when any individual or group acquire 33 percent of a company or exceeds a 50 percent stake, a compulsory public offering (OPP) on a two-month term becomes mandatory. The sticking point between the minority and majority shareholders comes when calculating the 33 percent share package. According to the legislation, this calculation includes both direct and indirect possessions. Currently, the National Securities Commission (CNVM) has put on the discussion table a draft law that brings a particular interpretation of the concept of direct holdings. Briefly, “All companies that own more than 33 percent of listed companies, even indirectly, after January 2007 come under the jurisdiction of this new project,” Victor Stanila, CNVM spokesperson, told Business Review. To understand more clearly, let’s take the recent example of the Austrian automotive company Porsche. Through the acquisition of Volkswagen’s majority package, Porsche became the indirect majority shareholder in Scania AB (whose majority shareholder is Volkswagen) and is thus obliged to launch an OPP.
ROMPETROL
REJECTS OPP FOR MINORITY SHAREHOLDERS
One of the businesses that could be affected by the CNVM’s new stipulations is oil giant Rompetrol. Company officials say that the current form of the CNVM project will have a negative impact on the majority and minority stake holders, by changing the functioning rules of the capital market. “The proposed changes will affect the majority companies listed on the Bucharest Stock Exchange (BSE), by forcing the shareholders that own a 33 percent stake to initiate public offerings, according to the CNVM changes, and not the ones that obtain this percentage, according to the European directive adopted by Romanian legislation as well,” said Rompetrol officials. They added that the transaction between Rompetrol Holding and BUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS KazMunaiGaz for the takeover of a 75 percent stake in Rompetrol Group NV was done in 2007 and was approved by all the necessary authorities. “Taking this into consideration, the new majority shareholder of Rompetrol Group cannot be forced to initiate public takeover offerings for Rompetrol Rafinare and Rompetrol Well Services, as this obligation isn’t stipulated in the Romanian legislation,” said Rompetrol representatives. The oil firm’s statement comes after QVT Fund, minority shareholder in Rompetrol Rafinare, last year asked the CNVM to apply the law to all minority shareholders and force the Rompetrol majority shareholder to initiate the OPP. “We haven’t yet had an answer to the request we made to the CNVM. We will have to see what offer price is established, under this new project, and the CNVM will have to submit an individual administrative act in the Rompetrol case. Rompetrol was supposed to have made the public offer in January of last year. If the firm now makes a public takeover offering, the majority shareholder will not pay the interest for this period of time,” said Cristian Dutescu, the lawyer representing QVT Fund.
INVESTOR
ect rapidly nearing, relations between minority and majority shareholders have become tenser. Capital market specialists believe that the negative long-term effects will be overshadowed by the financial benefits on the short term. “If this project is approved in the form proposed by the CNVM, on the short term it will confer advantages, because the mandatory public offerings which should come from the majority stake holders would have to be done at higher prices than those on the market. On the long-
run these new clarifications could have negative effects, because they might lead to exits from the stock exchange,” Andreea Gheorghe, chief analyst with Intercapital Invest, told BR. Property Fund (FP) officials also told BR what the effects of these changes would be for them. “The FP will outline all financial situations, according to capital market rules. We believe that changing recording depreciation in the value of assets on the balance sheet (and not through the profit and loss ac-
count) leads to a real reflection of the assets situation and of the results obtained. These modification will reflect a net profit correlated with operational profit and of course dividend allocation,” said FP officials. Some top companies in the market, like Generali Holding and Sanofi-Aventis have already expressed their intention to comply with the European directive and domestic regulations after the Ardaf and Sicomed takeovers. It is a first step on the road to a solution. dana.ciuraru@bmg.ro
REACTION
The Capital Market Investors’ Association (AIPC) said that the CNVM’s clarifications were just a late attempt to fix the legislation. “The purpose of the European directive is to enable minority shareholders to withdraw from a company at the same price at which the acquisition of the 33 percent stake was made by another shareholder,” Dumitru Beze, president of the AIPC, told BR. According to him, the CNVM’s obligation is to fine any majority shareholders who refuse to initiate the OPP with up to 5 percent of the share capital and to summon them to place these offers. But why have majority shareholders not initiated OPPs by now, and why hasn’t the CNVM intervened? “The stock exchange was riding the wave. Investors didn’t complain very much because they could have obtained a much better price from the market than from the OPP and some of them would not have even sold. Despite this, the law hasn’t been applied and this is a fact,” said Beze.
EFFECTS
ON THE MARKET
With the March 26 deadline for submitting observations on this projBUSINESS REVIEW / March 23 - 29, 2009
11
ANALYSIS By Corina Saceanu
STOCKEXCHANGE
Although the real estate market is downsizing, players expect it to become the economy engine again
Real estate shrinks but still thinks big The shrinking investment volumes on the local real estate market, decreasing number of projects still on track for delivery, and small volumes of investments put forward by those who still want to invest in Romanian properties, all point to a real estate market downsize. Is local real estate becoming a niche business? 12
The lack of new money and the losses posted by foreign investors on other markets have triggered a drop in the number of ongoing projects, slashed the number of active developers and will eventually lead to a forced flight to professionalism for the industry. “In other words, fewer people doing fewer things but in a professional way. Basically, a niche market,” says Muler Onofrei, country manager at Goodman. Return margins will drop on average, and those who invest will have to think long term, but the fact that the real estate market responds to a basic need means it does not risk becoming marginal. “It is not the end of an era, it is just the beginning of a new cycle,” says Francisc Peli, partner with PeliFilip law firm. “Everybody is struggling not to make a loss, and to keep feasible projects running. It is definitely not a fabulous time to sell, so margins are more or less a remote subject,” says Peli. Others take the same tone. “It is doubtful that real estate will become a niche business in Romania. Romania continues to be undersupplied in quality modern commercial and residential stock. While demand has slowed, it should improve when economic growth returns,” agrees Charles Krick, managing director with Jones Lang LaSalle Romania. “What will change is the public perception of real estate. In recent years many market participants believed real estate was a path to quick riches given the relative ease of success during the real estate bubble period. No longer is this the case,” Krick explains. Even if the real estate market does not become a niche, it will continue to see some shrinkage, which will make it a smaller pond than the sectors in which the little money there is left is pouring into nowadays, like renewable energy, for example. Investments in Romanian real estate have significantly dropped from the previous years. “One could say that at this moment, the level of investments barely reaches 10 percent compared to the previous years,” says Eran Kremer, shareholder in Anteea Estate. Other players also foresee a continuing decline, but not to the extent of becoming a niche market. “Real estate will not become a niche business in Romania. I would describe it as complicated, not something for anyone who doesn't have anything else to do,” says Ilias Papageorgiadis, CEO of More International Invest real estate brokerage firm.
