Business Review Issue 8

ROMANIA OPENS OFFICIAL TALKS WITH IMF AND EC OVER LOAN; SEE PAGE 6 NEWS

US CoachWorks enters Romania through affiliation with Brainovate, which is planning regional expansion, says Oliver Perkins of Brainovate See page 5

INTERVIEW

Zoltan Major, VP of retail with UniCredit Tiriac, says the bank is putting expansion on hold and looking at heath indicators rather than growth this year See page 12

ANALYSIS

Oltchim is seeking EC approval for its EUR 620 million rescue plan, which is causing its minority shareholders some consternation See page 19

BUSINESS REVIEW www.business-review.ro

ROMANIA’S PREMIERE BUSINESS WEEKLY

MARCH 9 - 15, 2009 / VOLUME 14, NUMBER 8

WASTE WATCH

In its drive to align with green EU values, Romania is now embracing waste recycling. But lack of education among the public is just one of the obstacles that stands in the way of companies making progress – and money – from trash LAURENTIU OBAE

See pages 10-13

BUSINESS REVIEW ROMANIA’S PREMIERE BUSINESS WEEKLY

MARCH 9 - 15, 2009 / VOLUME 14, NUMBER 8

Publishers BILL AVERY • RACHAD EL JISR Founding Editor BILL AVERY Editor-in-Chief SIMONA FODOR Senior Journalist CORINA S~CEANU

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Journalists

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OTILIA HARAGA MAGDA PURICE Copy Editor DEBBIE STOWE Contributor MICHAEL BARCLAY Photographer LAURENTIU OBAE

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BUSINESS REVIEW / March 9 - 15, 2009

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3

NEWS

ING Bank makes record EUR 29 mln profit, loans shrink

FLEXA SEEKS FRANCHISE PARTNERS é Danish company Flexa, a children’s furniture producer, is interested in expanding on the local market. The company has announced through the Danish Embassy in Bucharest that it is looking for individuals or companies interested in becoming a Flexa franchisee. The required conditions are to have market knowledge and a simple business and development plan. The minimum investment level is EUR 100,000-150,000. Flexa, a familyowned business, currently has 900 employees and its own production facilities in Denmark, Russia, Estonia, China and the United States. The company’s products are sold in 130 shops, of which 40 are in Europe.

Dutch lender ING Bank has witnessed demand for loans dropping on the Romanian market in the first two months of this year, with mortgages down to a third of those granted in the same period of last year. On the personal consumer finance segment, the loans granted by ING were down to half in January and February this year on the first two months of 2008, according to the bank's representatives.

ING Bank grew its profit by 66 percent last year, to some EUR 29 million, a record for the bank in its Romanian history. “Our liquidity status is very good considering the current market conditions, we have a liquidity excess.

Our loans-to-deposits ratio is 93 percent,” said Misu Negritoiu, general manager of ING Bank Romania.

The bank covers its financing needs through local resources, but also has a finance line from its mother bank in Amsterdam, according to representatives.

KIWI FINANCE’S TURNOVER RISES 2 PERCENT IN 2008 TO EUR 3.4 MILLION é Credit broker Kiwi Finance made a turnover of EUR 3.4 million at the end of 2008, a 2 percent increase compared with 2007, while its dealt credit amounted to EUR 442 million, according to a statement from the company. Last year, the broker managed a balanced credit portfolio, with mortgages representing 47 percent of the overall credit dealt by the company, an increase of 50 percent compared with the previous year, according to the firm. On bank retail, Kiwi Finance calculated it had amassed a 1.71 percent market share, with 65,000 clients.

PROVIDENT FINANCIAL GRANTS EUR 42 MILLION OF LOANS IN 2008, 3.5 TIMES UP ON 2007 é Provident Financial Romania, which provides small loans for consumer goods, posted EUR 42 million of loans in 2008, 3.5 times more than in 2007, while its customer portfolio increased 2.5 times, according to the company. In 2007, the firms granted loans worth EUR 12 million. By end-2008, it had 85,000 clients, compared with 33,000 registered at end-2007. Last year, it had revenues EUR 19.5 million, compared with EUR 5 million in 2007.

4

LAURENTIU OBAE

BRIEFS

Misu Negritoiu, general manager of ING Bank

The bank has grown its deposits despite staying away from the race between banks on the local market to offer higher interest rates on deposits to secure much needed liquidity.

ING Bank did not incur any loss from its lending activity last year, but

has grown the level of its provisions more as a safety measure, after reporting zero provisions in 2007. “Our provisions on credits are very low, but this year they will be higher,” said Albert Roggemans, CEO of retail banking with ING Bank in Romania. “We have a restructuring credit program and we will use it,” added Roggemans, referring to borrowers who could be facing problems in repaying their debt.

“For short-term problems ,we can talk about solutions, but if problems go on for the long term, I am afraid there is nothing we can do,” added Negritoiu.

Lending is not a problem of liquidity, it's more a matter of risk, and the Romanian risk is increasing, he went on. The ING Bank general manager said he was in favor of Romania taking a loan from the International Monetary Fund (IMF) and the European Union, because it would strengthen market stability.

Corina Saceanu

Raiffeisen sees gains rise 75 percent, mother bank pledges liquidity and capital Austrian-owned lender Raiffeisen Bank Romania grew its profit by 75 percent last year, when it reached EUR 165 million, another record profit posted by a bank active locally.

The bank plans to use the profit mainly for capitalization.

The lender’s total assets reached EUR 4.65 billion, with loans to customers exceeding EUR 2.67 billion, up 14 percent compared to the same period of the previous year. At the same time, customer deposits exceeded EUR 3.65 billion, the bank has announced.

It continued network expansion in 2008, reaching 553 business outlets at

the end of last year, but this year expansion will no longer be on the bank's agenda. “In 2009 we will focus more on current, maintenance activities at network level rather than on expansion,” said Steven van Groningen, Raiffeisen Bank’s CEO. As for the lending activity this year, on certain products “sales were down to 10 percent of what we used to sell in a good month last year. Obviously, we don't like that,” said van Groningen.

Raiffeisen International has been supporting the lending activity of its Romanian subsidiary with financing lines, while all profits of the Roman-

ian bank since 2003 have been used to cover the losses of the former Banca Agricola. “In 2008 the 17,000 Raiffeisen Bank shareholders received dividends for the first time. As majority shareholder, Raiffeisen International received EUR 11.8 million in dividends in 2008 and will not withdraw any money from Romania, except for shareholders’ dividends,” said Herbert Stepic, CEO of Raiffeisen International and chairman of Raiffeisen Bank’s supervisory board. “We will provide Raiffeisen Bank Romania with sufficient liquidity and capital to achieve its goals,” he went on.

Corina Saceanu

State-owned CEC Bank boosts coffers after Asiban sale Local state-owned CEC Bank, the former Romanian Savings Bank, made almost EUR 100 million in profit last year, much of which was due to the sale of its shares in insurance company Asiban. The profit, which was five times higher than the figure posted in 2007, was boosted by the bank's cashing in some EUR 87.5 million from the sale. CEC Bank's profit excluding the Asiban sale was some EUR 44.5 million, up 40 percent on the previous year.

The bank grew its assets by 25 per-

cent to EUR 3.4 billion, while its loans reached EUR 2 billion, up 56 percent in the Romanian currency. “The bank will support customers in accessing European funds,” said Radu Ghetea, president of CEC Bank. The volume of deposits grew by 28 percent, to some EUR 2.8 billion, for the bank, which was traditionally focused on savings.

The bulk of CEC's loans, some 64 percent of the portfolio in total, went to individuals, with consumer loans making up EUR 1.1 billion, and mortgages EUR 163 million. Loans to corpora-

tions went mostly to SMEs. “Between December last year and February this year, the bank continued its lending activity, especially on the SME, agriculture and public administration sectors,” said representatives.

The bank, which had 6,600 employees at the end of last year, has more than 1,400 branches, the biggest network in the Romanian banking system. The bank grew its number of cards by some 200,000 units, to 640,000 at the end of 2008.

Corina Saceanu BUSINESS REVIEW / March 9 - 15, 2009

NEWS

Generali PPF Holding to increase share capital, after Ardaf and RAI acquisitions

COURTESY OF GENERALI PPF HOLDING

Generali PPF Holding has announced that it will finance an increase in share capital both for Generali and Ardaf, in order to support this year’s activity. “The largest sum will go towards Ardaf, to cover the company’s losses from last year,” said Marie Kovarova, president of Generali Asigurari. Of the company she runs, Kovarova said that the share capital increase would support the development of the life insurance segment.

