O R A NG E A PP O I N T S T H I E R R Y MI L LE T C EO F O R R O MA N I A ; S EE N E W S O N P AG E 5 ANALYSIS
Metro lines connecting downtown Bucharest to Otopeni airport and Drumul Taberei respectively are back on the government’s agenda See page 9
ANALYSIS
The EU has set lower limits for roaming tariffs, and competition between mobile operators is expected to brings costs down even further See page 10
FEATURE
Despite recent efforts to promote Romanian tourism, the local seaside is tipped to attract 15 percent fewer tourists this year See page 13
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JULY 13 - 19, 2009 / VOLUME 14, NUMBER 26
NO FUN FOR FUNDS Long-term investment funds in Romanian real estate are either downsizing local portfolios or focusing on selective assets, while posting negative financial results and falls in stock exchange values See pages 8-9
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NEWS
BRIEFS EXIMTUR POSTS 25 PERCENT LOWER SALES IN H1 2009 é Tourism agency Eximtur said it had sold 25 percent fewer package holidays and tickets in the first six months of 2009, compared with the same period of 2008. Demand for local destinations dropped 15 percent in H1, while foreign destinations saw a fall of 25 percent, according to the tour operator. The company’s turnover fell by 20 percent in H1, and representatives fear the drop might worsen, since the tourism market is expected to decline by up to 45 percent. The best sold tourism destination is the Black Sea. Nevertheless, some coastal resorts have seen sales drop by as much as 46 percent, as is the case with Saturn, according to Eximtur’s data. SMART PARK LAUNCH POSTPONED UNTIL 2012 é The EUR 300 million Bucharestbased residential project Smart Park, developed by a group of investors made up of Immorent, Rompetrol Group and Dinu Patriciu, will push back its completion by two years. According to Patriciu, the delay is caused by changes wrought by the downturn on the local real estate market. In March 2008, the businessman said that the project was estimated to be completed in 2010. The financing for the scheme came from Erste Bank, part of Erste Group, which comprises Immorent. Smart Park is located in North Bucharest, near Baneasa Lake, and delivers 150,000 built sqm. ECOVALOR COMPLETES EUR 12 MILLION INVESTMENT IN CAMPULUNG WASTE PLANT é Ecovalor, part of waste treatment group Ecorec, has completed an investment of EUR 12 million in Campulung, according to a statement by the company. This year, the firm plans to see a 20 percent increase of turnover over 2008, when it reported EUR 8 million. The waste treatment station in Campulung is the second such investment by the company. The other, located in Alesd, Bihor county, opened in 2008 following an EUR 8 million investment. 4
Romanian economic contraction could be twice as bad as predicted The Romanian economy is likely to contract by as much as eight percent this year, which would be about twice as much as previously estimated. The International Monetary Fund (IMF), which is monitoring Romania after approving a loan to the country, is working on a new macroeconomic scenario, according to official sources quoted by Mediafax newswire. The steep drop would come after an economic increase of 7.1 percent last year. Romanian prime minister Emil Boc has said the government is willing to talk to the IMF and the European Commission, both of which have granted loans to Romania to help it weather the economic crisis, about increasing the budget deficit, but only for the infrastructure segment. “I can assure you that money will not be spent on plasma TVs, rewards or bonuses. Nor will we touch the flat tax or VAT,” said Boc, citing several important issues to investors. He went on to say that massive investments in infrastructure are among the government’s priorities. The Romanian economy contracted
The IMF is following Romania’s major economic indicators
by 6.2 percent in the first quarter of the year compared to the same period of the previous, which was above the average drop in the euro zone, of 4.6 percent. “This slowdown is more problematic for Romania than for other countries due to the low level of the country’s GDP per inhabitant. There is a risk that, considering the current crisis, a slowdown in economic activity will lead to disinvestments and a significant increase
Local businessmen set up publishing house Horia Ciorcila, the founder of Romanian lender Banca Transilvania, and local businessman Octavian Radu, who controls the RTC Holding group of companies, have joined forces to set up a business literature publishing house, called Injoy Books. According to media reports, the total investment in the publishing house reached EUR 150,000. The businessmen’s project targets a niche market which generates no more than 5 percent of the total revenues on the local book market. Injoy Books, which has now This is another new business started this year by been operational for one month, has businessman Octavian Radu, owner of RTC already published six business titles, including Warren Buffet Speaks, channels. 100 Minds that Made the Market The business books sector is a and The Only Three Questions that niche with very few competitors Count. The books have an average among Romanian publishing housprint run of 3,000 copies, and retail es. Injoy Publishing joins Brand at a price of EUR 18 to EUR 21 per Builders and Publica, with EUR copy, according to reports. 400,000 in turnover in 2008 and 40 The Injoy Books publishing new titles a year. The business seghouse distributes its books through ment is estimated to have made up the Diverta book store network as up to EUR 4 million of a total EUR well as in hypermarkets such as Co- 80 million book market in 2008. Staff ra and Carrefour and via online
in unemployment, which endangers the convergence process on the medium and long term,” stated a recent report from the Romanian Central Bank (BNR). Attracting European funds and public investments has become essential for Romania, the report goes on. Romania is not the only country in this situation, which is common among the Central and Eastern Europe economies. One of the requests from the business community, no tax on reinvested profit, should be applied in the second half of the year, after the Finance Ministry approves a law, following discussions with the EC and the IMF. Meanwhile, the Romanian government has started the First House program, intended to kickstart the mortgage market. The first such loan was granted last week. Several banks have been licensed to offer loans under the program. BRD, Alpha Bank, Bank Leumi and Banca Romaneasca were the first to lend under the government scheme. So far, the interested banks have received 10,000 requests for First House loans. Corina Saceanu
