Business Review Issue 7, March 2-8, 2009

UNILEVER BUYS FRIESLAND ICE CREAM DIVISION; SEE NEWS ON PAGE 6 NEWS

RBS Romania is up for sale as the mother bank has decided to reorganize worldwide operations following massive financial losses See page 4

INTERVIEW

Richard Moat, CEO of Orange Romania, says the company is looking at an investment budget of EUR 200 million for this year, similar to that of 2008 See page 16

FEATURE

Consultancy firm WSP Group is focusing on energy efficiency, renewable energy and infrastructure projects to help it weather difficult times See page 18

BUSINESS REVIEW www.business-review.ro

ROMANIA’S PREMIERE BUSINESS WEEKLY

MARCH 2 - 8, 2009 / VOLUME 14, NUMBER 7

TOUGH TIMES IN STORE

Retail Group, the firm in charge of leasing the space in Cocor Luxury Store, currently being refurbished, is having to adapt to falling rents and retailers’ push to delay store openings LAURENTIU OBAE

See pages 10-11

BUSINESS REVIEW ROMANIA’S PREMIERE BUSINESS WEEKLY

MARCH 2 - 8, 2009 / VOLUME 14, NUMBER 7

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

Managing Director RACHAD EL JISR Sales Manager GIUSEPPINA BURLUI Advertising Sales IULIAN B~BEANU ANA MARIA MARDAN Events Manager OANA MOLODOI

Journalists

Marketing Consultant

DANA CIURARU

GABRIELA ENESCU

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

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BUSINESS REVIEW / March 2 - 8, 2009

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NEWS

BRIEFS SIXT NEW KOPEL BUYS AAA AUTO LOCAL OPERATIONS é Operating leasing company Sixt New Kopel and second-hand car dealer AAA Auto have joined in creating AAA New Kopel, in which Sixt New Kopel will hold 95 percent.

AAA Auto, controlling 5 percent, will have the option of increasing its package to 49 percent. Sixt New Kopel currently has offices in Timisoara, Cluj-Napoca, Sibiu and Brasov.

HENKEL ROMANIA POSTS EUR 160 MLN TURNOVER é The Romanian branch of Henkel, the German producer of cosmetics,

Royal Bank of Scotland's local subsidiary RBS Romania, recently rebranded from ABN Amro, is up for sale after the bank's mother group decided to dispose of its non-core assets in the next three to five years. The move comes despite the local bank turning a profit, and being among the most solid banks in Romania, according to Romanian Central Bank governor Mugur Isarescu.

RBS Romania’s president, Peter Weiss, said that this was a strategic group decision and that it did not reflect the bank’s situation or its market position and performance.

After posting a EUR 28 billion loss last year, RBS has decided to restructure and put its subsidiaries into three categories. Romania is among the countries in which the group is exploring new ownership, which also includes Argentina, Slovakia, Chile and Venezuela, among a total of 15 coun-

LAURENTIU OBAE

Bucharest, Iasi, Bacau, Constanta,

RBS Romania up for sale on mother bank's list of disposable assets

The bank re-branded in Romania late last year

tries, according to an RBS presentation to its investors. In Romania, the bank currently has a network of 27 branches in 15 cities.

RBS said the credit and market

losses in concentrated areas around proprietary trading, structured credit and counterparty exposures had affected its results, and that over half of these losses pertained to the ABN Amrooriginated portfolio. The group intends to shift around 20 percent of funded assets to its non-core division, admitting these non-strategic areas to RBS also include some highly valuable businesses. The bank’s exposure to CEE and Central Asia is among the lowest in the group, under 10 percent, while almost half of its portfolio exposure lies in the UK. The local division of ABN Amro Bank, present on the market since 1995, re-branded as RBS Romania following ABN Amro's EUR 70 billion takeover last year by a consortium made up of Royal Bank of Scotland (RBS), Fortis and Banco Santander.

Corina Saceanu

detergents and adhesives, posted a turnover of EUR 160 million in 2008, and a 24 percent hike in operating profit compared with the previous year when it made EUR 31 million.

The result put the Romanian firm among the group’s best growing companies in the CEE region. Its Russian operation posted a 28 percent increase while the Bulgarian subsidiary posted a 20 percent rise in operating profit.

ARCELORMITTAL TUBULAR PRODUCTS LOSES EUR 48 MILLION IN 2008 é Steel tubes producer ArcelorMittal Tubular Products Roman increased its losses to EUR 48.34 million in 2008, following increased expenses of 15 percent y/y, the company said. It maintained the same turnover of EUR 245.31 million in 2008, while expenses reached EUR 293.64 million in the same year.