Insurer Generali PPF Holding has announced EUR 214 million gross premiums written in Romania last year and estimates that this year it will maintain its market share at around 10 percent.

Marie Kovarova, president of Generali Asigurari

Generali PPF Holding recently an-

nounced it had officially finished the takeover of Romanian insurers Ardaf and Roumanie Assurance International (RAI) after entirely acquiring Iberian Structured Investments IBV, the main shareholder of the two companies.

Thus, Generali PPF now holds 82 percent of Ardaf and 99.9 percent of RAI. Generali PPF Holding is formed of insurers Generali Asigurari, Ardaf, RAI and Generali Fond de Pensii. According to the holding’s president, the four companies will operate independently as distinct entities when it comes to management, shareholders and brands.

Dana Ciuraru

US CoachWorks joins forces with Brainovate to deliver local executive coaching

COURTESY OF BRAINOVATE

US-based CoachWorks International, provider of executive coach services and leadership training, has entered the Romanian market through an affiliation with training firm Brainovate, which has become the US company's certified facilitator.

Brainovate will deliver the US firm's legacy leadership programs in Romania and will also expand the coverage regionally, keeping Romania as a hub, Business Review has learned.

“Tough times require solid leadership skills and deep benchmarking for succession. This model provides leaders and organizations with a tested flexible platform for leadership development that directly supports business deliverables,” says Jeannine Sandstrom, one of the founders of CoachWorks International, executive leader coach and CEO of the firm.

“In terms of development plans,

Oliver Perkins, managing partner of Brainovate

we have relationships with multinationals in Romania but in the second half of the year we will market heavily Bulgaria, Croatia. Serbia, Hungary, Russia as well as Moldova. We have even had interest from a client in Abu Dhabi,” Oliver Perkins, man-

aging partner of Brainovate in Romania, told BR. “In terms of revenue it is obviously too difficult to predict, but turnover in Romania will be close to EUR 1 million with start-up countries planned to bring EUR 250,000 in turnover in the second half of 2009,” added Perkins. After initial consultations at CEO or senior HR level or on completion of competency inventory, a program is implemented based upon the five best leadership practices. CoachWorks International was founded in 1995 by Lee Smith and Jeannine Sandstrom, and the firm has trained over 200 certified legacy leadership facilitators from around the world. Sandstrom and Smith have authored several coaching books, including Legacy Leadership, the Leader's Guide to Lasting Greatness.

Corina Saceanu

Law firm Musat & Asociatii grows profit by 30 percent to EUR 10 mln Local law firm Musat & Asociatii posted over EUR 18.5 million in turnover and a profit of EUR 10 million in 2008, a 30 percent profit increase year-on-year, the firm has announced. The previous year, the law firm had achieved EUR 15.7 million in invoicing fees, while its profit was EUR 7 million in 2007.

That year, private clients, out of whom 80 percent were foreign, accounted for more than 99 percent of the fees, while only 0.3 percent came for state bodies. The law firm has recently appointed Mona Musat as comanaging partner and Marius BarBUSINESS REVIEW / March 9 - 15, 2009

ladeanu as equity partner with the firm.

With more than 13 years of experience within Musat & Asociatii, Musat was appointed partner in December 2002 and is currently coordinating the real estate and corporate finance practices.

Among her clients are La Caixa, ING Real Estate Development, Grupo Lar, Erste Bank, Generali Imobilien, Teesland iOG, Tornator and Equest Partners. In her new position, Musat has joined Catalin Baiculescu and Ion Dragne, also co-managing partners, who were appointed to the position in

January of last year. Barladeanu has worked with clients like Nova Imobiliare, EBRD, PPF Investments, TNT, Piraeus Real Estate, Bank of Cyprus, OTP Bank and UniCredit. The firm, which was set up in the 90s, employees 100 lawyers and has 12 partners.

Among the biggest in Romania turnover wise, it is rated in the second band for banking and finance, competition and antitrust, corporate and M&A, dispute resolution, energy, real estate and employment, according to Chambers and Partners' 2008 ranking.

Corina Saceanu

BRIEFS

ORANGE ROMANIA MAKES EUR 1.31 BILLION TURNOVER IN 2008, 6.2 PERCENT INCREASE Y/Y é Orange Romania, part of French operator France Telecom, posted a turnover of EUR 1.31 billion in 2008, up 6.2 percent on 2007, according to the company. At end-2008, it had 10.35 million customers, with yearly ARU (average revenue per user) reported as EUR 119. For broadband services, the operator had 1.673 million clients, 65 percent more than in 2007. IT subscriptions increased 150 percent in 2008 versus 2007.

Overall, the group posted turnover of EUR 53.5 billion in fiscal year 2008.

FABRYO CORPORATION PAINTS PICTURE OF 20 PERCENT TURNOVER GROWTH FOR 2008 é Paint producer Fabryo Corporation, controlled by investment fund Oresa Ventures, anticipates a turnover growth of 20 percent in 2008 y/y, after making EUR 42 million in 2007. In the first half of 2008, the company posted increased sales of 21 percent. In 2007, it started to produce at Popesti Leordeni, using a production platform built on 50,000 sqm, with a 250-ton daily production capacity and following EUR 15 million of investments. Fabryo Corporation has 38 distributors all over the country and 12 showrooms, and is planning to open three others by year-end.

PIRAEUS BANK ROMANIA DOUBLES GROSS PROFIT IN 2008 TO EUR 43 MILLION é The Romanian subsidiary of Greek group Piraeus Bank made a gross profit of EUR 43 million in 2008, doubling the result from 2007, due to credits rising by 56 percent, the bank said. In 2008, it managed EUR 3.7 billion of credits while saving deposits rose by 82 percent to surpass EUR 1 billion at the end of 2008, according to the bank. Piraeus plans to make a net profit of EUR 600 million in 2008 on the markets on which it is active, compared to EUR 503 million net profit registered in 2007 5

NEWS

BRIEFS

PRINCIPAL COMPANY GROWS SALES BY 30 PERCENT IN EARLY 2009 é Romanian cold cuts producer Principal Company has reported increased sales of 30 percent in the first two months of 2009, compared with the same period of 2008, the company has said. In 2008, it posted a turnover of EUR 33 million, 74 percent more than in 2007, due to the sales generated by the Matache Macelaru brand.

IPOTECIDIRECT PLANS TO MANAGE EUR 10 MILLION OF LOANS IN 2009 é Credit broker IpoteciDirect is rethinking its strategy and planning to handle EUR 10 million worth of loans in 2009, after failing to reach the target established for 2008. according to the company’s representatives. The firm set high targets when the market environment was comfortable and estimated EUR 18 million worth of managed credits by year-end in 2008. In the company’s first two operational months, IpoteciDirect managed 2.7 million of loans. The company entered the Romanian market in 2008 with an investment of EUR 500,000 and seven shareholders. For this year, the investment plans involve EUR 100,000, three times less compared with the previous sum.

6

Luxembourg-registered audit and financial consultancy company Riff Holding International, part of Moore Stephens network since 2007, has signed a partnership with the newly created law firm Deli & Hilboceanu. The new business line comprises financial and business consultancy services delivered to companies facing insolvency procedures, forced execution practice and debt recovery, according to Marius Stancescu, founder president of Riff Holding International.

Last year, the firm signed a partnership with UK-based bespoke financial instruments provider Armajaro Securities Limited, following which Riff plans to implement a guaranteed investment financial vehicle locally, starting in the second half of 2009. Armajaro creates tailor-made investment solutions using a combination of derivative and cash in-

COURTESY OF RIFF

DELACO ESTIMATES TURNOVER INCREASE OF 40 PERCENT IN 2009 é Delaco estimates that the company’s turnover will grow by 40 percent in 2009, maintaining the increasing pace registered in 2008, when turnover rose by 55 percent over 2007, according to the firm.

Delaco, which distributes dairy products on the local market and delivers logistic operations for Reinert, is also considering takeovers on the local market. In 2008, the company started to operate a storage unit in Codlea, Brasov county, following an investment of EUR 2 million.

Riff Holding partners law firm to increase business, potential merger in sight

Marius Stancescu, founder of Riff Holding

struments, enabling its clients to gain exposure to equity, foreign exchange, commodity and fixed income markets, with various degrees of capital risk, according to the British company.

In 2009, Stancescu said the firm is considering a possible merger with two

local financial consultancy services providers. “Both companies are Romanian-based and total around a EUR 2 million turnover. The idea of this merger has been mooted and if it is going to happen, it will be in 2009 or never,” said Stancescu.

The company reported a EUR 1 million turnover from consultancy services delivered in 2007 and EUR 1.5 million turnover in 2008 for similar services.