Royal Cola pops into Romanian market with EUR 2 mln investment plan American soft drinks producer RC Cola International has said it will invest EUR 2 million in the next three years in Romania, after recently launching on the local market. For its first operational year in the country, the American producer plans to market its products locally in 15,000 shops using local distributor GoodBev. Besides the new Royal Cola, the distributor will also supply brands like the British energy drink Boost Energy and Jaffa Juice. The company plans to sell Royal Cola with a target price of 10 to 15 percent below competitors Coke and Pepsi products in Romania, according to company officials. RC Cola International is part of the Canadian group Cott. It was set up in the US in 1905, having developed internationally. Now it has nine brands in its portfolio, covering the diet and non-cola segment though Kick and Upper10. RC Cola will join several existing players on the local soft drinks market, such as Coca-Cola, Pepsi Americas, European Drinks and Romaqua. ■ BUSINESS REVIEW / July 13 - 19, 2009
NEWS
Orange Romania names Thierry Millet chief executive officer Thierry Millet, who has been interim general manager of Orange Romania since the departure of Richard Moat, was officially appointed by France Telecom CEO of the company. “Thierry’s international experience as well as his good knowledge of the Romanian market made him the most suitable choice for the position of CEO. Thierry will lead the company to a new level of services and performance,” said Olaf Swan-
tee, SEVP and global leader of Orange. Millet has been interim CEO since March. Prior to that, he was commercial manager of the firm from October 2005. In this role, he was in charge of the customer service, and marketing and sales for individual users and companies departments. “Customers have high expectations from Orange as far as the performance and the value of the servic-
es are concerned, and innovation is essential in order to fulfill and surpass their expectations,” said Millet. “In order to reach this objective, we will adapt our operational model. The launch of the franchise program in March and recent online development are relevant examples of transformation initiatives that will determine our success now and in the future.” Orange Romania is currently the
leader on the telecom market in Romania, with 10,118,000 customers. Last year, it posted revenues of EUR 1.31 billion, a 6.2 percent increase compared to the previous year. In the first quarter of 2009, the mobile operator posted revenues of EUR 264 million. The company has 102 stores and collaborates with over 1,000 partner stores throughout the country. Otilia Haraga
Farmec Cluj-Napoca ends H1 2009 with EUR 10 million turnover Cosmetics producer Farmec ended H1 2009 with a turnover exceeding EUR 10 million, and a boost of 13 percent in sales on the local market, compared with the same period of last year, company officials have reported. The producer also posted significant increases in its distribution channels compared with last year: 24.86 percent in distribution within key accounts, 18.91 percent within pharmaceutical units and 10.28 percent in cosmetics shops countrywide. According to market research conducted by Nielsen, Farmec holds a market share of 30.93 percent for face cosmetic products, while for bodycare products it produced 15 percent more items with a value increase of 20 percent compared with the same period of 2009. The firm’s Gerovital brand, for example, holds a market share of 12.75 percent and leads its specific segment. Cosmetics producer Farmec ClujNapoca posted a turnover of EUR 4.6 million in Q1 of 2009, an advance of 6 percent over the same interval of last year, according to the company's financial results. The advance on monthly turnover was calculated at 15 percent in March over February of this year, with brands such as Aslavital and Farmec contributing 30 percent and 20 percent of the overall result respectively. In 2008, the company posted a turnover of EUR 24.5 million. Last year, Farmec Cluj-Napoca acquired the rights to use the Gerovital brands from Gerovital Cosmetics-Miraj, in a EUR 1.2 million deal, and announced ongoing talks regarding a possible takeover with three other Romanian producers. Magda Purice BUSINESS REVIEW / July 13 - 19, 2009
5
NEWS
BRIEFS
Altex Romania posts EUR 344 mln turnover in 2008
HOLCIM ROMANIA TURNOVER TO DROP 20 PERCENT IN 2009 é Cement producer Holcim Romania, part of Switzerland-based Holcim Group, estimates it will see a drop of 20 percent in turnover in 2009, after posting EUR 372 million in 2008. In March, Holcim said it would not assign any more money to production station investments in 2009, due to an estimated market decrease of 10 percent. This year, the company plans to invest the EUR 33 million already scheduled for carrying on its Campulung Muscel project. TOTALSOFT POSTS EUR 9.3 MLN TURNOVER IN H1 é Business software application producer TotalSoft had a turnover of EUR 9.3 million in the first half of 2009, representing a hike of 12 percent over the same period of the previous year. Within the entire sales value, Charisma Enterprise represented 40 percent while software development products made up 30 percent. ROMPETROL HOLDING CHANGES NAME TO DP
The results were below the firm’s estimations
Altex Romania posted a turnover of EUR 344 million in 2008, which represented an 8.5 percent increase compared to turnover in 2007. “The profitability indicators obtained were lower than those estimated at the beginning of the year, and the EBITDA amounted to 1.3 percent,” said company officials. The firm has two retail networks, Altex and Media Galaxy. Last year, it opened eight new Altex stores in Bacau, Brasov, Bucharest, Buzau, Cluj, Craiova and Iasi. Altex also opened five new Media Galaxy stores in Braila, Focsani, Oradea, Pitesti and Suceava. “While several years ago we
JW Marriott officially introduces new general manager
HOLDING é Rompetrol Holding SA will change its name to DP Holding, in order to avoid name confusion with the Rompetrol Group, according to Dinu Patriciu. Currently, the legal advisers are working on the change, according to the businessman. Despite the alteration, the company’s registration in Switzerland remains unchanged. Rompetrol Holding has 10,000 staff, of whom 1,100 work for Adevarul media group. The Rompetrol Group was part of Rompetrol Holding until August 2007 when Patriciu sold 75 percent of it to the Kazakhstan-based company KazMunaiGaz. In June of this year, Patriciu sold the remaining 25 percent of the firm to KazMunaiGaz. 6