He believes the real estate market in Romania will stay below EUR 10 billion, with the average price per transaction dropping by 30 to 50 percent compared to last year. The volume of real estate transactions in 2007 was four times the level in 2004, followed by 2008 at only two times the 2004 level, while 2009 will be the first year with transactions at 50 to 70 percent of the 2004 threshold, according to Papageorgiadis. Most of the investments this year will be opportunistic, and the market will once again be dominated by foreign investors, believe market players. “The foreign investors who will come will be those who need to recover some of the losses from neighboring countries, where the market has collapsed,” says Eran Kremer. Opportunistic funds have already expressed interest in the Romanian market, looking for distressed sellers, or properties whose prices have been slashed after they previously failed to sell, explains Dan Ionascu, head of valuations with Cushman & Wakefield in Romania. But Romania as a real estate investment target now faces competition from more mature, Western markets. “The increasing globalisation and transparency of real estate investment means that many investors can now easily compare the fundamentals of a Bucharest office building to an office building in Paris for example. So until real estate in Romania offers significantly better return potential or other significant advantages, many investors will focus on other markets,” explains Charles Krick of JLL. The number of foreign investors checking the market will be down by up to 80 percent on last year, as in 2008 there were thousands of “window shoppers” or serious investors who got scared by the asking prices, says Ilias Papageorgiadis. But he thinks that the number of foreign investors who finally invest in Romanian real estate this year could be even higher than in 2008, when the level of investments was low anyway. Currently investors are looking at income properties, agricultural land and land suited to energy projects, unfinished projects with potential and apartments, he says. There are several retailers investing as well, that now enjoy lower pricing. Foreign investments in real estate have made up the majority of investment volumes in recent years. “Given the pullback in foreign capital, there is a possibility that some local investors may step forward and fill some of this gap in 2009. However there is limited BUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS
COURTESY OF MORE
COURTESY OF ANTEEA
COURTESY OF GOODMAN
COURTESY OF JLL
Charles Krick, managing director of JLL
Muler Onofrei, country manager at Goodman
Eran Kremer, shareholder in Anteea Estate
Ilias Papageorgiadis, More International Invest
financial capacity from local investors so I don't see a huge change in the ratio,” says Charles Krick. Foreign investments will remain important, but the way Romanian capital works will change. “Locals were usually involved in development, and ended up selling projects to foreigners. This will change. Local investors which used to build average quality buildings and get top prices will have to think of building top quality and think long term, keep the buildings for a while. The idea of an exit will be a rarity for some time,” says Muler Onofrei. The
local-to-foreign investment ratio will not change much, but in absolute terms, there will be less money invested in real estate, he says. The Romanian market, which has grown more in the last three years than Western markets in the last ten, says Dan Ionascu, has been fueled by foreign investments, either equity or debt from foreign banks. “Those who lead the market are foreign investors, and local ones usually follow suit timidly,” he believes. Profit margins on real estate investments in general are also expected to go down, although opportunistic deals may
enjoy higher margins than in the previous years. “On the residential segment, where margins could reach 75 percent in previous years, we will see 10 to 30 percent maximum,” says Eran Kremer. On a shrinking market, with stalled or frozen projects, any profit, however small, is still good news. “Profit margins could even exceed those of the previous years in some cases, based on opportunities,” says Ionascu of Cushman & Wakefield. Papageorgiadis agrees. “What I can tell you for sure is that those who invest in 2009 will probably have double the
profit margin of the ones who invested in 2008, as it is not so easy anymore for someone to invest all around the world nowadays,” he says. Final investors asking for double digit yields will prompt developers to settle for lower profits, and in some cases even make a loss, says Muler Onofrei. But in the post-crisis world, real estate will again become the steam engine of the Romanian economy, as the demand exists and it has great potential, when many major mistakes are corrected, Papageorgiadis concludes. corina_saceanu@bmg.ro
BUSINESS REVIEW / March 23 - 29, 2009
13
INTERVIEW value to our customers, as we all pass through a difficult period economically speaking. By value, we mean providing our customers with bestin-class services at very affordable prices. Moreover, the community support provided through the Vodafone Romania Foundation is one of our constant priorities, this year too. Vodafone has announced it will make layoffs. Will the company do so in Romania as well? For the time being, we do not plan to restructure personnel at Vodafone Romania. We currently have around 3,000 employees.
LAURENTIU OBAE
Vodafone plans to develop network and mobile broadband services Vodafone Romania has decided to ride the wave of mobile data service growth this year, as have most market players. The firm has no plans to lay off personnel locally, at least not yet, says CEO LILIANA SOLOMON. In Q4 of 2008, Vodafone posted a 1 percent growth in service revenues, compared to a 19 percent growth for the same period in 2007. It added almost 730,000 new customers in 2008 to surpass 9.6 million by the end of December, making it the second largest operator on the market. By Otilia Haraga
What investment plans does Vodafone Romania have for 2009? We will continue to invest in network development and mobile broadband service enhancement, this year, too, in order to ensure our future growth. What will be the main directions 14
of investment this year for the company? In 2009, we will focus on products and services that still have significant growth potential, such as mobile data services. We are already very strong on mobile broadband through the quality of our services and the network capabilities, having the most extensive network coverage at 7.2 Mbps, in Romania. Our focus is to bring additional
You previously said you may have to bring under the company’s umbrella some activities that you outsourced in the past. What are these activities? Our priority has always been operational efficiency across the company and the intelligent use of resources. These are areas that a company should focus on anytime, not only in a crisis period. Now, it is crucial, more than ever, for any company to generate a cash-flow enabling further financing of the investments and future growth. The strategy we've followed over the last few years offered us an important competitive advantage, especially in the current economic context. As I previously said, we are working with several scenarios and we are continuously adapting our strategy to market conditions. If we are convinced that we can increase efficiency, given the economic situation, we might actually bring back within the company some of the activities outsourced in the past. How many customers do you expect to have at the end of 2009? What do you estimate will be the evolution of your ARPU in 2009? We usually do not make any forward looking statements regarding the number of customers or other key performance indicators. The Romanian telecommunications market is highly competitive and if the tariffs continue to erode it is very likely we could see a lower ARPU across the industry. How much do revenues from data amount to and how much do they represent in the total revenues of Vodafone Romania? How much do you expect this ratio to grow this year? An important part of our revenues
comes from mobile data services and we expect this percentage to grow as we see a constant increase in mobile broadband usage and penetration. How many stores does Vodafone Romania have at the moment and how many retail partners? Do you plan to open new stores this year or expand your partner network? We currently have 226 stores all over the country, plus a few hundred stores of our dealers who sell Vodafone products and services, as well as hundreds of selling points for prepaid cards. This year, we will continue to develop our distribution network, depending on the market opportunities and our expansion needs in certain regions of the country. Vodafone Romania registered only 1 percent growth in revenue from services in the third fiscal quarter of 2008. Why this small growth? We believe that any growth level is satisfying during an economic global crisis, the more so as we are in a mature and highly competitive market when organic growth becomes hard to get anyway. Therefore, the 1 percent growth in our service revenues reflects a good performance by our company. Moreover, if you relate this growth level to our total revenues, which exceed EUR 1 billion, the result is very good. It is simple mathematics, that's why small operators might report higher growth levels, which certainly sound great, but they have a smaller year-on-year basis. Have you been affected by the financial crisis in any way? How much did you lose from the volatility of the currency exchange? There is no industry immune to the crisis, that’s for sure. The most important thing is how one can manage and/or reduce the impact of the crisis upon the business. We are in the fortunate position of having focused on operational efficiency for years so that our strategy is better adapted to the current situation. What is your position regarding the ANC’s decision to start the public bidding for the WiMax licenses at EUR 1 million? This is just a proposal by the ANC. To become a decision, it has to be approved by the government, along with a new bid methodology and a new price for the license. ■ BUSINESS REVIEW / March 23 - 29, 2009
Estates&Construction
MARKET
MARCH 23 - 29, 2009 / VOLUME 14, NUMBER 10
BUSINESS REVIEW FORUM
Manage your business environment !