The group, which runs audit, consultancy and accounting activities in four European countries, posted a turnover of EUR 3 million in 2007 and EUR 4 million in 2008.

Early this year, the company entered the M&A market after acquiring the Sunbelt franchise, and is planning transactions worth EUR 15 million following the deal, the company said.

Magda Purice

Romania officially discusses loan conditions with IMF and EC Romania is testing the water for a possible loan from the International Monetary Fund (IMF) and European Commission, as government and Central Bank representatives met IMF officials in Washington last week, after also talking to EC representatives in Brussels. The Central Bank vice-governor Cristian Popa and the state secretary within the ministry of finance, Bogdan Dragoi, attended the IMF talks.

Romania is discussing with the CE and the IMF the structure, volume and conditions of a possible loan, said the minister of finance, Gheorghe Pogea.

“The amount will be established after we see all the terms. If we don't agree with them, we might not take the loan,” said Pogea.

The IMF experts have stipulated

several conditions for a possible loan, including promoting prudent fiscal and budgetary policies. In January, President Traian Basescu said Romania had informed the EC of its intention to contract a EUR 7 billion loan from the commission, under IMF monitoring. Previously, Basescu had said an IMF loan would be the last thing Romania would take out to solve its financing problems.

Any external loans Romania secured should compensate for its relatively limited EU fund absorption capacity and be repaid when the country saw higher EU fund inflows, in 2013, according to the BNG governor Mugur Isarescu.

As talks continue over a possible financing agreement, Romanian bankers have voiced their support for

such a measure, although opinions about the amount to be loaned vary.

ING Bank estimates Romania's external financing needs vary between EUR 17.9 billion and EUR 25 billion, and could be even lower depending on how much the BNR pledges from its reserves. A similar package to the EUR 20 billion received by Hungary is desirable for Romania, say ING Bank representatives. BNR held EUR 25.9 billion in foreign exchange reserves in February this year.

Raiffeisen Bank estimates Romania's financing gap at between EUR 8 and EUR 17.2 billion, which, according to the bank, could be covered by BNR reducing its reserves and from loans from international financial institutions.

Corina Saceanu

GTS Telecom Romania posts 18.2 percent higher revenue of EUR 19.07mln GTS Telecom Romania, one of the main players on the Romanian landline telephony market, posted last year revenues of EUR 19.07 million, an increase of 18.2 percent over the 2007 revenue of EUR 16.17 million. The operational profit of the company (EBITDA) amounted to EUR 4.9 million during the same interval, which marks a 23.1 percent growth over 2007, when the same indicator was EUR 3.9 million. “Our strategy is to continue developing GTS Telecom, by first leveraging our regional group strength,” said Dan Mihaescu, country manager of GTS Telecom.

The firm is a subsidiary of GTS Central Europe (GTSCE). GTSCE posted revenue of EUR 436 million, a 10.1 percent increase over the 2007 figure.

The EBITDA grew by 8.5 percent, to EUR 77 million. The revenue and EBITDA performance was driven by the 19 percent increase in datacommunications services, boosted by both the growth of international telecom services and the infrastructure investments made by the group, to the tune of EUR 49 million in CAPEX. Commenting on the results, Adam Sawicki, CEO of GTS Central Europe,

said, “Recent strengthening of our management team coupled with various efficiency programs will allow us to better focus on and execute our core competency which is being the preferred provider of data and voice solutions to corporate and carrier customers in Central Europe”.

Gerald Grace, Group CFO, added, “The group continues to be focused on cash flow performance with operating cash flow of EUR 28 million in 2008 representing 45 percent growth on the previous year.”

Otilia Haraga BUSINESS REVIEW / March 9 - 15, 2009

CALENDAR / WHO’S NEWS

EVENTS, BUSINESS AND POLITICAL AGENDA MARCH 9 é 10.00 – WWF Dunare-Carpati Romania organizes press conference to

launch Earth Hour 2009 program, at Intercontinental Hotel, Rapsodia Hall.

MARCH 10 é 9.00 – Business Media Group organizes Tax, Law and Lobby event at

JW Marriott Bucharest Grand Hotel. For more information see www.brforum.ro. é 13.00 – Greenpeace organizes conference on nuclear energy, at K+K Hotel Elisabeta.

MARCH 11-12 é HR Club organizes the conference “The Strategic Partnership of the

Human Resources Function during Times of Economic Decline” at JW Marriott Hotel.

MARCH 16 é 18.00 – Accor Group and Domain de la Cavale organize event to

launch Domain de la Cavale French wine brand in Romania, at Novotel Bucharest City Center. Registration required.

MARCH 17-18 é LUXURYDAYS 2009 take place at Carol Parc Hotel.

MARCH 24 é Business Review Investment Awards take place at JW Marriott Hotel.

NEWS

WHO’S ROBERT REDELEANU is the new CEO of Scandia Romania, and also a board member of the company. He has wide experience in the FMCG industry.

For the last three years he has been working for Unilever Russia, Ukraine, and Belarus as marketing director for food products. He started his career at Unilever, and has held various positions in marketing and sales. From 2004-2006, he was head of marketing at Telemobil Romania.

He holds a degree in banking, and graduated from an executive program at Darden School of Business in 2009.

LAURA DANCIULESCU has joined KPMG as an advisory manager, part of the business performance services department. She will be dealing with business performance and restructuring. Danciulescu has 11 years’ experience working for leading Romanian companies. Her specialization includes development and business process restructuring, acquisition projects and IT system implementation, as well as project management. Danciulescu is a graduate of the EMBA program of the University of Asebuss-Kenessaw, Atlanta, USA. ADINA BASAG, 27, is the new group creative director at Graffiti BBDO. She

has been working in the advertising industry for the last six years, and has been with Graffiti BBDO for the past four. She holds a degree in advertising and mass media from the Bucharest SNSPA, and has won an Effie for the Banca Romaneasca campaign.

DR. WENZEL WEBER is the new general manager of Automobile Bavaria. He has been involved in the auto industry for the past 30 years, working for a premium brand in Germany. He has experience in organizing the sales structures of companies in the region, where he has been working for the past 10 years.

DAN GEORGESCU is now president of the Romanian Cable Operators Association AOTR, a non-profit organization supporting the interests of cable operators in Romania. A founder of AOTR, Gerorgescu was the president of the National Regulatory Agency for Communications from 2005-2008, and previously led AOTR in its first two years of establishment.

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

BR Awards near final voting stage The fourth edition of the Annual Business Review Investment Awards, which take place on March 24th at the JW Marriott, are nearing the voting stage. The jury has nominated several deals in each of the ten categories. Continental Wind Partners has landed nominations for Best Renewable Energy Project, while for the Real Estate Deal of the Year, the Upground sale was on the list along with the Atisreal-Cornerstone and CBRE-Eurisko deals.

Tuca Zbarcea & Asociatii, White & Case and Wolf Theiss have been nominated in the Law Firm of the Year category, while KBC and Capital Partners are on the list for the Financial Adviser of the Year. The M&A award will be contested by several deals, including the Raiffeisen-HVB Banca pentru Locuinte deal, Vienna Insurance Group-Unita transaction, AsibanGroupama, Heinken-BereMures and BUSINESS REVIEW / March 9 - 15, 2009

Advent-Labormed. Sopolec, with its Romania Green Building Council initiative is among nominees for Sustainable Business Practices. Arabesque, Genpact, EDY Group, Noble Telecom and BitDefender were nominated in the Growth Strategy category, with HVBRaiffeissen and the OPCOM initiative on the list for the Deal of the Year Award.

Ioana Momiceanu of Atisreal, Petrom’s Mariana Gheorghe and Camelia Sucu of Class Living were nominated for the Businesswoman of the Year award. The Businessman of the Year award is disputed by Florin Talpes of Softwin, Raiffeisen’s Steven van Groningen, Yorgos Yoannidis of Romtelecom and Friedrich Niemann of the Bucharest Hilton. The Annual Business Review Investment Awards are organized by BMG, publisher of this magazine. ■ 7

COVER STORY

By Otilia Haraga

LAURENTIU OBAE

Rubbish at recycling: players say that some local consumers need more education about green behavior

Obstacles litter the road to recycling Once a used product leaves the consumer’s household, it has a long journey until it is recycled. That is, if it is recycled. In Romania there is currently a great deal of waste, much of it historic, and recycling is still a new activity.

On the road from individual/company – retailer or collection association – recycling company – and again producer, there is bound to be problems.

10

According to pundits in this field, the Romanian legislation is close to European legislation in waste collection and management.

Government decision HG nr.