were mainly targeting stores in the center of the city to be closer to our customers, now we have opted to open stores in modern commercial centers which offer several shopping options in the same area, have generous parking space and various options for entertainment and leisure,” said Cristian Moanta, director of marketing and acquisitions at Altex Romania. The company has invested EUR 15 million in communication and promotion. Altex also invested EUR 630,000 in human resources development. In 2008, the most significant growth in sales was in entertainment products: movies, music, game consoles and games on CD and DVD, sales of which surpassed 60 percent. Accessories was also a growth category, rising 60 percent. Small home appliances and personal care products posted an increase of over 20 percent. Sales of photo and video cameras rose by 15 percent while electronic products posted a growth of approximately 10 percent. Sales of IT products also increased by 17 percent. The category that registered a decrease was communications, where sales dropped by 15 percent compared to 2007. Otilia Haraga
Porecki has already started his mandate at the JW Marriott in Bucharest
Five-star Bucharest hotel JW Marriott has officially announced its new general manager, Igael Porecki. The new head comes from Tbilisi, where he was general manager of Tbilisi Marriott Hotel from 2002, and GM of Courtyard by Marriott Tbilisi from 2004. Porecki, who is fluent is Hebrew, English, German
and also speaks Romanian, started his career in hospitality in 1975, after having completed hotel management studies in Tel Aviv. His first job was head of shift at the reception of Tel Aviv Grand Beach Hotel, and he was subsequently promoted to reception manager and sales manager. In 1989, he became general manager of the Renaissance hotel in Tel Aviv. Prior to working in Tbilisi, Georgia, Porecki was deputy GM of the Marriott hotel in Warsaw. He is married with two children. Igael Porecki joins a group of expat five-star hotel managers in Bucharest, which includes Pierre Boisel, the GM of Crowne Plaza, Ali Yilmaz Yildirimlar of Radisson SAS, Peter Craig Martin, GM of the Howard Johnson hotel, Marten Schoenrock of Intercontinental and Friedrich Niemann at the helm of the Hilton. Corina Saceanu
Bpv Grigorescu reaches EUR 15 million tax litigation portfolio Local law firm bpv Grigorescu has seen its tax litigation portfolio, measured by the value of claims, increase by over 20 percent more than initially anticipated, to approximately EUR 15 million, the firm has announced. “We anticipate that by the end of the year the value of tax claims represented by our firm will exceed EUR 35 million,” says managing partner Catalin Grigorescu. “The increase in tax litigation work is caused mainly by two factors: an increase in tax collection activities by the tax administration focusing on large taxpayers, and the growing reluctance of taxpayers to accept unreasonable practices or findings by the tax administration in the current circumstances of economic distress. We expect this trend to continue as economic conditions deteriorate further.” Anca Grigorescu, head of tax at the firm, adds, “One third of our tax litigation work is referred to us by tax consultancy firms which perceive our tax litigation capabilities as suitable complements to their tax advisory practice.” In 2008 bpv Grigorescu registered a turnover of approximately EUR 3 million, up 30 percent compared to the financial year 2007, and forecasts a similar figure for 2009. ■
PeliFilip reaches 31 lawyers with new litigation team Law firm PeliFilip has expanded its litigation practice with the addition of five new lawyers, the firm has announced. The division will be led by Catalin Alexandru. The move brings the number of PeliFilip lawyers to 31. “We will not artificially establish any size that we want to reach at any point in time. We are interested in size only to the extent it allows us to be able to carry out any project in Romania – and we reached that size a while ago,” Francisc Peli, partner at the firm, told Business Review. PeliFilip was set up in 2008 by a team of lawyers who had left law firm NNDKP. The firm is headed by five partners: Carmen Peli, Cristina Filip, Francisc Peli, Alexandru Barsan and Ioan Dumitrascu. Carmen Peli, Filip and Franscisc Peli were included in the top band in the Chambers and Partners Europe 2009 ranking on competition & antitrust, energy and natural resources and real estate. Staff BUSINESS REVIEW / July 13 - 19, 2009
NEWS / WHO’S NEWS
Half of big companies have dismissed employees, study reveals
One in five firms has frozen salaries this year
More than half of companies employing over 50 people in Romania have dismissed some of their personnel this year, according to a study by the market research company Mercury Research. The study was conducted in April on a sample of 200 companies, whose names were not made public. “While among big companies, 52 percent have let some of their
BUSINESS REVIEW / July 13 - 19, 2009
employees, go the figure is different with the companies with fewer than 50 employees: 24 percent of companies with up to 49 employees and 23 percent of firms with nine or fewer workers,” said Mercury Research representatives. Only in the case of 16 percent of the 200 companies that were interviewed did employees on the management team say that the workforce would grow this year. One in five firms (21 percent) has frozen employees’ salaries this year. As regards the small- and medium-sized companies analyzed, around 25 percent of them had laid off people this year, the survey found. According to Mercury Research, some of the measures taken by companies to better deal with the crisis were dismissing employees, freezing salaries, and reducing or blocking investments budgets, team building activities or other bonuses. Staff
WHO’S RODICA CAZANGIU was appointed general manager of Avenir Telecom Romania. She has 25 years of experience in the IT&C industry. Previously, she worked for Telefonica and Orange. Before being appointed GM of Avenir Telecom, Cazangiu worked in the domain of management consultancy in sales and distribution. She is a graduate of the Faculty of Computers within the Politehnica University of Bucharest. MARIUS ALIN BARBU was appointed head of the Bucharest Stock Exchange (BSE), where, together with Anca Dumitru, he will be in charge of coordinating the daily activities of the stock market. He has been working in the IT and system development departments of the BSE since 1996, and was then promoted to head of
NEWS department and manager. He has an MBA in finance. DOINA VORNICU is the new general manager of CEZ Distribution. She has over 23 years of experience in the energy field. In 2006, she joined CEZ as maintenance manager. Vornicu later founded the department of Non-Technical Damage and was also risk manager for the Fantanele and Cogealac Aeolian project. B O G D A N DR A G O S C O N S T A N T I N E S C U , 42, steps down from the position of general manager of Cisco Systems Romania, on July 24. He is now considering becoming the manager of a local IT company. Constantinescu has been general manager of the firm since September 2004.