S+P Gruppe continues EUR 200 mln of local projects without Immoeast, may delay retail
LAURENTIU OBAE
The Austrian developer is working on revamping an office and retail building on Magheru Boulevard in Bucharest
Austrian real estate developer S+P Gruppe, which recently bought Immoeast's share in their regional joint projects, wants to develop all projects planned for Romania within the coming years, although it may delay the retail projects for one year. “We believe that the time is right to invest because construction costs are decreasing and we follow the strategy of anti-cycle investments,” Reinhard Schertler, managing director of S+B Gruppe and one of the shareholders in the company, told Business Review. “All of our Romanian projects are 100 percent in our private ownership. No fund or stock exchange-listed companies are shareholders. We will develop all of these projects, with Pipera Business Tower and Magheru Boulevard currently under con-
struction, within the coming years,” he said. The firm has so far invested EUR 60 million in Romania, and plans to up the figure to EUR 200 million in the next four years. “We believe in the Romanian economy and the comeback of the real estate markets in 2010,” added Schertler. Pipera Business Tower, one of the firm's local office projects, will deliver 13,300 sqm of office space upon completion, scheduled in Q2 of 2009, according to the company. Another office building, 25,000-sqm Airport City Park, was supposed to start this year and be completed in 2011. Magheru Boulevard office and commercial building, under construction, was supposed to be finished this year, delivering 4,000 sqm of space. As for retail, the developer was plan-
ning a shopping center in Sibiu, with offices, a hotel and some apartments too, all on 68,000 sqm. According to previous announcements, the project should have started this year too. Four Stop Shop projects in Oradea, Satu Mare, Targu Mures and Arad were also listed among S+B Gruppe's projects in Romania. Immoeast has started to sell off some of its assets across the region, and reported at end-2008 a portfolio of 80 projects in Romania worth some EUR 1 billion, compared to 135 properties of EUR 3.4 billion in total mid-last year. Regionally, it has canceled 51 projects and delayed 29. The fund, listed on the Vienna and Warsaw stock exchanges, saw its share value drop by as much as 90 percent last year. Corina Saceanu
ESTATES & CONSTRUCTION MARKET
C&A signs Cotroceni Park lease for second store in Bucharest
LAURENTIU OBAE
Cotroceni Park will host the third local C&A store
AFI Cotroceni Park Mega Mall in Bucharest has enlarged its tenant portfolio with two more international brands, C&A, part of Swiss group Cofra, and the first entry on the local market of Bestseller Group, which will bring such names as Vero Moda, Jack & Jones, Name IT and Pieces, according to Cushman & Wakefield. C&A has rented a two-level flagship-type space of 3,200 sqm while Bestseller Group took 600 sqm.
Holcim stops further investments, continues with EUR 33 million Campulung project
C&A recently rented a 1,500sqm space in Cometex’s Aurora Shopping Mall Buzau. The retailer will open its first Romanian store at the beginning of April within Militari Shopping Park. In February, Mango and the Spanish group Inditex, the owner of Zara, also signed rental contracts within AFI Cotroceni Park Mega Mall, which is set to open in the last semester of 2009, according to the company. AFI Cotroceni Park, an estimated EUR 300 million investment from AFI Europe, will deliver a built area of 210,000 sqm and a GLA of 75,000 sqm according to the project plan. The commercial gallery comprises 250 retail units, a Real hypermarket and underground and deck parking space for 2,500 vehicles. AFI Europe is part of Africa Israel Investments Group, owned by Israeli Lev Leviev, which runs commercial real estate projects in Eastern Europe. Magda Purice
Eggo Fashion Party, an event for promoting young artists sponsored by Be Igloo
The Romanian arm of Swiss group Holcim has said it will not assign any more money to production station investments in 2009, due to an estimated market decrease of 10 percent this year. According to Holcim Romania’s general manager, Markus Wirth, the firm will see a drop of an average of 10 percent in turnover in 2009, after making EUR 372 million in 2008, 25 percent more than in 2007. From the total, EUR 273 million came from the cement division, EUR 70 million from ready-mix concrete while the rest came from aggregates, according to company representatives. “The worst possible scenario may be a drop of 20 percent in our turnover in 2009, while the best results would mean a steady turnover compared with 2008,” said Wirth. According to the GM, the company has not given up on operations
and results from real estate contracts but, if the market doesn’t unfreeze soon, Holcim thinks the infrastructure projects will deliver contracts for the company. “It is not that I’m relying on infrastructure contracts for this year, but the country greatly needs these projects and there are available European and structural funds for such projects,” Wirth told BR. One of the largest involving Holcim is the Bechtel Transylvania highway project. This year, the firms plans to assign only the EUR 33 million already scheduled to carrying on its Campulung Muscel project. Holcim has a network of 20 concrete stations countrywide of which seven in northern Romania produce at low capacity while two in Bucharest built in 2008 remain out of use. Magda Purice
Bank notifies Equest of loan contract breach for Moldova Mall Bank Austria Creditanstalt has notified Equest Balkan Properties (EBP) of a breach of conditions in the loan contract for the Iasi-based commercial center Moldova Mall. The loan was contracted by the firm in 2006. According to the investment fund, the breach is not expected to impact EBP's other assets or borrowing. Following the notification, Rivium Galeria Mall, the vehicle through which Equest owns the shopping center, and the bank engaged in discussions. EBP says it is not aware of any other pending breaches of financial conditions by EBP or any other subsidiary.