48/2005 was drafted based on the EU legislation (Directive 2002/96/EC) that has been in force since 2003. However, a draft has now been submitted by the European Commission to modify this directive, and this also applies to Romania.

According to representatives of the RoRec Association, which is in charge of the collection of Waste Electrical and Electronic Equipment (WEEE), there are still omissions in the modification project of HG nr.

448/2005.

“What is most serious is that it introduces stipulations that are contrary to the position of the industry, which could really worsen the problems that exist in this domain in Romania,” says Mihaela Serban, environment councilor within RoRec. Among the critical aspects, she mentions the lack of appropriate conditions in accordance with EU norms in which companies that process the WEEE can run their operations.

Another factor would be the establishment of a target for collection of the WEEE for producers as a percentage of the quantity of equipment they put on the market the year before (the non-fulfillment of this obligation is punished by their having to pay penalties to the Environment Fund run by the Ministry of the Environment). Moreover, the project avoids the setting-up of a coordinating and compensation organization of the Clearing House type.

This organization should decide on the obligations for taking over the WEEE that needs to be processed from the authorities in a way that is suited to Romania, as well as verify that these targets are met.

“Under these conditions, the project comes in conflict with the position of the European industrysuch as eCECED (European Committee of Domestic Equipment Manufacturers), EICTA (European Information & Communications Technology Industry Association) and WEEE Forum (European Association of Electrical and Electronic Waste Take Back Systems), who expressly stipulate the obligation that BUSINESS REVIEW / March 9 - 15, 2009

COVER STORY

STOCKEXCHANGE

Large quantities of waste still await recycling in Romania, much of it historical waste

local authorities continue to be responsible for the collection of waste from households given that they are the ones responsible for administering city waste.

“Thus, the principle of separation of duties according to which city halls should be responsible for waste collection from households and the producers should take over the collected WEEE for recycling is not respected. Imposing financial penalties on collecting associations for processes they are not responsible for and that they cannot control is a form of stealth tax,” says Serban.

She explains that in the waste flux there are multiple economic interests, which is why other “players” – apart from producers – act to bring it under their own control.

Moreover, all the economic agents that process the WEEE should respect minimum requirements stipulated in the environmental authorization, an aspect which is completely lacking from the draft, and encourages a situation that is contrary to EU norms.

“European experience and the reality in Romania show that where there are several collection associations authorized to administer the same categories of WEEE, it is necessary to set up a coordinating organization to assist producers in complying with their legal obligations,” says Serban.

At the moment, little is recycled from what already exists as historic waste (waste that appeared before the green tax was introduced).

“The problem lies in the differBUSINESS REVIEW / March 9 - 15, 2009

ence of mentalities of Romanians who will not give up their old equipment and in the lower level of income that does not allow them to upgrade various equipment more often. Last but not least, the necessary technology to put to good use certain waste material that resulted from dismemberment is missing in Romania,” says Nicolae Stanescu, manager at Sinergy SRL.

THE

ROUTE OF THE WASTE

The process of selective collection and recycling of electrical equipment is complicated. From the ecological point of view, it makes sure that dangerous elements in the structure of old equipment are eliminated.

There is also an economic perspective to be taken into account, since materials such as plastic, glass and metal are replaced in circulation for future production processes.

Last but not least, recycling also prompts companies to consider the technological perspective.

“For producers of IT and electronic products for public consumption, it has become a strategic option to rethink their technological processes and manufacture new products that are lighter, more compact and more environmentally friendly, which fulfills their commitment to both the protection of the environment and the requirements of a more informed and demanding consumer,” say representatives of the ECO TIC waste collection association.

In 2007, ECO TIC collected 379 tons of waste. A year later, the 11

COVER STORY

STOCKEXCHANGE

STOCKEXCHANGE

Waste may contain dangerous components that should only be recycled following certain EU norms.

amount collected by the association increased dramatically to 8,975 tons, 24 times greater than the quantity gathered the previous year.

“Given the international economic context that is affecting Romania as well, the association, which has signed contracts with 14 companies that are into WEEE recycling, estimates that in 2009 it will collect roughly the same quantities of electric and electronic waste,” said the association reps.

Individuals should take their used WEEE to the collection centers in their city of residence. Alternatively, they can also deliver them to retailers when they buy new such equipment (buy-back programs).

Companies can contact ECO TIC which will pick up their waste in certain conditions and based on a protocol.

The waste is stored in special containers and later shipped to the recycling companies.

Recolamp, the only organization in Romania that is in charge of collecting lighting sources, has 100 members, Romanian producers who put new lighting source products on the market and have transferred to the association the responsibility for waste collection.

Recolamp started last year to collect waste lighting sources, and has managed to gather a total of 158 tons of waste.

Eighty percent of this represent12

ed historic waste, which various parties had decided in the past not to abandon and throw away but to store.

“In 2009 we have committed first of all to intensely expand the collection infrastructure from 1,000 locations to at least 1,500 to create the means of increasing the collected quantities. It is very difficult to make a forecast of results for 2009 since our efforts must be accompanied by the understanding of the need for the recycling of this type of waste and thus, the consumer should be the one who places at our disposal the used sources he or she owns,” said Raul Pop, GM of Recolamp.

Currently in Bucharest over 160 companies have accepted or requested containers for selective collection of waste lighting sources.

Pop says collaboration with Recolamp does not cost companies anything since Recolamp pay for the entire logistic chain from placing selective waste recipients up to collecting the waste, transportation and recycling.

After the waste is collected and sorted out, some of it (compact lighting bulbs) goes to a manual recycler in Targu Mures and the rest (fluorescent and economic bulbs) go to a specialized company in Germany, since in Romania the technology to recycle this type of waste does not yet exist.

The recycled metals are dispatched to the foundries where they start a new cycle of life.

RETAILERS AND PRODUCERS GET INVOLVED IN WASTE COLLECTION Retailers and producers are another link in the chain of waste recycling. Vodafone has set up special collection points in its stores (160 in total) where users can bring their old mobile phones and accessories.

The handsets that are still functional are re-conditioned and reused in developing countries, thus facilitating access to mobile telephony services for users with limited financial resources. Those that cannot be repaired are taken apart and their components are re-used for manufacturing new equipment following a recycling process that takes place outside Romania.

Approximately 99 percent of a mobile phone can be recycled. “We are working with a partner, Regenersis Plc, which is in charge of recovering the components. The handsets and accessories collected in our stores are periodically sent to a central Vodafone collection point from where they are taken over by Regenersis,” says Angela Galeta, senior project manager for CSR at Vodafone Romania.

In the first year since the launch of the program in Romania, 4,410 handsets were collected, (43 percent of which could be repaired and reused), along with over 280 kilograms of accessories.

The company foots the bill for

running the “National Program for Recycling Mobile Phones and Accessories,” and any money made from recycling is donated to environment projects. “Last year, the sum that was obtained from recycling handsets was EUR 4,000,” says Galeta.

Altex also collects home appliances and electronic equipment in its Altex and Media Galaxy stores and organized a buy-back campaign, “Protect the Environment and Receive 15 Percent Discount” in partnership with Philips Romania and ECO TIC. Customers who brought an old piece of equipment received a 15 percent discount when they bought a Philips LCD or plasma TV.

RECYCLING COMPANIES WISH FOR MORE WASTE Representatives of the recycling companies say what and how much is recycled depends on how much is collected. “The target set by the EU for Romania was the collection of 4 kg per capita in 2008. However, the collected quantities were smaller, we have not yet reached 1 kilogram per capita,” says Corina Ursache, PR officer at GreenWEEE. So, in fact, it is not a problem of the recycling companies’ capacity for processing the waste but a question of the collection of the waste.

“The recycling problem could be solved if the collection system BUSINESS REVIEW / March 9 - 15, 2009

COVER STORY

BUSINESS REVIEW / March 9 - 15, 2009

that were processed should re-enter the circuit.

“The brute matter obtained through recycling is purely and simply directed towards those producers of light sources who wish to reuse it. But attention! What results from the recycling is a product that is more expensive than a new one and most of the time the organization that does the collecting is the one that has to foot the price difference, making sure that the recycling has fulfilled its target and new resources are not used,” says Pop. ■

STOCKEXCHANGE

were improved,” she says.

Once the waste reaches the recycling company, it goes through several stages until it is recycled effectively. First of all, someone must check whether the WEEE are still fit for use, after which the equipment is broken down into various components and then torn into bits. Then the resulting material is separated according to its kind, for example the metallic from the non-metallic material and the ferrous from the non-ferrous.

GreenWEEE has at this point a capacity of processing 50,000 tons of waste a year. The company can recycle nine out of the ten categories of electric and electronic waste and has three separate lines for recycling.