Business Review welcomes information for Who’s News from readers. Feel free to contact us on 210 77 34, by fax at 210 77 30 or e-mail: otilia.haraga@business-review.ro
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ANALYSIS
The America House offices in Bucharest belong to French Natixis’s PPW II Real Estate fund, which also owns a shopping center in Targu Mures
From riches to rags: investment funds face tough times in Romania The debt crisis has been felt by most of the investment funds which own local properties. Some of the long-timers in Romania have reduced exposure to the local market or are just pursuing a few of their planned projects, after suffering financial losses and drops in share prices. Business Review looks at some of the major institutional investors in Romania. By Corina Saceanu
IMMOEAST DRASTICALLY REDUCES R OMANIAN PORTFOLIO One of the worst affected investment funds was Immoeast, which has recorded a high drop in the value of its portfolio across the region, as well as in the value of its Vienna listed shares. The fund has managed 8
to reduce its exposure on the Romanian market, decreasing the country's weight in its portfolio from 30.7 percent in January 2008 to 21.5 percent in January this year. The value of its properties had dropped by 20.3 percent at the end of January this year, compared to the same period of last year, to some EUR 3.48 billion. In a bigger drop, its share price declined by 84.4 percent, resulting in a market capital-
ization of EUR 767 million. At the beginning of last year, Immoeast's market capitalization was almost EUR 5 billion. Romania, which was one of the focus countries for the fund, saw the investor canceling local projects and ending joint ventures which had been intended to build properties in the country. According to its latest market report, Immoeast recorded at the end of January this year 73 properties in Romania, with a book value of EUR 966 million, wiping around 50 properties off its balance sheet and EUR 2.4 billion in value brought by the Romanian portfolio, compared to data at the beginning of 2008. Some 24 projects were canceled in Romania, a reduction of EUR 1.36 billion, according to its latest report. For example, the fund has canceled its partnership with S+B Gruppe, which bought Immoeast's share in seven projects in Romania, including Stop.Shop retail projects, a retail project in Sibiu and an office project in Bucharest. Projects in other countries were also subject to the move, which resulted in an overall capital requirement reduction of EUR 2.43 billion. In total, “by way of measures for the consolidation and strengthening of liquidity begun in autumn of 2008, 53 projects have been canceled or their realization postponed until there is a change in the economic environment,” said officials. The fund still holds several income-producing office properties in Romania, including Victoria Park and Baneasa Aiport tower, which is now fully let, the fund has said.
EUROPOLIS
WORKS ON N E W L O C A L D E V E L O P M E N T, PREPARES EXIT FROM OLDEST FUND
Austrian investment fund Europolis, also a long-timer in Romanian real estate investments, owns two office projects and a logistics park in Bucharest, but has plans to increase its portfolio. It is working on the development of a 47,000sqm office building called Orhideea Towers. The fund will also work on expanding Europolis park Bucharest (former Cefin Park) with an additional 40,000 sqm. Europolis, which posted negative operating results for the first time last year, said it would concentrate this year on real estate asset management rather than on development.
“We receive purchase offers for our properties every week, but the low price of properties compared to last year doesn't necessarily make us want to sell,” said Marian Roman, country manager with Europolis in Romania. While focusing on existing properties or current developments, Europolis is likely to start selling some of the assets from its E1 investment funds. “The sale of real estate from the first Europolis portfolio E1 will be prepared following the expiry of the investment period,” the firm wrote in its latest financial report. The 14,300-sqm Europe House office building in Bucharest and phases in Europolis Park Bucharest are part of the E1 portfolio, along with Nile House and Amazon Court in Prague, a logistics park in Poland and office building Zagrebtower in Croatia. The E1 portfolio is 65 percent owned by Europolis, with EBRD controlling the rest. The portfolio is worth around EUR 954 million, according to the fund.
CA IMMO WORKS ON RETAIL PARK
SIBIU
CA Immo owns in Romania Bucharest Business Park and Opera Center 1 and 2 office buildings, bought in deals going back to 2003, the beginning of the local real estate investment market. The Austrian investment fund is now working on a retail park in Sibiu, a EUR 95-105 million investment, which is under construction and where the fund holds 60 percent of the shares. The project was under development in partnership with Austrian developer Oasis. “As far as the Sibiu retail park project in Romania is concerned, infrastructure installation work is currently in progress. The next steps depend on planning permission being obtained,” said CA Immo in its Q1 2009 financial report. Romanian properties make up 3 percent of CA Immo's property portfolio, which total EUR 3.79 billion. “In view of the challenging market climate, the operational focus for 2009 will clearly include measures aimed at upholding and boosting operating cash flow alongside careful implementation of development projects already initiated. Securing rental income takes top priority, especially in times of deep economic uncertainty; for this reason, we will consistently push ahead with initiatives aimed at minimizing BUSINESS REVIEW / July 13 - 19, 2009
FEATURE vacancy levels,” said CA Immo reps.
CHARLEMAGNE
POURS MONEY INTO OFFICES AND RESIDENTIAL
Investment firm Charlemagne, which manages the European Conv e rgence Development Company (ECDC), has made a partial exit from Romania through another managed fund, but continued developments here, now preferring the joint venture option. Despite the slowdown of the residential market, the fund continued its investment in Asmita Gardens residential towers, and went on partnering developer Cascade for Cascade Park Plaza. ECDC has made a further investment of EUR 1.4 million in Cascade Park Plaza, with a commitment to invest a further EUR 2.6 million. The building is currently approximately 75 percent leased by area and the company expects tenants to begin to take occupancy from October 2009. The fund has also made a further investment in Asmita Gardens. “The company's contribution of EUR 4.7 million has been matched by its joint venture partner and is supported by an extension in funding provided by the project's bankers,” said the firm. The fund expected three of the seven towers in the project to have been completed by July this year, with a further four towers due for completion in the fourth quarter of 2009. “Over 50 percent of the total apartments have been sold. Sales ground to a halt in the last half of 2008, which necessitated a refinancing of the JV company’s bank loans during early 2009,” wrote Charlemagne in its latest financial report. Like other investment funds active locally, Charlemagne has received offers to buy distressed properties in Romania, but has rejected many of them. “The manager has begun tentative discussions in relation to a few such projects and will continue to monitor the distressed opportunities market,” writes Charlemagne. Equest Balkan Properties investment fund had a disappointing 2008, its managers said in its recently published yearly report. The fund made a pre-tax loss of EUR 64.3 million, which included a re-evaluation loss of EUR 20.8 million. The bank has declared defaults for the fund’s loans for its Moldova Mall and Vitantis projects have been, but BUSINESS REVIEW / July 13 - 19, 2009