ArcelorMittal Roman, formerly Petrotub, was taken over in 2003 by the Mittal Group, the owner of the former platforms of Sidex Galati, Siderurgica Hunedoara, Tepro Iasi and Romportmet Galati.

4

International banks pledge EUR 24 billion for CEE lending support A group of international investors and lenders in Central and Eastern Europe have pledged to offer support to banking sectors in the region and help fund the businesses which have been hit by the global economic crisis. The European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank (WB) said they would provide up to EUR 24.5 billion to achieve this by deploying rapid financial assistance to support lending to the real economy through private banking groups, in particular to small and medium-sized enterprises. The financial support will include equity and debt finance, credit

lines and political risk insurance. The EBRD has already offered a financial package to Banca Transilvania for SME lending, while BCR is looking at a EUR 100 million loan from the European bank.

The EBRD will provide up to EUR 6 billion for the financial sector in 2009 and 2010 as equity and debt finance, to banks and directly to SMEs, and trade finance. The EIB will put EUR 11 billion into SME lending facilities in Central, Eastern and Southern Europe, of which EUR 5.7 billion is already available. The World Bank Group will provide support of about EUR 7.5 billion.

EBRD president Thomas Mirow

recently said the crisis could wipe out two decades of economic reforms in Central and Eastern Europe and international support was needed to avoid this scenario becoming reality.

The EBRD recently announced it would increase investments in Eastern Europe this year, although it posted a EUR 602 million net loss last year.

“The loss will not affect the bank’s investment plans as the EBRD remains very strongly capitalized. The bank is planning to invest around EUR 7 billion across its countries of operations this year, compared with EUR 5.1 billion in 2008,” representatives said.

Corina Saceanu

Pullman sees low January occupancy, expects revenue to fall this year The recently rebranded four-star hotel Pullman witnessed a drop in occupancy rate to 44 percent in January this year, compared to the average rate of 70 percent last year, while the hotel's total revenues dropped by 30 percent in the same month on the previous. “What we saw in January and February was very bad, but we'll know the precise trend at the end of March.

We have been extremely affected,” said Bruno Vinette, general manager of the hotel. The Bucharest hotel market in general has witnessed drops in

occupancy rates in the first two months of this year, between 40 and 50 percent on average.

The former Sofitel hotel, rebranded as Pullman at the end of last year, said it had posted a EUR 9 million turnover last year, and that this year's revenues would fall. “For sure we'll feel a drop,” said Vinette. The hotel, owned by World Trade Center Bucharest, expects to achieve a 68 percent occupancy rate this year, despite the low performances in January and February. The 203room facility, whose customers are

mainly business travellers, is part of the Accor hotel group, which also runs the Novotel and Ibis units in Romania.

The chain could further affiliate hotels in the country, with a target in Timisoara suitable for a Novotel unit, as well as in Cluj and Brasov.

World Trade Center Bucharest is owned by several companies, including the Property Fund, Bucharest Municipality, SIF Muntenia, Pullman International Hotels, Debarth and Bouygues Batiment International.

Corina Saceanu BUSINESS REVIEW / March 2 - 8, 2009

NEWS

BCR doubles 2008 profit on insurer sale, listing no longer in sight

LAURENTIU OBAE

BCR’s profit was boosted by the insurer sale

The largest local lender assets wise, Austrian-owned BCR, saw a two-fold increase in its net profit last year on the previous, to EUR 541 million, the bank has reported. Moreover, BCR has become the most efficient bank in the portfolio of its owner Erste, according to the group's representatives.

BCR's results last year included the positive impact of the sale of its insurance business, which helped it reach the highest level in the history of the BCR Group. However, excluding the revenues from the sale of BCR’s minority shares in Romanian insurer Asiban and in the Italian bank Banca Italo-Romena as well as the insurance business BCR Asigurari, which totaled EUR 192.6 million after tax, BCR’s net post-profit grew by 39 percent on 2007, to EUR

348.4 million.

BCR, which was EUR 16 billion in assets, has increased its provisions for loans and advances to EUR 170 million, based on its conservative approach to risk management and due to the deterioration in the macroeconomic environment over recent months. “BCR adequately adjusted risk provisioning to the changing market circumstances,” said the bank. “We intend to do as much as we can to help our customers get through these difficult times” said Dominic Bruynseels, BCR CEO. The bank increased its volume of aggregated loans by 22 percent before provisions, to EUR 11.1 billion, “despite the general slackening of lending in Q4 in the Romanian banking system,” say representatives. The share of domestic currency loans in BCR’s portfolio make up around 48 percent of the total, while the corporate loan portfolio represents 47 percent. Deposits from customers increased by 10.2 percent year-on-year to EUR 8.2 billion.