Depending on the type of material, the waste is then dispatched to various destinations. The metal goes the way of the foundries, the plastics are shipped to producers who use them in combination with other materials to manufacture various products and the glass is sent to producers of glass and cathodic tubes.

Polyurethane foam is incinerated for energy purposes. There are also dangerous substances such as freon, mercury, lead and cadmium that are incinerated.

At this point, recycling companies are in the process of expanding their activities. Romrecycling, one of the major recyclers of ferrous, non-ferrous and non-metallic material, with five waste processing points (in Bucharest – the Jilava and Berceni areas, Sibiu, Brasov and Alexandria), has recently opened three new ones – in Buzau, Chitila and Constanta. The company made a greenfield investment of approximately EUR 1.5 million in the Buzau unit and EUR 1 million in the Chitila unit, according to GM Bogdan Popoiu.

As far as the Constanta unit is concerned, “the company will roll out there about 10,000-15,000 tons of iron per month which is destined for exportation. Thus, Constants is an alternative for the contracts we have with the large iron and steel factories,” said Popoiu. Romrecycling posted a turnover of approximately EUR 125 million and processed on average over 230,000 tons of waste last year and aims to open other two recycling units in the near future.

Following recycling, “a new cycle of life” is created, since by law, a certain percentage of the materials

Recycling companies are waiting for the influx of waste that is collected to grow

13

INTERVIEW

COURTESY OF UNICREDIT

UniCredit Tiriac prioritizes health indicators rather than growth UniCredit Tiriac bank is looking at banking health indicators rather than growth this year, after seeing a drop in demand for loans and an increase in deposits, says ZOLTAN MAJOR, vice-president of retail banking. The bank has seen some customers struggling to meet repayments and others clearing much of their loans ahead of schedule, and is already working with some of those in trouble to restructure their credit.

By Corina Saceanu

To what extent do you expect UniCredit Tiriac to expand its branch network this year?

Last year we opened 100 branches, so we now have 240 in total. We want to see how the economy evolves, and the decision to continue opening will come if and when the economic situation gets better. We are assessing the performance of every branch, but we are not planning a massive closure. If we have to, we may consider, for example, relocating or downsizing, but that's a business-as-usual measure, not crisis-related.

How have the first two months of 12

this year been in terms of loans and deposits for the bank compared to the same period of last year?

We can clearly see that, as the crisis intensifies, uncertainty is growing in the market, and people are focusing on savings rather than loans. The demand for credit products has decreased, not only in our case, but at national level as well.

When it comes to granting new loans, we are looking very carefully at how borrowers can afford to repay those loans. Otherwise, we continue to give credit. We are also seeing a greater increase in deposits.

We have been able to grow consistently even in the fourth quarter of last year, when we grew our credit portfolio, and our deposit portfolio at a higher per-

centage than the loans.

Overall, from our standpoint, 2008 was a successful year. In 2009, the priority will be to maintain some key indicators – not growth. Indicators like loans-to-deposit ratio and cost-income ratio will be extremely important. This year we want to become more efficient and focus on increasing our quality of services. After banks’ high growth in recent years, it is good to have some time to settle and improve internal operations.

Everyone is talking about the crisis, but Romania is in a better position and can get through the crisis with relatively less pain than other countries. However, even in our case, this hysterical movement is becoming almost a self-fulfilling prophecy. People keep talking about the crisis and consumption drops, which leads to less demand for products, and it becomes a vicious circle. This is most worrying, because we can't see when it will end. So the role of the government is even more important than it normally is.

To what extent do you agree with the Romanian state helping banks or the banking system as a whole?

The most important help from the government will be to revive confidence in the economy. It is very important that president Basescu has encouraged people to go to banks and ask for loans.

These are the steps that can help the country, not direct financial help. From this standpoint, we have the National Bank, which is a very important player.

Of course, if a bank gets into trouble for whatever reason, the state has to handle that particular situation.

How long does it take nowadays for a customer to get a loan from UniCredit Tiriac?

It takes even less time than it did.

For private individual loans, it takes less than two days. Our UniCredit Consumer Finance subsidiary can actually grant a loan instantly to some customers. They can walk out with the credit the same day. The period has shortened because demand is lower, the number of credit files has decreased, so the time to assess a credit file is even shorter. If the customer has the documentation ready, it can be a matter of hours.

How much higher are costs for customers taking out loans now compared to last year?

The evolution of the country risk is the single most important driver at this point in time. At the beginning of last year, we didn't even look at the country risk, because it was a couple of basis points. Now it is at 700 basis points, so

the cost of financing has increased. The more people keep talking about the crisis and the more this filters through into the economy, the more the country risk increases, and it has increased for all the countries in Eastern Europe.

How much of the bank's portfolio is made up of mortgages? Have you already started seeing customers having problems paying back their debt?

About half of our retail portfolio is mortgages or mortgage-backed loans. It is difficult to assess the situation at this point, but we have seen a deterioration.

We have seen people repaying their credit partially, or failing to meet their full instalments.

We didn't want to grant loans in exotic currencies, so, overall, we are in a better situation. We are in a safe position compared to the situation at national level, and this is because we were very careful. We were one of the banks with the highest crediting standards even back then. Foreclosing is the worst case scenario, so we will work with out borrowers. We have implemented some measures for restructuring credits, like extending the term. We have already had such cases, not many but a few.

What's the status of changing your policy since the Central Bank softened the conditions of mortgage lending?

It is a matter of submitting our credit policies for approval and we are working on it. In the next couple of weeks we'll align our policy.

What was the level of provisions for UniCredit Tiriac last year?

In the last quarter the level of provisions began to increase. But let's not forget that one of the drivers for increasing provisions was the foreign exchange rate, because provisions for foreign currency loans are also in foreign currency.

The volatility of the EUR/RON exchange rate was a driver of that increase.

When do you think mortgage lending could re-start in Romania?

When confidence in the economy returns, I am absolutely certain the demand for mortgage products will increase. It won't be the overheated demand we have experienced in the last three years, there's no question about it.

But this will be a good thing. Some people also tip asset prices to go down, which is not good for the economy, as it makes people postpone their purchases, which impacts lending. Probably in the third or fourth quarter this year we will be able to see better through the clouds. corina_saceanu@bmg.ro BUSINESS REVIEW / March 9 - 15, 2009

Estates&Construction

MARKET

MARCH 9 - 15, 2009 / VOLUME 14, NUMBER 8

BUSINESS REVIEW FORUM

Manage your business environment !

Hungarian Ablon proceeds with Airport City project despite residential halt

COURTESY OF KING STURGE

The development, in the vicinity of Bucharest’s main airport, will provide both offices and mixed-use facilities

Hungarian group Ablon, which has halted its residential projects in Romania, is expected to start construction of its Bucharest-based, mixed-use project Airport City this year, according to King Sturge and Jones Lang LaSalle, the project’s appointed exclusive consultants.

Airport City is designed to provide offices and mixed-use facilities totaling 266,000 sqm, on a plot of 13.3 hectares located near Bucharest’s Henri Coanda International Airport.

The first phase is expected to provide

buildings from 15,000 to 50,000 sqm.

In February, Ablon Group, with gross assets of EUR 593 million, announced its intention to put on hold all its developments in Romania until a general improvement on the market, and said it would pursue only three projects in Budapest and Prague.

“In the current economic climate, the board believes it is in the interests of the shareholders to put a hold on our development projects. Until the time comes that credit lines from the banks are reinstated, we will only un-

dertake minor refurbishment and design projects," said Dennis Twining, chairman of Ablon, last month.

On the Romanian market, the developer previously announced the halting of work at one of its residential projects in Bucharest, Sunset Residences in the Drumul Taberei area.

The residential compound was initially estimated to require a EUR 200 million investment, with a market value calculated at EUR 300 million last year.

Magda Purice

ESTATES & CONSTRUCTION MARKET

Holcim Romania bucks group’s downward trend with increase

COURTESY OF HOLCIM

Romania was among the group’s growth drivers

The Romanian subsidiary of the Swiss group Holcim posted a 31 percent increase in turnover in 2008 to reach EUR 352 million, due to the company’s volume growth of 18.9 percent and price rises of 12 percent, representatives said.

The financial results attained in Romania exceeded the company’s previous estimate of up to a 20 percent increase in turnover. Contrasting with the group’s general falling financial results, its sales in South-Eastern Europe were sustained by growth registered in Romania, Bulgaria and Adjerbaijan.