the fund is still pursuing solutions for each. “As a result of the defaults at Moldova Mall and Vitantis, these loans are technically payable immediately. We do not believe it is in the shareholders’ interest to remedy the covenant at Moldova Mall or to restructure the loan on the terms available. With respect to the default at Vitantis, we believe that this was a breach of a technical nature related to the conditions, not financial covenants,” Equest has said. “We are in active discussion with the bank concerned on this matter.” The fund had EUR 117.8 million of banking debt at the end of last year. Both loans for Moldova Mall and Vitantis were taken out with BankAustriaCreditanstalt (BACA). The fund's properties in Romania were valued at more than EUR 130 million. It is still evaluating a car park project in Bucharest. Dawnay Day Carpathian fund, part of bankrupt investment firm Dawnay Day, which owned MacroMall shopping mall in Brasov and was building Atrium shopping projects in Romania, has become Carpathian. The fund has recently obtained a rollover of its EUR 235 million loans from Hypo Real estate, which were due this year, but have been pushed back to 2011. The fund still has a EUR 471 million debt, which includes the mentioned sum. Recently, another investment fund, New Europe Property Investments (NEPI), which focuses on Romanian properties, made an offer to buy Carpathian for EUR 46.4 million. In its turn, NEPI has continued to pursue investments in Romania, considering now the perfect time to primarily target Romania due to the debt crisis, which has improved the investment environment in Romania and Europe as a whole, in that fewer investors are currently active in the real estate market, among other reasons. The fund owns a portfolio of commercial spaces rented out to Flanco, Piraeus Bank, KFC and Pizza Hut and casino operator Aura Gaming. It also owns 18 properties primarily rented out to Raiffeisen Bank, among others. While most of the funds have decided to restructure portfolios, others have sold Romanian assets in bulk. This was the case of investment fund Fabian, which was taken over by Romanian businessman Dinu Patriciu's investment fund earlier this year. corina.saceanu@business-review.ro
Government gives new Bucharest metro lines project another try It's not the first attempt for metro lines from Drumul Taberei to downtown and Otopeni airport to the city, but now the first round of financing is in place and a new round of technical memoranda ready to be signed. Even so, work will not start sooner than next year and it will take at least five to seven years to see the project completed. By Corina Saceanu
After having switched the metro project connecting the Victoriei area to Otopeni airport from the Bucharest city council to the Ministry of Transportation earlier this year, the Romanian government has decided to give the undertaking another shot. Financing for the scheme is likely to be in place after the government completes negotiations with the Japan Bank for International Cooperation (JBIC) over a EUR 300 million loan. The JBIC loan will incur 1.7 percent interest per year and will be reimbursed by the Romanian state in 25 years. The government will soon sign memoranda for both financing and technical features for the new metro line. Under the current project, it will cost EUR 1 billion to build the new connection. The previous proposal, of which the former minister of transportation, Ludovic Orban, was in charge, was priced at only EUR 250 million for a railway connection. Then, the railway option was preferred as it was less expensive than an underground metro line and could have been built using an existing railway track between Chitila and Mogosoaia. “Construction works at the new line will most likely start next year and will last five to seven years,” said Gheorghe Udriste, general manager of Metrorex, the state-owned company which runs the Bucharest metro. He explained why the underground option was chosen this time: “The lack of space above ground prompted the idea of a metro line completely underground. Moreover, this line will also serve the urban area north of Bucharest, areas like Mihalache Boulevard, 1 Mai, Free Press Square and Baneasa. Two route options, one through Poligrafiei and the other through Domenii, are being analyzed. The new line connecting the city to the
It will take six to seven years for the new metro line to Otopeni to be built
main Bucharest airport will run for 15.7 kilometers and will be served by 19 new metro stations. The metro line connecting Victoriei Square to Otopeni airport is the main priority for the government, along with a new metro line connecting the Drumul Taberei neighborhood to Universitate Square downtown. Drumul Taberei is the larg e s t Bucharest neighborhood without a metro connection. The line connecting this area to downtown will be partially financed with a EUR 370 million loan from the European Investment Bank (EIB), which has already been approved. The EIB financing should be expanded in the coming years, in order to provide enough funding to keep the project going. The entire investment for this underground line will reach an estimated EUR 700 million. Overall, building new metro lines and connections to railway lines could cost Romania around EUR 8 billion in the next 25 years, according to the minister of transportation, Radu Berceanu. Several underground stations are already connected to railway lines: Basarab, Gara de Nord, Obor and Republica. The ministry plans to build four other stations: Baneasa, Bucharest West, Progresu and Berceni. corina.saceanu@business-review.ro 9
ANALYSIS
Happy talk: holidaymakers and business travellers will no longer suffer the shock that the mobile bill brings after using the phone abroad
EU sets lower roaming tariffs and encourages more competition The European Union has reduced the tariffs that cell phone users have to pay for calls, text messages and mobile data communication when abroad. Although the figures are the maximum that telecom operators can charge for roaming services, competition is likely to force them down even lower, shaking up the market. The EU move was prompted by the excessive sums customers were being charged for using their mobile abroad. By Magda Purice
The new tariffs imposed by the European Union (EU) for text messages and internet surfing abroad came into force last week. The European Commission (EC) revised the regulation adopted in 2007, expand10
ing its stipulations to encompass SMS and data communication services. The commission also extended the validity period of the regulation until 2012. The EU reduced the maximum tariff for SMS (text messages) sent while roaming within EU territory to EUR 0.11, compared to the average
EUR 0.28 per message that operators were charging until this point. A maximum limit for data traffic in mobile networks was established at EUR 1/megabyte, compared to an average of EUR 1.68 per megabyte as charged by the operators before the new regulations came into force. The new tariff limits also reduce the costs of calls made abroad, inside the European Union, to EUR 0.43 per minute, from EUR 0.46 per minute before. Received calls will from now on cost at most EUR 0.19 per minute compared to EUR 0.22 per minute previously. The EC ruled that as of July 1, 2009, any telecom supplier is compelled to charge per second for received roaming calls. For calls made while abroad, the supplier can apply a minimum initial charged period that must not surpass 30 seconds. “The commission and national regulation authorities will closely monitor roaming tariffs for data transfer and will evaluate next year if the market of roaming services has finally become competitive,” said Viviane Reding, EU commissioner for telecommunications. The three largest operators on the local market, Orange, Vodafone and Cosmote, have already cut their tariffs in conformity with the new European norms starting on July 1. According to Irina Pana, wholesale, international and regulatory affairs manager at Orange Romania, “The decrease in roaming tariffs as a result of EU regulations will reduce the company’s cash-ins, but the resulting growth in use of roaming services will somewhat compensate for this effect.” Romanians’ main roaming destinations are in Europe. They are countries with which Romania has strong economic ties such as France, Italy, Germany, Austria, Great Britain and Spain, as well as neighboring countries such as Hungary, Bulgaria and the Republic of Moldova, says Pana. Orange Romania has signed roaming agreements with more than 300 operators in over 150 countries and with two operators of mobile telephony through satellite. Vodafone Romania cut its roaming tariffs on June 16 for voice services (down by 6.5 percent and 13.6 percent), SMS (between 62 percent and 68.5 percent lower) and for mobile data (a decrease of approximately 16.5 percent). Over the last year, Cosmote has added to its roaming coverage 38