According to EBP, Moldova Mall represents 4 percent of EBP’s net assets value. In 2006, EBP’s subsidiary took out a refinance loan of EUR 81.12 million and used warranties such as Moldova Mall and City Center Sofia Mall, which was sold for EUR 101.5 million to Heitman European Property Partners III in 2008. In Romania, Equest is involved in several projects such as Vitantis Retail Park, acquired in 2006 for EUR 31.2 million. A year later, the fund contracted financing of EUR 37.8 million from the Austrian bank Creditanstalt in order to complete the development. ■
Castrum Grup to complete EUR 33 mln complex
16
Igloo, the sales organisation of Norwegian fund of investments will sustain, long term, the promotion and the development of the Romanian young artists. The show contains a presentation of photographic art by Bogdan Dinica, a jazz recital sustained by Ladislau Mircea Horvath, a fashion show by Denis Predescu on a live soundtrack offered by Drum Up band, a stile show and a concert of Alin Pascal band. ADVERTORIAL
Friday, March 20th, in Club Pat the PR&Advertising Diana Metiu International Agency, beside Eggo Creative Shop and the main sponsor, Be Igloo, had organised a cultural, trendy, high life event: Eggo Fashion Party. The event belongs to an ample concept called Eggo Creative Collection in which important names of the Romanian show-biz will guarantee for the talent of young artists in a first class show. Finally, the creations of 150 artists will be published in a register. By the series of events rejoined on this name, the main sponsor, Be
The privately-held Romanian Castrum Grup is about to complete a EUR 33 million investment in its Bucharest-based Castrum Complex project, an A-type six-floor office building and four-star aparthotel with 11 levels, according to CBRE Eurisko. The turnkey delivery is expected to happen in H2 of 2009 for the office building, while the aparthotel will be ready to open in Q4 of 2009 in the Victoriei Square area. Of the investment, the developer secured EUR 16.8 million from the Romanian Commercial Bank (BCR) according to its representatives. Castrum Complex covers
21,431 sqm, of which the aparthotel occupies 10,300 sqm and the office construction 3,555 sqm, according to the project draft. There are 170 parking spaces on a built area of 7,580 sqm. Victoriei Square and its adjacent locations host several office buildings, of which the best known are America House and Europe House, both developed and subsequently sold by developer Globe Trade Center (GTC). The area hosts HQs of top companies such as BRD, Orange, Microsoft, Oracle, HP, CBRE, Cosmote, Rompetrol and Edipresse. Magda Purice BUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS
LAURENTIU OBAE
Most of the investors on the local stock market have become short-term speculators
After the 2008 storm, investors mark short-term profits on local stock market Blue chips selling at low, but still decreasing, prices and certain companies posting share price increases have attracted buyers to the Bucharest Stock Exchange since the beginning of the year, but last year's investors have become speculators marking short-term profits. The word of the day is caution, but brokers believe the past falls on the stock market have already absorbed the negative economic shocks. They also see hope in companies with attractive dividend policies. By Corina Saceanu
18
share price dropped by 39.3 percent. Similarly, Petrom covered 10.6 percent of the market trading, with its share price dropping by almost 21 percent. “The current prices are very attractive, but nobody knows whether they will become more attractive, meaning continue dropping,” Razvan Pasol, general manager of Intercapital Invest, tells Business Review. The mentioned increases were determined by specific issues which affected only certain issuers, like the Romanian National Securities Commission (CNVM) discussions on indirect takeover or announcements of very good dividends, Pasol adds.
LONG-TERM
INVESTORS BECOME SHORT-TERM SPECULATORS, INSIDERS MAKE THEIR MOVES
After seeing all traded companies on the BSE dropping in price last year, even those which had posted encouraging financial results and which in other circumstances would have triggered trading, investors have switched to caution. “Having lost a lot of money, or witnessed big drops in price if they sold on time, investors are now more cautious. The market is dominated by short-term speculators, while everybody is waiting for a clearer signal on economic development and from international markets to start making long-term investment decisions,” says Pasol of Intercapital Invest. Last year, the stock market enjoyed mass participation, and specu-
Biggest share price increases on the Bucharest Stock Exchange Company Zentiva SA Alumil Rom Industry Bucuresti Rompetrol Rafinare Constanta VES SA Sighisoara Flamingo International Bucuresti Santierul Naval Orsova Antibiotice Iasi Rompetrol Well Services Oltchim Rm. Valcea Vae Apcarom Buzau Electroputere Craiova
Price increase 60.52% 47.83% 35.68% 34.69% 25.00% 22.67% 11.11% 5.67% 4.29% 2.27% 1.39%
BUSINESS REVIEW
After a low year culminating with the October drop on the Bucharest Stock Exchange, the trading on the BSE since the beginning of the year shows what investors have learned from last year's losses. Buyers have become cautious and
gone from medium- and long-term policies to short-term speculation, not knowing what to expect from the market from one day to another and marking every profit. Buyers have gone for SIFs, BRD, Banca Transilvania and Petrom, among others, which have been among the most traded shares since
the beginning of the year. The BSE capitalization reached EUR 7.9 billion as of March 19, from EUR 11.6 billion throughout the entire 2008. More companies saw their share price grow during this period than in the same period in 2008. Only four companies were enjoying increases then, with the biggest increase posted by Zimtub Zimnicea, at 26 percent. But since the beginning of this year, 12 companies have seen their share price growing, the highest increase coming from Zentiva, up 60 percent. The price increases for these companies, including Rompetrol Rafinare Constanta (up 46 percent), Alumil Rom Industry Bucuresti (47.8 percent) and VES SA Timisoara (34.6 percent), were however triggered by specific reasons, and did not reflect a market trend. “With Rompetrol and Zentiva, the increases were to a large extent influenced by the possibility of a takeover offer. In the case of VES SA, the increases were sustained by insiders, because the company is priced very low and therefore becomes attractive to those who have a long-term interest in it. Alumil also had a huge drop and buyers were attracted by the low price, below half of the nominal price,” Silviu Enache, general manager of KD Capital Management, tells BR. For example, VES SA Sighisoara, a company which produces cooking pots, stoves and fireplaces, has seen 1.7 million shares traded on the BSE since the beginning of the year, with the company's economic director Calin Stupariu buying 464,000 of them. In Rompetrol's case, the price increase was also caused by the expectation of oil price increases, which would have positively impacted on the refinery business, explains Nicolae Pascu, president of STK Financial. Claudiu Simulescu, the general manager of Fairwind brokerage company, believes the price increases for some of the companies were due to the hope of a possible de-listing. These companies saw the biggest share increases, but the bulk of the trading was somewhere else. Buyers were more attracted by cheaper bluechips, like BRD, the SIFs and Banca Transilvania, but these companies have seen share price falls since the beginning of the year. For example, BRD Societe Generale's trading on the BSE has made up 12.7 percent of the total trading since the begging of the year, but its