According to the company’s official data, Holcim has entered into a syndicated loan facility agreement of about EUR 271.4 million with a group of Swiss

banks arranged by Zürcher Kantonalbank, to be used to refinance existing debt and to optimize the capital structure.

Overall, the Swiss group posted net sales of EUR 15.8 billion in 2008, losing 3.5 percent since 2007, against the background of a sharp economic slowdown which has led to a recession both in North America and in parts of Europe, according to the company’s overall financial report issued in February.

But the picture was not entirely bleak. “Even though the global economy lost further momentum in the second half of the year, trends in the growth markets of Latin America, Africa, Asia and Eastern Europe were predominantly positive,” the group said.

The document predicts a difficult 2009 for the construction and building materials sector, keeping the same decreasing track of the previous months on the markets on which the group is active.

Holcim expects a decline in demand but has refrained from making any other estimates due to the lack of key forecast data on the trends on global economies.

This year, the group will focus on maintaining its financial stability, according to its two key representatives, Rolf Soiron, chairman of the board of directors, and Markus Akermann, CEO of Holcim Group.

Magda Purice

Pullman Bucharest World Trade Center opens its doors

Militari Shopping Center to open in April with C&A and Decathlon on board

BUSINESS REVIEW / March 9 - 15, 2009

will cover 170 sqm within the complex and the chain will be operated under franchise by the Romanian company Tritex, which has been active on the local retail market since 2001.

This year, Tritex aims to invest EUR 500,000 in the development of the Imaginarium network. Other tenants which will open their doors within the complex in April are Humanic, Hervis, Leonardo, Deichmann, dm and Adidas.

“Militari Shopping Center is aiming to become one of the main Bucharest-based commercial centers,” said Ion Olteanu, manager of the complex. The space rental within the center is being conducted by Krammer & Wagner Project Development, while Manhattan Real Estate Management, part of Atrium European Real Estate Limited, is managing the spaces.

Magda Purice

On February 23th Pullman Bucharest World Trade Center opens officially its doors with a press conference, organized by Diana Metiu International.

Accor, number 1 in Europe and one of the most important hotelier chains all around the world, is present for more than 40 years in 100 countries, having more than 150,000 employees and offering hotels like: Sofitel, Pullman, Novotel, Mercure, Suite hotel, Ibis, All Seasons, Etap Hotel, Formule 1 and Motel 6. The offer comprises more than 4000 hotels with 500,000 rooms.

With Pullman, Accor is reinforcing the coherence of its brand portfolio in order to impose itself as a major player in the upscale hotel segment. The Pullman brand is the perfect complement to Accor's current portfolio of non-standardized brands, alongside Sofitel in the

luxury segment, Mercure in the midscale segment and All Seasons in economy accommodations.

The Pullman hotels in Romania came as an answer to the market request. Pullman’s offer containing new services welcomes in the most appropriate way the business clients and their needs.

The rooms are first and foremost a place to rest and relax thanks to the comfort and quality of the Pullman bed.

They are also equipped with WiFi access, a cordless phone, a webcam and an office corner, allowing business travelers to keep in touch with the office and their families. A "docking system" offers a simple, practical way of recharging the different devices and equipment: laptops, digital cameras, USB keys or Smartphones.

ADVERTORIAL

Militari Shopping retail park, which required an estimated investment of around EUR 70 million by Land Development Proiect, part of Atrium European Real Estate Limited, will open as scheduled at the beginning of April, the company has announced.

The development’s commercial area comprises 51,400 sqm of rentable area which will host 61 shops and anchors such as IT&C firm Media Galaxy, Domo and a Praktiker DIY unit. French retailer Auchan is paying EUR 20 million to rent a 12,500-sqm hypermarket within the complex.

The complex’s fashion galleria brings several debuts on the Romanian market, such as C&A, Mladinska and Imaginarium, plus first entries on the Bucharest market like New Yorker. Decathlon will also open its largest shop in Romania at the venue. Imaginarium

17

ESTATES & CONSTRUCTION MARKET APARTMENTS AND VILLAS TO LET

ATLAS Q l HERASTRAU (BANEASA) – new villa (for office or residence), 150 sqm., 5 rooms, 4 bathrooms, unfurnished, equipped kitchen, A/C, small yard – 2300 EUR/month.

l TRIUMPH ARCH – apartment in block: living, 2 bedrooms, bathroom, furnished, A/C – 900 EUR/m. l BANEASA (ANTENA 1) – apartment in new building: living, 3 bedrooms, 3 bathrooms, furnished or unfurnished, garage, terrace, A/C – 2400 EUR/m.

l PRIMAVERII – luxury apartment new building: living, 3 bedrooms, 2 bathrooms, terrace, furnished or unfurnished, A/C, garage – 4500 EUR/m. l PRIMAVERII – apartment in new building: living, 3 bedrooms, 3 bathrooms, terrace, A/C - 2600 EUR/m. l HERASTRAU – apartment in new building: living, 3 bedrooms, 2 bathrooms, balconies, A/C, garage – 2800 EUR/m. l DOMENII – apartment in villa: living, dining, salon, 2 bedrooms, 2 bathrooms, old style furniture, garage, garden – 2000 EUR/m.

… and many other similar options.

Phone/fax 312.42.10 Mobile: 0722.574.201(2) agency@atlasq.ro www.atlasq.ro 18

Last year, the retail team increased its income by 82.7 percent, having leased over 60,000 sqm of retail space.

“The residential team managed to maintain strong turnover for 2008, in spite of the slowdown in sales for the medium-class newly built apartments during the second half of the year,” said company representatives.

The primary source of income for the residential department was the upper premium and luxury segment, they went on.

Staff

Impact tots up EUR 3.5 million from 25 Greenfield deals in February Impact, the local developer and contractor developing the residential compound Greenfield I in northern Bucharest, has reported securing EUR 3.5 million from 25 signed deals and nine sales agreements for the homes in its Greenfield project.

According to the firm, this is the second month in a row when it has registered growth, after the weak results posted in November and December 2008, when the company managed to sign 16 sale contracts. Impact attributes the improvement to the latest financial solutions being offered for a housing deal within the project.

“The deals we signed in February are 50 percent higher than the 2007 level. This time, we have focused on housing solutions and financial options to substitute for the liquidity

Prices in Greenfield I are down 14 percent

shortage on the market,” said Carmen Sandulescu, Impact’s CFO. The new conditions have hit prices. Within Greenfield I, the aver-

age sales price has dropped 14 percent compared with 2008. A built sqm is being sold for around EUR 1,500, a similar level to prices in 2007. At the end of last year, a 53sqm Greenfield studio went for EUR 91,600 including VAT, while renting this kind of property would cost an estimated EUR 440 per month, according to Sandulescu.

The Greenfield I project consists of 676 apartments and houses delivered as part of a first development stage at the beginning of the first semester of 2009. Impact representatives said that 430 apartments have been contracted so far. The project is part of a wider development which will cover 60 hectares by completion time.

Magda Purice

Colliers shuts down residential department, vice-president departs Real estate consultancy company Colliers International has closed down its residential department on falling sales on the residential market, while vice-president Horatiu Florescu, who was in charge of office leasing, has left the firm.

The company evaluated EUR 8 billion of properties last year in Romania, with most of the work coming from investment funds and developers, representatives have said.

The sum includes both the value of existing buildings and the residual value of land.

In previous years, Colliers saw mainly demand for individual valuation, linked to large privatizations, but expects the customer profile to change this year.

Collaboration with the firm’s

LAURENTIU OBAE

l BANEASA: – villa in compound: living, dining, 3 bedrooms, 3 bathrooms, A/C, garden, garage – 2500 EUR/m.

Tim Wilkinson, MD of DTZ Echinox

LAURENTIU OBAE

l DOWN TOWN – apartment in new building: living + dining, 2 bedrooms, 2 bathrooms, balconies, modern furnished, A/C, garage, guard – 1800 EUR/m.

Real estate consultancy firm DTZ Echinox posted a EUR 5.7 million turnover in 2008, a 35.7 percent growth compared to 2007.

The company has registered in particular substantial revenue in its valuation retail and residential businesses.

The valuation department’s income grew by 31.5 percent in 2008, with clients such as Avrig 35, Impact, GTC, Adama, AFI, Red Management, Petrom, Future Group, CCCF and Nepi Investment. In 2008, DTZ Echinox valued properties totaling EUR 3 billion.

COURTESY OF DTZ

l HERASTRAU – apartment in new building: living, 2 bedrooms, 2 bathrooms, balcony, luxury furniture, A/C, guard1600 EUR/m.