new destinations so that the company’s subscribers can now use roaming services in 160 countries through 342 partner networks. Users of Cosmote prepay services can make use of roaming services in 158 countries through 279 partner networks. GPRS services are available in 39 countries through 71 partner networks. “The decision to bring down roaming tariffs to the level set by the European Union aims to set a reasonable limit of costs from the point of view of the consumer, and at the same time, a limit below which mobile operators can compete eff i c i e n tly from an economic point of view. The regulation of these tariffs was a consequence of the fact that there was no clear and valid explanation for the very high level of roaming tariffs that were being charged,” said representatives of the National A uthority for Management and Regulation of Communications in Romania (ANCOM). The tariff limits that were introduced are generically called “eurotariffs.” The euro-tariffs were established in such a way for operators to maintain a reasonable profit margin but also to eliminate situations such as those in the summer of 2005 when the cost of a call made from abroad could reach approximately EUR 1.70 per minute (no VAT i ncluded) for a German consumer who made a roaming call to Austria, EUR 1.47 per minute (no VAT included) for a British consumer who made a call from overseas to Italy and EUR 2.50 per minute (no VAT included) for a Belgian consumer who made a roaming call to Cyprus. According to the European Commission, these measures will reduce roaming tariffs for Europeans by 60 percent and will therefore encourage mobile phone customers to use their cells more while abroad. “This will cause a reduction in the profit per minute/per message but in the long term the increase in the degree of usage of these services will compensate for the diminishing of revenues they generate, which also largely depend on the number of users who travel abroad,” said off icials. According to the last statistical report published by ANCOM, roaming services for Romanian users registered significant growth between 2007 and 2008, especially at the level of voice traffic (both dialed and incoming calls). otilia.haraga@business-review.ro BUSINESS REVIEW / July 13 - 19, 2009
Estates&Construction
MARKET
JULY 13 - 19, 2009 / VOLUME 14, NUMBER 26
BUSINESS REVIEW FORUM
Manage your business environment !
Redevco and EMCT end partnership in local Romanian Retail Development
Michael Richard, local head of EMCT, the firm which took over the projects under the partnership
Redevco and EMCT have decided to terminate their joint venture Romanian Retail Development (RRD), according to an official statement made by the companies. The decision, which comes into effect immediately, was attributed to “differences of opinion between Redevco and EMCT in the evaluation of the current market situation and the resulting business
approach for the foreseeable future.” According to the same document, Redevco Group has decided not to start any new retail real estate developments in Romania during 2009 but will continue to develop its planned retail project in Tulcea and explore further investment opportunities on the local real estate market. The two companies will continue
to operate as independent entities in Romania and are optimistic about the local potential for developing retail real estate, their representatives said. According to the official data, it has been agreed that EMCT will take over RRD’s activities. In 2007, the real estate developer Redevco Europe and EMCT Romania set up joint venture Romanian Retail Developments, in which they planned to invest around EUR 500 million in Romania in the next five years. RRD was intended to focus on developing projects consisting of between 25,000 and 100,000 sqm of gross lettable area (GLA) in several cities around the country. At that time, RRD was agreed to primarily develop Redevco’s own real estate projects, while the two projects EMCT had under development – Sun Plaza Bucharest and Siret Plaza Galati – would continue to be developed by EMCT Romania. Sun Plaza, to be located in South Bucharest, will feature some 76,000 sqm of GLA, and will need around EUR 150 million in investment, according to the developer. The mall should have been ready in 2008 but has been subject to multiple delays so far. Sun Plaza is a joint development with Austrian Sparkassen Immobilien. Siret Plaza in Galati, which will consist of some 60,000 sqm of shopping area, had a primary completion time set for 2009. Magda Purice
ESTATES & CONSTRUCTION MARKET
Menatwork plans to develop EUR 10 million industrial park in Bucharest
Italian Menatwork saw its turnover down by 20 percent at the beginning of the year
Construction company Menatwork is planning to develop an industrial park near Bucharest, to which it will assign EUR 10 million, according to the company's general manager, Monica Grafu. “Currently, we own 60,000 sqm of land and we plan to buy another 40,000-sqm plot by the end of this year for this development. In 2012, the park is expected to be fully operational through business centers and production facilities
developed both for Menatwork and the park’s tenants,” said Grafu. The Menatwork Group, which is controlled by Italian investors, comprises 22 companies carrying out a range of construction activities as well as production, distribution, trade and consultancy for construction operations. Romania is home to 19 companies from the group, which established its HQ in the Popesti-Leordeni area, on a 120,000-sqm plot. At the beginning of 2009, the firm saw a decrease of 20 percent in its turnover, which is expected to stay the case until the end of the year. Last year, the company had a turnover of EUR 100 million. In 2010, company representatives hope for a turnover similar to the figure for 2008, in a best case scenario. For the next two years, the group plans to increase its exports to 6 percent in 2009 and 10 percent in 2010, a similar level to that seen in 2008. The company's GM believes that the construction market will continue its fall in 2010. Magda Purice
First Home program does not impact BREI indicators so far, Colliers reports
The residential market has shown signs of stabilization since April
According to the latest BREI monthly research on the cost of homes in the capital, conducted by the real estate company Colliers, the recently launched governmental program First Home has not yet had an impact on residential property prices, disproving the general impression that overall sale prices of apartments had increased since the program had started. BREI indicators show that for the last 11 months until April this year, apartments steadily fell in value, while from April the residential market showed signs of stabilizing with prices staying approximately the same, according to Colliers. Two-room apartments have been slightly affected by the First Home program, according to the real estate consultant, as sellers are no longer so keen to negotiate sale prices since new residential entries on the market have posted slightly higher sale prices than before.