Andreas Treichl, CEO of Erste Group, said BCR's stock exchange listing could be delayed until the capital market stabilizes. The group has signed an agreement with the Austrian state for a EUR 2.7 billion capital increase. It posted an EUR 859 million profit last year, down 26.8 percent on the previous year, while the fourth quarter of last year ended with a EUR 603.4 million loss for the group.

Corina Saceanu

Broker XTB targets EUR 400 million of transactions per month Polish brokerage company XTrade Brokers has officially launched in Romania, with a target for the year of intermediating EUR 400 million of deals monthly on the local market.

“Due to the size of the local market and to low investment options, Romania has great potential for our company. We rely more on corporate clients, from whom we expect the largest transaction volume. But despite being active in Bucharest for a short period of time we also have a consistent number of individual interested in trading and we expect the number to increase in the near future,” Victor Safta, director of XBUSINESS REVIEW / March 2 - 8, 2009

Trade Brokers Romania, told Business Review.

Overall, the broker has achieved total transactions of EUR 20 billion per month in the CEE region, according to the company. Within two years, it hopes to intermediate transactions worth EUR 1 billion per month in Romania. It currently plans to postpone its entry as a broker on the Bucharest Stock Exchange, due to the low volume of deals.

X-Trade Brokers was founded in Poland in 2002, and is currently activate on the Czech, Slovenian, Spanish, Italian and German markets as well.

Dana Ciuraru 5

3Q CEO of Sebra, RTC Holding's hospitality division What revenues do you expect Sebra to bring within the group?

Together with the catering firms and the sandwich factory, I would say around EUR 5 million, but it is difficult to estimate. In October last year we had a different estimate, of around EUR 10 million, but that is no longer valid.

What other kinds of brands do you plan to bring under the Sebra umbrella?

We are in discussions over several other brands, some of which are already finalized but I can't disclose them. We want to add a brand on the fresh juice segment, for example.

There are three other brands with concepts ready, and we are in advanced discussions for two other foreign brands; we need to see how we can finance their development.

Corina Saceanu 6

Romanian oil and gas producer Petrom, controlled by Austrian company OMV, registered a 43 percent cut in net profit last year, to EUR 277.5 million.

According to company information, Petrom reported losses of EUR 244.5 million, mainly due to the provisions set aside for restructuring activities and law suits by former and current employees. These provisions increased by 64 percent year on year to EUR 4.82 billion, compared to a 49 percent annual increase in total revenue, to EUR 5.25 billion.

“Our financial performance last year was affected to a large degree by one-off items such as provisions for litigation and restructuring, as well as the impairment of the Arpechim refinery.

Excluding these one-off items, Petrom recorded both a significant increase in turnover, due to the favorable oil price environment during the first three quarters of the year, and improved operational efficiency in all business seg-

Mariana Gheorghe, CEO of Petrom

ments,” said Mariana Gheorghe, Petrom’s CEO. She added that the local oil market would drop an average 5-10 percent this year, due to the current crisis. The company presently has a 45 percent share of the domestic gas station market, which it is attempting to maintain, according to the CEO.

The company also announced it would not issue dividends from last year’s profit, which would instead be reinvested, and that it could do the same with this year’s profit. “We recorded an operating loss for the first time since privatization. This is a major blow for the company, and this year it is expected to be a year of big challenges for Romania and for Petrom,” said Gheorghe. She added that for this year the company would consistently reduce the level of investments, given the current unfavorable economic conditions in Romania and the oil industry.

Petrom has a maximum annual refining capacity of eight million tons, and some 550 gas stations in Romania.

Its natural gas production fell three percent in 2008 year on year, to 5.553 billion cubic meters, because of limitations in the gas transportation network, temporary interruptions in the activity of some industrial consumers and the small number of new wells.

Dana Ciuraru

Unilever buys Napoca ice cream division from FrieslandFoods FrieslandCampina, one of the local subsidiaries of Dutch group FrieslandFoods, has sold the company’s ice cream division to Unilever, following a deal estimated at not more than EUR 5 million. Following the transaction, FrieslandCampina will continue to produce ice cream at Napolact, the company’s plant in ClujNapoca. Napoca-branded products will be included in Unilever’s portfolio as soon as the competition authority approves the deal, the representatives stated.