These are the only currently traded companies which have seen their share price increasing since the beginning of the year; the data reflects the situation as of March 19 BUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS
COURTESY OF KD CAPITAL MANAGEMENT
LAURENTIU OBAE
COURTESY OF STK FINANCIAL
COURTESY OF FAIRWIND
Claudiu Simulescu, general manager of Fairwind Securities
Nicolae Pascu, president of STK Financial
Razvan Pasol, general manager of Intercapital Invest
Silviu Enache, general manager of KD Capital Management
lators sought to benefit from an increasing trend. “But now the stock market is exclusively the territory of insiders, meaning those who always gain,” says Pascu of STK Financial. He believes that although there have been fewer buyers on the market since the beginning of the year compared to the same period of last year, they are trying to accumulate in order to gain on the long term, considering the obvious undervaluation of shares at the moment. For example, nine insiders with either management positions or members of the administration council have bought and sold small share packages in BRD Societe Generale, while Societe Generale has bought bulks of shares in the bank since the beginning of this year. “Those buyers who were medium- and long-term investors last year have become speculators. Each short-term profit is marked due to the market uncertainty,” says Enache of KD Capital Management. “Those with cash, experience and patience will definitely make profitable investments on the medium and long term,” he goes on. Claudiu Simulescu of Fairwind Securities also thinks the market is made up of speculators, and he also sees small residents as active buyers on the market. “But the market is almost nonexistent, with a huge imbal-
ance between supply and demand,” Simulescu tells BR. The local stock market is already a year and a half beyond the peak of its indexes, and trading values are comparable to those posted several years ago, according to Razvan Pasol. The BET index, which reflects the trading of the most liquid shares, was down by 26 percent since the beginning of the year, after dropping by 70 percent last year calculated in RON. In the March 18 trading session, Santierul Naval Constanta posted the biggest share price increase, of 58.2 percent, while Zentiva grew by 14.7 percent on the previous day, and Flamingo International further increased by 7.14 percent. In terms of the number of transactions, BRD was on top with 472, followed by SIF Moldova and Petrom, with 432 and 416 respectively. Judged by values, the same trading session saw SIF Oltenia posting the biggest value of trading, RON 1.9 million, followed by Banca Transilvania and BRD, both with trading values of around RON 1.5 million. After a promising January came a drop in liquidity in February, followed by another start of an increase at the beginning of March on the BSE. “Now we are seeing a rally which still needs to reveal whether it
is sustainable, that's something as yet unclear. In any case, buyers are excessively cautious, which is something justified by the negative events last year, especially those from October, which won't be forgotten very easily,” says Silviu Enache of KTD.
lowed by one of an accumulation of shares, which will be reflected in the lack of a clear pricing trend, or by a period of high volatility, according to him. “In such periods, the only efficient option is in general the prudent one, possibly accompanied by small speculations,” he also says. Simulescu of Fairwind sees solutions for the Romanian market in the possibility of introducing trading group accounts and in the public listing of state-owned companies. corina_saceanu@bmg.ro
Most liquid shares on the Bucharest Stock Exchange Price variation
Liquidity
Share of total trading
Banca Transilvania BRD Societe Generale Petrom SIF Oltenia SIF Moldova
-74.62% -39.39% -20.99% -31.62% -35.66%
91.5 mln RON 62.2 mln RON 52.4 mln RON 37.3 mln RON 34 mln RON
18.67% 12.70% 10.69% 7.62% 6.95%
BUSINESS REVIEW
Company
All the top five traded shares saw their trading prices going down since the last trading session of last year; data reflects the situation as of March 19 BUSINESS REVIEW / March 23 - 29, 2009
PAST
DROP ABSORBS FUTURE NEGATIVE IMPACT
The future macroeconomic evolution will most likely be negative, but “the stock market dropped by up to 90 percent, and this drop absorbed all the future negative evolutions,” explains Nicolae Pascu. “On the other hand, the Western capital markets are on the verge of switching trends, and their positive evolution is likely to have a positive effect on the Romanian one too, which was similar to how they negatively influenced the local market when the Romanian macroeconomic situation was still positive,” Pascu goes on. Enache expects the capital market to mirror the first signs of economic improvement. “The decreases we have seen have anticipated the weak economic performances expected in 2009 and even in 2010,” he said. As for what's in store for trading, Enache believes the market will see interesting evolutions for the companies which will run an attracting dividend policy. “It is possible that for certain companies, the value of the dividend compared to the share price will be higher than the interest offered by banks, which makes the investment even more attractive,” the KD Management representative says. Razvan Pasol however thinks investors need to follow a prudent policy, limiting their exposure on shares and placing their money into fixed revenue instruments, “because the period of decreases could last longer.” This period could be fol-
Trading with Flamingo International shares é IT&C retailer Flamingo Interna-
tional has been subject to a series of accumulation purchases since the beginning of the year. The company's shares, up 25 percent since the start of 2009, were among the most liquid on the market, with a value of RON 7.4 million by March 18. Trading with Flamingo shares led to changes in the structure of the firm's shareholders, with Romanian businessman Dan Adamescu reaching a 17.45 percent stake in the firm through his companies Astra Asigurari and Nova Trade. Recently, Ion Alexandru Tiriac bought a 5.13 percent stake in the firm. é The other shareholders in the firm are Dragos Cinca, QVR Fund and Flanco Holding. é Flamingo, priced RON 0.03 per share on March 18, saw its share price up 9.6 percent from the beginning of March. The firm posted a EUR 10 million loss last year, and a 16 percent increase in turnover, to EUR 203 million.