The BREI indicator for old apartments registered increased prices in districts 2, 5 and 6 in Bucharest, decreases in districts 1 and 4 and a steady market in district 3. The average cost of buying a home was EUR 1,126 per sqm in June, down from the month before, when old apartments were changing hands for an average of EUR 1,131 per sqm. On the market of new apartments in Bucharest, Colliers consultants identified various trends. Developers that have managed to sell a large portion of their project under development so far, are now less eager to cut sale prices, as they do not have the pressure of bank loan repayments. However, developers whose schemes were in the early stages of development when the market started to fall are in a different position, expecting payments of some 70 to 80 percent of the overall sales price for the delivered apartments, according to Colliers. Magda Purice
PVC Teraplast Bistrita shuts down five showrooms, postpones two openings Construction materials producer PVC Teraplast Bistrita has announced that it will close five showrooms and cancel two projects involving sales unit openings, due to the economic crisis. The company will continue to operate its current 12 functional sales units in Romania. “Due to the present economic background, we have decided to restructure our sales division and to postpone the sales units we planned to open,” said representatives of the company in a statement made to the Bucharest Stock Exchange. In the first quarter of 2009, Teraplast posted a turnover of EUR 7.1 million, down 28 percent compared to the same period of 2008. For the analyzed period, 12
the company recorded a profit of EUR 600,000, an increase of 6 percent compared with Q1 of 2008. This year, Teraplast plans to increase its turnover by 9.4 percent, while its net profit is expected to fall by 16 percent. Last year, Teraplast Bistrita said it was planning EUR 66 million of investments by 2013, in expanding production. Of the total sum, EUR 22.6 million was used for relocation, a process started in 2006 and completed at the end of 2008. PVC Teraplast Bistrita has been listed on the BSE since 2008, the latest capitalization being calculated at EUR 25 million, using the recent figure of RON 0.35 per share. Magda Purice BUSINESS REVIEW / July 13 - 19, 2009
FEATURE
Empty chairs: the Romanian coast is expected to play host to fewer holidaymakers this year
Life’s no beach for tour operators as the cost-conscious holiday at home Local tourism has been hard hit, judging by tour operators' data this year, with most selling fewer local holidays, especially to the seaside. But the clogged A1 highway at the end of the week suggests that salvation comes from weekenders, who are putting money into hoteliers’ pockets and taking up the unofficial accommodation provided by Black Sea coast residents. By Magda Purice
TOURISM
OFFICIALS HAVE DIFFERING EXPECTATIONS FOR
2009
The Romanian seaside is expected to attract up to 15 percent fewer local and foreign tourists this summer compared to last year, according to estimates by tour operators. The drop is not due to tariffs or conditions, but to the falling sums that people are allocating to their holidays, according to the general secretary of the Employers’ Union of Romanian Tourism BUSINESS REVIEW / July 13 - 19, 2009
(FPTR), Dragos Raducan. The National Association of Tourism Agencies (ANAT) hopes the number of tourist on the Romanian coast, which last year accommodated 1.3 million Romanian and around 60,000 foreign tourists, will remain constant. The most popular foreign destination seems to be Turkey, while fewer Romanians are going to Bulgaria. The number of Romanians spending their holidays abroad could fall by 10 to 15 percent this year, back to the level of 2007, said the ANAT spokesperson, Traian Badulescu. The official voice of ANAT is
more optimistic that Romanians will spend their holidays in local destinations, and, unlike Raducan, Badulescu expects an increase of 10 percent in local tourism. According to Badulescu, financial pressures are persuading Romanians to choose local destinations for their holidays. Increases are also foreseen for the outgoing segment, estimated by ANAT to grow by up to 7 percent this year. The contradictory opinions of ANAT and the FPTR continue, with official ANAT data stating that Romanians, despite the crisis, still want high-quality holiday locations, with all-inclusive package deals in Turkey going for EUR 600 to EUR 800. For the whole of 2009, Romania is estimated to play host to a total of 5 million tourists, of whom 1.4 million will choose the Black Sea region, according to ANAT. For foreign destinations, the centralized data from tourism agencies, reveals that most Romanian holidaymakers are choosing Greece (with 280,000 tickets sold), Bulgaria (250,000 tickets), Austria (220,000), Turkey (180,000) and European tours to Italy or France (140,000). Other popular destinations among Romanians are Spain, to where some 50,000 tickets are estimated to be sold, and Tunisia, which is expected to welcome 30,000 Romanian tourists. ANAT officials believe that the hot topic of the economic crisis has not had a huge impact on Romanians’ appetite for enjoying their time off this year. Although January and February posted lower tourism numbers, March recorded a strong comeback in this respect and 2010 is estimated by ANAT to be the year that will change the pessimistic general view that tourism is declining.
BLACK SEA IN JULY
COAST HALF EMPTY
The most recent statement from ANAT through its president, Corina Martin, was that the Black Sea Coast had registered some 60,000 tourists since the start of the holiday season, an occupancy rate of 50 percent, with Mamaia registering the best results. “The hotels in Mamaia are posting an occupancy rate of 90 percent. Each hotel has a back-up 10 percent of vacant room, for last-minute guests,” said Nicolae Bucovala, the president of the Employers’ Association of Mamaia. According to Eximtur agency data, sales at Saturn resort are down by 56 percent, while Costinesti posted a
decrease of 21 percent, Eforie Nord 14 percent and Olimp 25 percent. Regarding prices, the representative said that some hotels have reduced their prices by 5 to 10 percent at reception, with a three-star hotel in Mamaia now costing RON 200 per night, including breakfast for two and the tariff for renting two chaise longues. (The price for renting a chaise longue on the beach in Mamaia is RON 25 per day, while a fancier baldachin bed costs RON 40.) According to a study conducted by research company GFK, 39 percent of Romanian holidaymakers chose this destination, while only 22 percent would rather go to the mountain resorts, especially Bucharest residents. According to GFK data, 13 percent of Romanians have not yet chosen a holiday destination, while 20 percent of them have decided to stay at home, because of lack of money.