DTZ Echinox grows turnover by 35 percent in 2008

Colliers is now operating on a different market

other departments, which have eased access to real market information, have helped in the process, said Colliers representatives. “Last year, Colliers International was the

evaluator of the biggest real estate portfolio in Romania, which belongs to Austrian investment fund Immoeast. The fund has recently had a write-down of its portfolio in Romania, where it has also frozen future investments.

Colliers International posted a EUR 17.6 million turnover last year in Romania, down 17 percent on the previous one. Colliers was the biggest real estate consultancy firm in Romania turnover wise in 2007, when it accounted for EUR 21.2 million. At end-2007, the company estimated an increase in revenue of 30 percent for last year, but it changed its outlook several times during the year, due to the downturn on the real estate market.

Corina Saceanu BUSINESS REVIEW / March 9 - 15, 2009

ANALYSIS es was the financial expenses incurred by the company, caused by the unfavorable exchange rate and cost of loan interest,” Constantin Roibu, Oltchim’s general manager, told Business Review.

But a question still remains: how did a company that exports 75 percent of its production not hedge the risk?

SHAREHOLDER NOT HAPPY WITH PROPOSAL

MEDIAFAX

Fuel to the fire: Oltchim’s woes have been compounded by the exchange rate and high interest rates

Oltchim keeps fingers crossed for EC rescue plan approval Local petrochemical producer Oltchim needs a EUR 620 million shot in the arm, for which EC authorization is needed. Company officials say that part of the sum represents state debt converted into shares and the rest loans for which state warranties might be asked. Constantin Roibu, Oltchim GM, tells BR that the company’s first priority this year is to integrate its raw materials supplier, the petrochemical division Arpechim, into Oltchim operations – a costly plan as the company has been put in the E risk category for banks, which means high interest rates.

By Dana Ciuraru

BUSINESS REVIEW / March 9 - 15, 2009

DARING

INVESTMENT PLANS

The Oltchim management has announced a bold EUR 485 million investment plan. “Oltchim’s number one priority is to integrate the petrochemical part of Arpechim into our operations, as we are dependent on it – it is our main source of raw materials. Our target is to integrate this petrochemical division by April this year,” said the Oltchim GM. According to him, the company is

Oltchim in figures 2004 2005 2006 2007 2008 2009*

Turnover (EUR mil) 339 398 492 525 529 646

Net profit (EUR mil) 20.6 6.2 2.5 -28.8 -61.3 5

No. of Employees 6048 5432 5048 4836 4836 -

SOURCE: FINANCE MINISTRY, OLTCHIM

The rescue plan for local petrochemical producer Oltchim Ramnicu-Valcea will this week be on the European Commission (EC) table. The solutions stipulated in this document could be termed state aid, which is why the plan needs EC approval. The document stipulates a conversion of the debt to the Romania state and an investment plan for which the company is looking for financial support from the major local banks and a state warranty.

But how has a company which in

2004 posted a net profit of EUR 20.6 million come to need a rescue plan?

The decline of Oltchim started in 2005, when the company reported a drop in net profit of 65 percent y-o-y.

The poor results didn’t stop here. In 2007, Oltchim reported EUR 28.8 million in losses, which last year almost doubled.

Company officials say that last year’s poor result was partially because the company was functioning at half capacity.

“During Q4 of last year, the prices of our products dropped by 30-50 percent.

But the main reason for last year’s loss-

“Oltchim’s investment program for this year is estimated at EUR 620 million. From this sum, some EUR 135 million represents debt to the Authority for the Recovery of State Assets (AVAS) – which controls a 53 percent share package – a debt which the authority plans to convert to shares by increasing the share capital,” Roibu told BR. The Oltchim management’s intention brought a vehement reaction from the main minority shareholder, the German company Petro Carbo Chem (PCC SE).

“We are afraid that this solution could be illegal state aid. If the EC thinks so too, what will Oltchim do then?

Moreover, only minority shareholders will put up money for these debts, or the state will just get more shares in the company. This is not a real rescue plan for Oltchim,” Wojciech Zaremba, business development director at PCC SE, told BR. According to him, for PCC SE, the debt conversion will mean paying out several million euros in order to keep its share package in the company. “PCC SE has the money because it sold its rail business to Deutsche Bahn. We are ready to invest in Oltchim, but we don’t want to see the results on paper only,” said Zaremba.

currently in negotiations with several big banks on the local market over a loan.

Silviu Pandrea, Oltchim legal representative, said that the company “is considering the possibility of asking for state a guarantee for the loan.” Oltchim previously asked for a state warranty for a loan which it was unable to pay back, thus increasing its debt to AVAS. The Oltchim management believes that without help from the state, it faces an uncertain future. “If we manage to integrate the Arpechim petrochemicals firm into our operations, we will have direct and unlimited access to raw materials resources, which will enable us to function at maximum capacity. We know that there is demand for Oltchim products in the region, which will produce the necessary cash to repay the loans,” said Roibu.

According to company information, Arpechim would need EUR 100 million in investment for modernization. “There are ongoing negotiations for the takeover but no figure has been made public,” added the GM. According to Oltchim, after the merger with Arpechim, the total turnover is expected to reach EUR 646 million and the net profit to stand at EUR 5 million, while by 2013 – the year in which the company estimates it would restart paying back its loans – it is expected to generate a turnover of EUR 975 million and a EUR 81 million net profit.

The PCC SE official said that even some of the investments made up until now are not yet producing results. “They don’t have any real business solutions, only an administrative one: to get help, to get state warranties,” said Zaremba.

The predicted results of this rescue plan may look good on paper, but the reality isn’t so rosy – even the Oltchim official admit that “because of its low share capital, Oltchim has been put in the E risk category, which means a high interest rate for loans.”

Oltchim’s rescue plan relies very much on state support, but what if the EC says “no”? What back-up plan does Oltchim have? dana.ciuraru@bmg.ro

*Company estimates 19

ANALYSIS ”In car parks with repossessed vehicles, about 50 cars and some 50 light commercial vehicles are currently available for sale, most of them recovered in the last threefour months,” Felicia Relenschi, GM of the leasing services division of GE Money, told Business Review. Mihaela Mateescu, Raiffeisen Leasing GM also confirms that the company has up to one hundred repossessed items, most of which are cars.

But how come a market which has almost doubled in the past three years is facing such difficulties?

LEASING

MARKET DROPS DOWN A GEAR

STOCKEXCHANGE

Going nowhere: many drivers are having their vehicles repossessed after failing to make payments

Leasing companies become car dealers to recover debts Leasing companies with operations on the local market are reporting a steady increase in repossessions, especially of cars and commercial vehicles.

This phenomenon started toward the end of Q3 of last year, when the financial crisis began. Currently, leasing companies say they are forced to become car dealers in order to recover their debts, never mind turn a profit.

By Dana Ciuraru

20

REPOSSESSION

ROAD

“Repossessing a car from a customers is a last resort, and it isn’t a solution we offer to everyone. It isn’t a solution to boost the car fleet either,” said Adriana Ahciarliu, ALB general secretary. This way of thinking is shared by the management of various leasing companies.

“We have a plan for customers who get into financial difficulties. Following a detailed analysis, we identify one or more solutions to offer to our customers, like the postponement of monthly payments or contract restructuring. For this analysis we request various information to ensure that the difficulty they are claiming to be in is genuine,” said the GE Money representative.

According to her, for almost 90 percent of the requests received, the company manages to come up with concrete proposals, thereby minimizing repossessions.

Raiffeisen Leasing’s GM said that there is no one-size-fits-all solution, but each customer is evaluated independently. “We offer a certain kind of help to customers who have contracts with the state, and another to a private company which has lost some of their contracts and can’t make monthly payments,” said Mateescu. Relenschi said that the majority of leasing companies require a post-dated check before signing the leasing contract, but this isn’t enough to recover the debt.

The problems will not stop here for the leasing companies. It is difficult to make an assessment of what rate repossessions will reach.

Specialists say that it could amount to several thousand cases, compared with just few seen annually up until now. dana.ciuraru@bmg.ro

COURTESY OF GE MONEY

The BT Leasing website lists in its special offer category at least 50 cars, light and heavy commercials. A Mercedes ML 270 CDI from 2003 is going for EUR 20,000, and a Mercedes C200 CDI for EUR 11,000 both including VAT. Similar adverts can be found on the GE Money website, and those of other significant leasing companies active on the local market.

The fact that more and more

companies and individuals are finding themselves unable to meet their installments for goods bought under a leasing contract is obvious, from the first moment one enters a leasing firm.

For instance, at the headquarters of Raiffeisen Leasing, one of the highest-profile companies on the market, there are two display boards listing cars repossessed from customers who can no longer afford to pay for them, and which are being put up for sale by their rightful owner, the leasing company.