19
ANALYSIS By Dana Ciuraru
MEDIAFAX
No deal: the number of bilateral contracts inked by energy firms is down to zero this year
Energy companies pass on bilateral contracts The current economic situation is leaving its mark on the bilateral contracts energy market overseen by OPCOM, with none inked since the beginning of the year. Up until now only Electrica and Rovinari Energy Complex have made offers on this market, but they were annulled due to warranties issues. OPCOM officials told Business Review that the two main effects of the economic climate on the market were an increase in short-term trading and lower energy prices. 20
The bilateral contracts market (PCCN) of the Romanian power market operator OPCOM hasn’t been as unattractive to energy companies since it was created. While in the first two months of last year 11 energy sales contracts were signed, sealed and delivered, now the PCCB has not signed a single one. Just two energy sale offers have been registered, one from Rovinari Energy Complex and one buying offer from Electrica. According to OPCOM, these offers were annulled because the companies did not present any warranties. In fact, all three OPCOM markets, the spot PCCB and forward contracts market PCCB-NC are reporting changes in the current economic climate. “Participants’ behavior on all three markets is coherent. The watchword is short-term energy trading. Dedicated to large and long-term volumes, the bilateral contracts market reported intensive activity in the last quarter of the year. On the forward contracts market there were offers even in February and March, while last year we didn’t have any trading. The interest in this type of contract this year is because the participants have become interested in short-term trading, as consumption diminishes. On the spot market (PZU), the transaction volume is constant, but the energy price is dropping, a trend also registered by the European energy market operators,” Lucian Palade, director of the electricity market surveillance and development division with OPCOM, told Business Review. In his opinion a series of trends has been generated by the crisis. “The current economic situation is reflected in OPCOM trading in an orientation of market players towards short-term trade: we have registered an increase in PZU trading and the companies have expressed early (since February) their interest in forwards contracts. Of course, the current economic situation also lowers the energy price,” said Palade. The numbers confirm what is happening on the PCCB. In February this year, 866 MW/h was traded at an average price of EUR 48.19 per MW/h, with transactions carried out particularly in Q4 2008 (77 percent). These transactions represent a 19.55 percent share of the estimated consumption for this month. Compared to the previous month of delivery, the number of contracts stood at 77. Up until now, the BUSINESS REVIEW / March 23 - 29, 2009
ANALYSIS
COURTESY OF OPCOM
OPCOM’s trading table is likely to have a few more empty seats this year as the deals dry up
share volume traded for delivery this year represents 20.48 percent of the total consumption estimated for this year.
SPOT MARKET GENERATES THE MOST TRADING With a traded volume of 454,405 MW/h, February became the third consecutive month in which spot transactions have exceeded 10 percent of the forecasted domestic energy consumption. “The average volume traded remained constant in February this year, from 678 MW/h registered in the same period of last year. This means that the spot market share reached 10.47 percent, compared with 9.75 percent in February 2008. We forecast a 10 percent cut in energy consumption last month compared with February 2008,” said Palade. According to OPCOM information, the average price dropped to EUR 32.02 per MW/h, a 40 percent decrease from last year’s results. The OPCOM official believes that the market price has fluctuated convergently. “Unlike 2006, in 2007 and last year the PZU regression was almost identical to the trend reported by the bilateral contracts market. In January and February the levels were much lower than those registered last year,” said Palade.
EUROPE’S
BARGAIN ENERGY
In the past few years there have been discussions on some significant discrepancies between the electricity prices from the energy market operator and those from those signed directly between certain partners. Energy traded on the local market is still at low levels compared with other countries in Europe. “With an average price of EUR BUSINESS REVIEW / March 23 - 29, 2009
32.02 per MW/h, the PZU is for the third consecutive month close to the lowest average spot price among European energy market operators. In February this year the average price on spot markets in Europe fluctuated between EUR 32 per MW/h and EUR 77 MW/h, with an average price of EUR 46.32 per MW/h,” said Palade. In his opinion, the current economic climate will continue to keep the average energy prices traded at low levels compared with other European countries for a while.
REGIONAL
GOALS
It is some years now since OPCOM expressed its goal to become a regional player among the energy market operators. The first step has been taken. “The contract with the Hungarian energy market operator has already been negotiated and will be signed after the license is received, which should happen very soon. We estimate that in Q1 2010, OPCOM will qualify and will be able to unite the energy markets,” said Palade. According to him, both in Bulgaria and Serbia there are ongoing auctions for projects that include the opportunity to set up energy market operators in these countries. “If the outcome of this analysis is positive, this will be an opportunity for OPCOM to offer our services as we did in Hungary. Such an integration of the energy market operators would be done through the OPCOM trading platform and by using common rules,” said the official. It remains to be seen what the results of the cooperation with the Hungarian energy market operator will be and whether OPCOM will prove itself a reliable partner in a market where there is tough competition. dana.ciuraru@bmg.ro 21
FEATURE both technical and commercial, has changed and needs recalculation. Moreover, this changing process is ongoing and everything related to costs and income has become volatile,” said Nistor. The manager also points to the more and more unrealistic prognoses which, besides the general economic unsteadiness, results in caution.
ALMOST COMPLETED DEAL WITH EUROPOLIS, FURTHER PLANS FOR SEMA PARC
COURTESY OF RVER INVEST
Sorin Nistor of River Invest is one of the many people now taking a prudent approach to investing
Sema Parc proceeds with caution Caution seems to be the attitude of investors, especially real estate players. River Invest, the company developing multifunctional Sema Parc in west Bucharest, is no different, but its estimated completion by 2018 could buy some more time, facilitating a clearer direction. Sorin Nistor, director of strategy and business development at River Invest, clarifies for Business Review the distinction between the industrial compound Sema Parc of the
Sema Parc, the current mixed-use designed project, represents an update of the initial project drafted three years ago, when the master plan was drawn up. Nistor says that the basic principles of this project remain unaltered, but components have changed in the meantime, such as the redesign of space, developments and commercial performances. In 2008, Ion Radulea, the businessman who owns River Invest, announced he had abandoned the idea of building a mall in Sema Parc, saying that Bucharest already had too many malls. Instead, the mall was to be replaced by a commercial area as the main anchor of the entire park. “Initially, the project considered a traditional mall built as a single construction. Now, the project targets a shopping village-type commercial area which will look like a group of urban buildings, to host commercial galleries, entertainment and green areas,” Nistor says. Currently, the company is rethinking the business pattern of the development to suit the new economic background, according to representatives. This translates into a segmented budget for each component within the park – commercial, residential, office, four-star hotel – of which, Nistor stresses, bank financing plays the main role. “The segment which has evolved so far and is subject to a potential financing contract comprises a group of four office buildings similar to the already de-
Sema Parc in figures
former Semanatoarea plant and the real estate project of the same name.