AGENCIES STRUGGLE TO KEEP BUSY THIS SEASON While the data published so far indicate falling figures, agencies could gain this year through highpriced tourism packages, to balance the decreasing demand. For instance, J'info Tours reported increased turnover of 35 percent in H1 of 2009, to EUR 18.9 million, and the firm estimates total turnover of up to EUR 38 million for the entire year. However, the agency has seen demand for local holiday resorts fall since 2008, a segment which makes up some 4 percent of the agency's turnover. The big money is coming from foreign package holidays. The most costly package sold by the agency went for EUR 47,000, to two tourists who spent two weeks in the Canary islands, in locations such as Tenerife and Lanzarote. Eximtur has also seen demand fall. It posted 25 percent lower sales in the first six months of 2009, and a 20 percent lower turnover, compared with the same period of 2008. Last year, the agency made a turnover of EUR 40.5 million, 15 percent up on 2007. “Sales for local destinations have decreased by 15 percent this year, while demand for holiday packages abroad has shrunk by 25 percent. We hope the decreasing pace will not worsen by the year’s end, as the overall tourism market is expected to decrease by up to 45 percent for this year,” said Lucia Morariu, general manager of Eximtur. magda.purice@business-review.ro 13
EVENTS
Local child abuse is increasing
Romania’s emergency line 116 111 has received calls from a high number of troubled children
The number of child abuse cases in Romania is increasing alarmingly, according to data on the situation of Romanian children. Many of the callers to the emergency number 116 111 alleged sexual abuse. What is more shocking is that most of the time the perpetrators of
the crime are the parents themselves. In the first half of the year, the Association Telefonul Copilului answered 11,820 calls. Some 48 percent of the cases brought to its attention were of sexual abuse and requests for psychological and legal advice. Statistics show that in 71 percent of these cases, those who abused the children were the parents. Also increasing is the significant number of children whose parents are abroad and who have been left with people who abuse them. In Romania, most child victims of sexual abuse come from poor or broken families, or families where the parents are abroad and the children have been left with relatives, friends and acquaintances unofficially. Most child abuse cases were registered in Constanta, Bucharest sector 1 and 6, Ilfov, Brasov, Bacau, Cluj and Vaslui. Otilia Haraga
Melenia Art Gallery is currently hosting an exhibition of the works of Romanian artist Petre Serban, whose paintings span the genres from still life to landscape and portrait. The exhibition is called Urban Views & Rural Landscapes through Petre Serban’s Work. Serban’s style is reminiscent of that of wellknown Romanian painter Nicolae Grigorescu, however, it is unique in its own way and carved its own niche. The exhibition will be open to the public until September 30.
Romanian Pantheon to cost no more than EUR 20 mln
The Pantheon’s location has not been chosen
The construction costs of the Romanian Pantheon, a monument to honour the important figures of Romanian culture, will not exceed EUR 20 million. The sum does not faze the initiators, with the money to come from donations,
14
Otilia Haraga
Two Romanian sopranos perform in the same show at Royal Opera in London
Angela Gheorghiu will perform in July
Romanian sopranos Angela Gheorghiu and Nelly Miricioiu will be headliners at the Royal Opera in London in the same show, Tosca, albeit on different days. Gheorghiu will sing on July 9, 14
Reggae artist SHAGGY performed at Turabo Society Club in Bucharest on July 10. Shaggy has been a familiar presence in the music charts since the start of the 90s when he launched his career with a remix of the ska classic Oh Carolina. He won a Grammy award for Best Reggae Album in 1996 after the launch of his album Boombastic. In 2000, he released the best sold album of 2001, Hotshot, which contained two hits: It Wasn’t Me and Angel. Then followed some very prolific years: the next year he issued Lucky Day and in 2003 Friends Reunited: The 90’s. In 2005, he released Clothes Drop and in 2006 Reggae Vibes. After two more albums in 2007, Bonafide Girl and Intoxication, the next year he premiered the video for the track What’s Love on My Space, the second single off the album Intoxication, produced in collaboration with Akon.
the vice-president of the Foundation for the Romanian Pantheon, Nicolae Ivan, told Mediafax newswire. The foundation was established on Wednesday in Bucharest and has its headquarters at the Romanian Academy. The fundraising campaign has not yet started since the procedures for the registration of the foundation took six months as a result of red tape.The foundation will be in charge of the management of the project through county branches which will have the task of raising funds and making proposals regarding the famous figures to be included in the Pantheon. While the location has not been settled yet, Ivan says six places in the capital are being considered. The Pantheon could be built from scratch or could be situated in an already existing building.
and 16 while Miricioiu will take over vocal duties on July 11 and 18. It is the first time when the two Romanian sopranos have shared the same stage, with the Royal Opera a suitably illustrious venue for the event. Both women became famous following appearances at the Royal Opera: Miricioiu hit the bigtime following a role in the show Pagliacci in 1992 and Gheorghiu through her part in La Traviata in 1994. The current production of Tosca which showcases the talents of the two sopranos together started in 2006 with Gheorghiu as protagonist, replacing the famous production that director Franco Zeffirelli staged in 1964 for the legendary Maria Callas. Otilia Haraga
The 19th edition of the George Enescu International Festival and Competition, a bi-annual classical music event which takes place this year between August 30 and September 5, will host a much greater number of competitors than previous editions. There will be 77 competitors in the violin section, 84 in the piano section, and 180 works submitted for the composition section. Participants will come from 40 countries. The first prize for the violin category and the violin and piano interpretation categories will be EUR 15,000, the second prize EUR 10,000 and the third prize EUR 5,000. In the composition section the first prize is EUR 10,000 for symphonic works and EUR 7,000 for chamber works. BUSINESS REVIEW / July 13 - 19, 2009