”Despite the fact that Q2 is traditionally a good period for the financial leasing market, in the second part of last year the market started to fall. This drop was the result of the pollution tax – which stifled the new car market – and of the financial crisis, which started towards the end of Q3 of last year,” said Relenschi.

And the data gathered by the Leasing Companies Association (ALB) confirm this scenario. While at the end of Q2 the local leasing market reached EUR 1.5 billion, in Q3 the market dropped by 12 percent quarter on quarter, and Q4 saw an even more dramatic drop of 60 percent. The market now has total assets of EUR 4.8 billion, a 2.6 percent decrease y-o-y. “There have been delays in payment from customers, because the exchange rate evolution has increased the pressure on our clients, who for the same monthly payment in EUR are paying more RON,” said the GE Money official.

According to her, repossessed cars are sold either through other specialized companies or directly.

“The resale of repossessed cars isn’t a profit-making strategy but one by which we can reduce our losses.

We don’t always manage to recover all our expenses. It is difficult to resell a used vehicle, as market dealers are currently offering significant discounts on new cars,” said Relenschi.

The Raiffeisen Leasing GM added that such cars have a resale period of up to three or four months. “Until now we have made a loss on only 15-20 percent of repossessed items. This resale represents a business opportunity for small companies who want to buy second-hand cars, because the leas-

ing companies are not looking to make a profit, but only to recover their debts,” said Mateescu.

Felicia Relenschi of GE Money leasing division BUSINESS REVIEW / March 9 - 15, 2009

FILM REVIEW

FILMREVIEW: Milk

Milking it: Harvey celebrates political victory

America’s most famous human rights activists have often died young. Although not a household name like Martin Luther King or Malcolm X, Harvey Milk earned his place in the pantheon. The first ever openly gay man to be elected to public office in the US – or “any substantial political office in the history of the planet” as Time magazine put it – Milk was gunned down in 1978 after less than a year in the job, but not before taking on the might of the anti-gay American right and striking a powerful blow for the LGBT community. This biopic charts his rise from disillusioned former insurance salesman to ground-breaking gay rights leader and ultimately martyr.

Harvey Milk came to politics relatively late. We first see the character (brilliantly played by Sean Penn) as a 40-year-old New York drifter, unhappy with his life and seeking change. He and boyfriend Scott (James Franco) move to San Francisco and set up a camera shop, which over time becomes a hub for the gay community in the workingclass Castro neighbourhood. Milk’s hippyish demeanour belies his business nous, and he is soon mobilising youngsters for the gay cause, starting a movement that culminates in his running for local office.

Despite several failed attempts, Milk doesn’t quit. He ditches the pony-tail and jeans, and with his committed campaign team eventually wins a seat on the San Francisco Board of Supervisors. The victory is not without sacrifice: Harvey loses first Scott, and then unbalanced new lover Jack (Diego Luna), neither of whom can compete with his devotion to his goals. He must also deal with a deteriorating professional relationship with fellow supervisor Dan White (Josh Brolin), an Irish-American former police officer, whose conservative, family values conflict with Milk’s progressive agenda. But his main political BUSINESS REVIEW / March 9 - 15, 2009

fight is against Proposition 6, a motion to ban homosexuals and their “sympathisers” from teaching in California’s public schools.

Although the events portrayed in the film occurred in the 1970s, it is depressing how relevant they remain. Some thirty years after Proposition 6 was defeated, last year’s Proposition 8, also in supposedly progressive California, successfully abolished same sex couples’ right to marry.

Openly gay US politicians are still a rarity at any level, entirely absent from high office, and while one huge glass ceiling has recently been broken it is hard to imagine a gay person could become president any time soon.

Milk endured the expected hostility, from low-level street harassment and insults to death threats.

Aside from its gay theme, the movie works as an inspiring parable about never giving up, despite the odds and opposition. Its power lies in Penn’s superlative, Oscar-winning performance. He inhabits the role.

Milk’s only flaw is its length: two hours, though long for a film, is not enough to answer all the questions this fascinating story raises. It would have been interesting, for example, to learn more about the politician’s killer, who was not a random nut, but someone known to him.

The murderer’s only real motive, according to the movie, is a hint that he might have been a closet homosexual, something for which there is no substantiation, in real life or in the movie.

The part was originally to go to Matt Damon, whose past turns as mysterious assassins Jason Bourne and Tom Ripley may have helped him bring more colour to the role.

As it is, the murderer’s psyche remains a blank slate.

But despite his and other supporting characters’ lack of sufficient screen time and psychological exploration, this is an important, absorbing film, as much about the milk of human kindness as about Milk the politician.

Debbie Stowe Director: Gus Van Sant Starring: Sean Penn, Josh Brolin 21

EVENTS

Civil Society Gala invites applications

Save the Children sets up mental health center for young children

STOCKEXCHANGE

Mental health issues are best tackled early

Grass roots organizations are invited to submit their projects for the Civil Society Gala

The Civil Society Gala, which awards and promotes the best projects developed by NGOs, has invited entries for its seventh edition.

This year brings a new category called “Budget -/ Efficiency +,” for NGOs that reach their targets using limited money, by involving volunteers and other non-financial resources such as local communities and beneficiaries.

There will be three prizes per section compared to just one in previous years.

“We believe the changes we have

made this year in the competition are a natural step in our initiative to offer visibility to as many NGOs as possible, both by opening the way for organizations with limited resources that have implemented projects with real impact but also by involving more people who are very active in Romanian civil society,” said Andrei Bortun, GM of Millenium Communications and initiator of the Civil Society gala project.

The competition is open to associations and foundations, initiative groups, unions and individuals.

Otilia Haraga

Save the Children Romania will help set up a Communitarian Center for Mental Health in Bucharest. The project is intended to develop and implement communitarian mental health services for children of up to six years of age and also contribute to improving the competence of health and education professionals.

“We estimate that approximately 40 percent of children of up to 6 years old and their families will be the direct ben-

Foreign artists hold exhibition in Bucharest

LAURENTIU OBAE

Trolley dash: shoppers spent less time in stores

Romanian consumers spent more last year, but visited stores less frequently, according to a study by GfK market research company.

Traditional commerce, meaning corner shops, served fewer customers than modern retail formats, like hypermarkets and discounters.

The latter cover 41 percent of the to22

LAURENTIU OBAE

Shoppers splash more cash but go less often to stores, study shows tal value of consumed goods last year, a slight increase on 38 percent in 2007. The percentage is even higher for Bucharest, where 71 percent of spending goes to modern retail.

More than half the Romanian families spent money in hypermarkets last year, visited them more frequently and spent 25 percent more on their purchases than in 2007.

Traditional trade formats attracted fewer and fewer shoppers, and their drop in market share is more pronounced throughout the country than in Bucharest, where the number stayed relatively constant.

The capital has also witnessed customers shopping less frequently in hypermarkets and supermarkets, while only discount stores have managed to convince shoppers to pop in more often.

Staff

eficiaries of the communitarian mental health services that will be offered in the Prof. Dr. Alexandru Obregia Clinical Psychiatry Hospital starting this spring,” said Gabriela Alexandrescu, executive president of Save the Children Romania.

The project is being financed through a Phare program.

Studies show that the first three to seven years of life represent the optimum period for promoting social and emotional health and preventing mental health problems.

Pre-school children who are exposed to family conflict, parental health problems or poor behavior management are much more vulnerable to developing mental health problems at school age and as adults. Up to 75 percent of preschool children with behavioral issues continue to manifest these problems even after the age of 6. If there is no intervention to correct problems such as aggression, antisocial behavior and anxiety, they will be harder to deal with after the age of 8.

Otilia Haraga

The exhibition Today in History, a “joint venture” – the first in Romania – by artists Ahmet Ogut & Jakup Ferri, was officially opened last week and runs until April 15 at the Center for Visual Introspection. The works of the two artists are deeply rooted in everyday reality and its comic, poetic and sometimes conflicting situations. The exhibits are at the border between sociology and performance and combine drawing, films and books which offer a subjective reflection of the current state of the public and private space.

Second Testa Rossa coffee shop opens in Baneasa Shopping Center Italian Coffee Concept, controlled by Marius Ghenea, has opened the second Testa Rossa coffee shop franchise chain location within Baneasa Shopping Center, at a cost of EUR 200,000. The businessman is considering opening up to 10 Testa Rossa coffee shops in the next three to four years, with an estimated budget of EUR 1.6 million. Testa Rossa is the result of a franchising contract with the Austrian group Wedl.

BUSINESS REVIEW / March 9 - 15, 2009