Every statement by an investor or a company developing anything nowadays includes terms like crisis, waiting, caution, no further planning, and strategy conversion. The plans optimistically drafted no more than one year ago have been frozen or even canceled. Sorin Nistor likes the word “caution” when 22
describing his company’s plans for its largest project, Sema Parc, and clarifies the general attitude to a project scheduled piece by piece with segmented budgets for each development stage. “The overall uncertainty of the economic environment calls for prudence, which is a very important condition for any company planning complex projects on the long term, especially in real estate. All the entry data for a project,
Overall built area
964,826 sqm
Underground space area
400,000 sqm
Parking spaces
14,000
Residential area
305,200 sqm
Commercial and entertainment area
93,500 sqm
Business park
526,800 sqm
Four-star hotel
21,300 sqm
Services, infrastructure
18,000 sqm
SOURCE: RIVER INVEST, SEMA PARC PLANNING BY AREAS
By Magda Purice
livered two. We are still in talks with several banks,” Nistor said. Plans for 2009 including revamping the former industrial platform and a project of another four office spaces and residential compound. What has been nailed so far is the transaction between Austrian fund Europolis and River Invest following the fund’s purchase of the two completed office buildings delivering 43,000 sqm of the park’s first development stage. The forward-purchasing contract was signed in 2006 and the fund will soon pay the outstanding amount of a total deal estimated at more than EUR 100 million for the A-type office buildings totaling 80,000 sqm, of which 80,000 sqm is rentable area. The two-office building compound hosts tenants such as Zapp/Telemobil, British American Tobacco, Enel Romania, Tiriac Leasing, UPC and CMU. The Sema Parc development, which was estimated to attract investments of EUR 1.3 billion, has nothing to do with the industrial compound Sema Parc, Nistor points out. “The industrial park was a temporary solution to use the existing industrial spaces of Semanatoarea but the new real estate development is different. According to the plans, the current Sema Parc project on 42 hectares will gradually replace the former industrial constructions and shrink the existing park. At the start, the company will play safe and build the office component, which will join the later developments of the retail and residential segments. By the time of completion, Sema Parc is estimated to host around 100,000 people living and working within the developments. It is not a project to be sold, at least not for the time being, the company representative stresses with vehemence. “It won’t be sold – of that there is no doubt. Any sale deal in this stormy economic weather, when all the things are unstable, would be a mistake. There have been different purchasing demands coming from investors for components of the park.” ■
By completion time, about 100,000 people will live and work within Sema Parc BUSINESS REVIEW / March 23 - 29, 2009
RESTAURANT REVIEW
Paparazzi BD AVIATORILOR 31, TEL 021 222 6422 t’s a strange name for a restaurant. When you think about it, the paparazzi are a breed of intrusive spies who are loathed by right thinking members of society. So why on earth name your restaurant after a bunch of mud sucking, bottom crawling, social pond life? But in keeping with the theme of the name, they have adorned the walls of the restaurant with old black and white photographs of movie people from the 1950s and 60s. It has a pleasing effect, and it is comforting to nostalgically browse through the pictures. And in fairness, the restaurant itself has a comfortable feel about it. It is small with low ceilings lending a cozy feel to it. Ideal for lovers. So we dived into the wine list, which was comprehensive, but expensive. We chose two glasses of house wine which was a little steep at RON 24. But we were there to eat, so let’s look the menu over! I was there on the recommendation of a friend, whose good taste I trusted. But he omitted to tell me just how small and limited the menu was. It was slanted in a Mediterranean fashion with a leaning towards Italy. There was a choice of four salads and we chose a goat’s cheese version. It was an absolute delight with generous helpings of warm cheese balanced by a dressed rucola. We were happy. But we were not so happy when our bread arrived for it was too dry and we had no accompanying olive oil or butter.
I
LAURENTIU OBAE
Picture this: Paparazzi’s menu may be limited, but the food and service both make the cut
The three soups on offer were not inspiring so we passed and went on to pasta. Again, there was not much choice, four in total. None of them were meat based, but we settled for a prawn tagliatelle. I forgot to ask the House for lashings of garlic, but no matter. It was perfectly well seasoned, but a little on the small size. We passed on a chicken tandory at RON 35, and grilled swordfish at RON 45. But there was not really much left to choose from. There was a fillet mignon of pork with apricots (a perfect classic combination) with carrots and cumin. Cumin is a hot Indian spice and I was curious to see how this would match the dish. OK,
I shall try it next time.
Michael Barclay mab.media@dnt.ro
LAURENTIU OBAE
24
There was lamb with mushrooms and rosemary sauce, and entrecote steak with salad and a choice of either a Roquefort or black pepper dressing. So for RON 65, I chose a turnedo of beef with a Roquefort cheesy sauce. Yes, the steak and the sauce were perfectly good. But there is not much more I can add, because I have just described almost the entire menu. Overall, the food and service were exceptionally good, but my only reservation is that the selection on the menu will not greatly challenge the skills of a good chef. And this chef was good. I would like to have seen something far more adventurous on offer. But I will go back.
Photo finish: in keeping with the name, celebrity photos adorn the walls of the restaurant
BUSINESS REVIEW / March 23 - 29, 2009
FILM REVIEW / EVENTS
FILMREVIEW:
Project EcoWeb launched to tackle environmental issues
A Beautiful Life
BUSINESS REVIEW / March 23 - 29, 2009
dreams of becoming a singer. They’re all dreaming of A Beautiful Life, geddit? You probably will get it, because the movie has all the subtlety of a strip club. Instead of exploring the characters’ psychology, the film reverts to MTV style sequences in which they walk along poverty-ridden streets, to a soundtrack of poignant pop music. That’s when it can tear itself away from the copious and graphic strip club scenes. Cheap thrills are wrung from squalor – ooh! Prostitutes! Strippers! Homeless people! Through no fault of their own, the main actors have little to get their teeth into, and go through the motions. The minor roles are even more one-dimensional than the leads. As for the message, “All things are possible for the ones who believe” might seem profound if you’re 14, but older viewers may find it a bit banal. It’s not unremittingly awful. A Beautiful Life often looks pretty, thanks to its fashionable urban blight and attractive three leads, who manage to make the viewer care a little bit about their characters, despite the film’s flaws. A few of the supporting cast are vaguely entertaining. Romanian viewers may enjoy the blink-and-you’ll-miss-it cameos from local gossip rag regulars Stefan Banica and Andreea Marin as amoral criminals hating on our heroes. Boo! This would be an excusable effort if the director were about 22. He’s 40. Debbie Stowe Director: Alejandro Chomski Starring: Angela Sarafyan, Jesse Garcia, Ling Bai On at: : Hollywood Multiplex
STOCKEXCHANGE
In case of confusion with the Romanian translation, this is not Life is Beautiful, the popular Italian comedy. Nor is it uplifting Christmas classic It’s a Wonderful Life. Go expecting either of them and you’ll be dreadfully disappointed. You’re liable to be pretty disappointed anyway. This indie flick is filmschool level cinema-by-numbers – although at times it’s closer to a music video than a film. Denise Richards was supposed to appear but doesn’t. When even Denise Richards’ services can’t be retained, it’s time to worry. The main characters, and I use the word in its loosest sense, tick all the cliché boxes. Troubled teen, check. Stripper who dreams of something better, check. Dignified illegal immigrant who just wants a decent life for himself and his family, check. Maggie (Angela Sarafyan), a traumatised runaway, is walking the mean streets of LA. We are not told why, but seeing as she’s still in touch with her mom and doesn’t want to see her dad, you can probably take a wild guess. She pitches up in a seedy strip club, where she is befriended and immediately offered a place to live by kitchen porter David (Jesse Garcia), an El Salvadorian in the US illegally, and Chinese stripper Esther (Ling Bai). Who knew that strip clubs so readily doubled as drop-in centres? Times are hard, and David and Maggie soon turn to the criminal underworld to earn enough to survive. Cue lots of scenes when nasty creditors (boo!) say menacingly, “You got one week to come up with the money.” Meanwhile, Maggie’s bedroom issues hint at the source of her trauma, David tries to find his mother and Esther
Green issues are at the heart of the initiative
The National Environmental Protection Agency (NEPA) has launched Project EcoWeb, designed to promote environmental education across Romania and stimulate greater collaboration between public authorities, local schools and NGOs confronting environmental issues. The program was designed in
partnership with the US Peace Corps to create a national resource for environmental education materials. Project EcoWeb has three primary objectives: to create a publicly-accessible national website for environmental education materials; to highlight the work and contributions of different individuals and organizations in the field of environmental education in Romania; and to help create a network of communication and collaboration between non-governmental organizations, schools and public authorities. Organizations that submit lesson plans will be recognized for their contributions on the site and those that submit five or more lessons will be featured as project partners. The deadline for submitting lessons for the first phase of Project EcoWeb is April 17 and the website is set to go live in May. Otilia Haraga Avant-garde Romanian label Rozalb de Mura took its fall-winter 2009/2010 collection entitled Powder Cadillac 1B-2410& Desert Twilight 6A3410 to the On/Off event that is part of London Fashion Week. This is the second time the label has appeared at this event, where the catwalk hosted the creations of three other European designers. The Rozalb de Mura fashion show consisted of a selection of menswear. It concentrates on the “colors of the future” predicted in an imaginary research study by famous German psychologist Max Luscher. Pop group the Sugababes (in pic) were among the celebrities at the show.
25
EVENTS
Start Internship goes nationwide
Habitat for Humanity and Petrom complete 110 homes COURTESY OF HABITAT FOR HUMANITY
The dwellings were built through a public-private partnership STOCKEXCHANGE
The program offered 800 intern positions last year
interns selected in 2008 said the program met their expectations while 38 percent said their expectations had been exceeded. Sixty-two percent of the interns were happy that they were involved in several projects, 55 percent liked that they did practical activities and 37 percent that they took part in training sessions. According to Jeri GuthrieCorn, Charge d'Affaires in the US embassy in Romania, internships are used extensively in the US to ensure that students obtain valuable work experience and training, and their takeup here is proof of Romania’s significant progress over the past 20 years. Otilia Haraga
Bucharest photo exhibition documents the life of the Roma people
STOCKEXCHANGE
Following the pilot edition held last year for students in Bucharest, the educational project Start Internship Romania has been rolled out nationally. The program offers students the opportunity to undertake internships during their summer holiday within Romanian and foreign companies which have local offices. The initiative is meant to align university education to the needs on the labor market and increase young graduates’ chances of employment. START Internship Romania offered over 800 internships in 60 Romanian and international companies in 2008. According to a study conducted by GfK Romania, half of the
The flood-stricken families in Doljesti, Neamt county, will move to new homes after 110 dwellings were built following a public-private partnership between Petrom, the NGO Habitat for Humanity Romania and the Romanian
government. The dwellings were partially built by the government and the last facilities were added by Petrom and Habitat for Humanity Romania. Over 150 volunteers worked on the project, including 60 Petrom employees and members of the Habitat for Humanity Association, 20 journalists and opinion leaders, local and foreign volunteers. In total, Petrom allotted EUR 1 million to the project. Habitat for Humanity Romania has been developing projects building homes destroyed by floods for the past four years. Last year the association contributed to rehabilitating 100 dwellings in Tecuci. Otilia Haraga
The exhibition is entitled Shukar
A photograph exhibition about the life of Roma people in Hungary, Slovenia, Romania, Poland and Ukraine was opened at the Romanian Peasant’s Museum in Bucharest. The exhibition is enti-
tled Shukar, which means “something beautiful” in the language of this minority group. It was opened by artist Marina Obradovic, who confesses to having always been fascinated by the Roma and even lived for a year with her son within a Roma community which gave her enough time to take pictures and get to know them. “In 2000 I left Paris with my five-year-old son. We bought and furbished a truck and we traveled through Hungary, Slovenia, Romania, Poland and Ukraine for a year. We met very many people and were very well received in Roma communities,” said Obradovic. Otilia Haraga
Oracle Innovate program signs up 250 participants so far STOCKEXCHANGE
Works by Greek artists Kostas Tsoklis, Afrodite Liti, Michali Manoussaki and Venia Bexrakis will be displayed between March 26 and April 30 at the Melenia Art Gallery, which promotes Greek and other international artists. The work of Kostas Tsoklis, considered “Greece’s complete artist” since the 1950s, is dominated by constancy and experimentation while sculptor Afrodite Liti speaks through his works about birth and rebirth, growth and fertility. The main themes to be found in the work of Michalis Manoussakis revolve around the idea of the individual and his or her relation to the real world, relationships with others and with time. Finally, young artist Venia Bechrakis processes pictures digitally and combines images from the public and private space. 26
The Oracle Innovate program has already signed up 250 participants who have followed an online training module and taken part in the Oracle Innovate Days series of seminars. The program has also sparked the interest of another 7,000 students who have accessed the dedicated program website www.innovateprogram.ro. It includes a series of steps, such as the partnership with Junior Achievement, to offer an online training module to students interested in this program, which covers
topics such as business ethics, management procedures, financial mechanisms, business and development plans as well as legal and administrative requirements for founding a company. “It is not that important to learn how to found a company, what is important is to bring on the market a product or service that is viable and for which there is a market,” says Stefania Popp, CEO of Junior Achievement. Otilia Haraga BUSINESS REVIEW / March 23 - 29, 2009