The new Unilever division will comprise 29 employees at the Napoca plant, according to a statement by the company. With this transaction, Unilever has consolidated its ice cream distribution and production segment in Romania. The company

STOCKEXCHANGE

To what extent will the restaurant market in Romania will be affected by the drop in economic growth this year?

It will certainly be affected. Last yea, when we decided to enter the restaurant market, the growth estimates were of 30 to 35 percent per year. This meant a EUR 1 billion market in 2007 was about to double in three years. There will be an impact from the crisis, but we won’t see drops like in other segments, such as the 50 percent fall in the car industry, or a market freeze like in real estate. I would say it will rather be a stagnation, possibly a small drop. The other operators on the market have already announced 5 to 6 percent drops, but these are small values compared to what is happening on other markets.

People are giving up many things during the crisis, but Romanians have just started to discover going out. Moreover, the Vapiano concept attracts people, and we hope to get customers from other restaurants as well.

Litigation with employees cuts Petrom’s profit

COURTESY OF PETROM

Sebi Vasilescu

NEWS

The deal was estimated at some EUR 5 million

holds a portfolio of ice cream brands such as Magnum, Carte d'Or and Cornetto, which were previously distributed on the local market by an independent company. Unilever will take

over the import and distribution of these products in Romania, according to Alexandra Gatej, president of Unilever South Central Europe.

The deal will allow FrieslandCampina to focus on the other milkbased products in its portfolio, said Ian Gearing, managing director of FrieslandCampina Romania.

Unilever’s deal with Friesland is part of the group’s expansion strategy in the Eastern European region and Romania, where the company says there is a local ice cream market of EUR 160 million. According to the company’s statement, the takeover will be approved within four months and Unilever ice cream products will be in shops’ refrigerators from March.

Magda Purice

Fresenius NephroCare Romania estimates 65 percent turnover growth in 2009 German-capitalized Fresenius NephroCare Romania estimates a growth of 65 percent in 2009 over 2008.

Alexandru Ciolan, general manager of the private dialysis services company, says that the firm’s planned investments for 2009 are safe and the company is planning expansion in cities like Ploiesti,

Pitesti and Suceava.

By 2010, the private dialysis services provider plans to open 11 centers in Romania, with the average investment in such a clinic estimated at EUR 2 million, according to the company.

Fresenius Medical Care Germany is present in Romania with two divisions, Fresenius Medical

Care Romania, which imports and distributes equipment and consumables for dialysis, and Fresenius NephroCare Romania, the division of private dialysis services. In 2008, Fresenius NephroCare Romania planned a turnover of EUR 31 million in 2009 and over EUR 36 million in 2010.

Magda Purice BUSINESS REVIEW / March 2 - 8, 2009

NEWS

First Imaginarium store to open under franchise this spring The first Imaginarium store for children will open in Romania at the start of spring in Bucharest’s Militari Shopping Center. Imaginarium is one of the three new brands that will open stores in the center, the others being Decathlon and C&A. The store will have more than 2,000 products on offer and will launch 400 new ones every season. Prices range from RON 5-2,500. Covering 170 sqm, it 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.

The store is expected to post a turnover of EUR 400,000 in 2009. Company reps believe they will recover the investment in 36 months. “Starting from this assumption, a store should become profitable in its second year of activity,” said Calin Cavaleru, business development manager.

Cavaleru says the company is interested in developing the concept all over

the country but it is unlikely to go outside Bucharest this year. “By the end of the year we aim to have two functional stores.” On the decision to open in a shopping center instead of a street location, he adds: “The rent and customer traffic were important criteria in choosing the first location, but they were not the only ones. We looked for a generous space that would afford us the implementation of the Imaginarium concept; we wanted to reduce as much as possible the necessary time for setting it up and we were interested in having a window shop that placed the accent on the symbol of the brand – the double doors. All these made us choose a location inside a mall,” said Cavaleru.

According to the company’s estimate, the Romanian toy market has been developing lately compared to previous years but it is still significantly smaller in terms of consumption per capita than the European average. While Romanians spend EUR 20 yearly on toys for each child, the Germans spend EUR 300.

Otilia Haraga

MOL Romania’s sales rise slightly, net profit at standstill Despite last year’s economic environment, MOL Romania’s fuel sales increased by 2 percent y-o-y and the company’s turnover hiked by 11 percent, to some EUR 590 million. The net profit reported for last year was similar to the figure registered the previous year.

“Last year, MOL Romania inaugurated nine new filling stations.

Taking into account this significant investment and following a steady and efficient cost cutting plan, we secured a profit of almost EUR 12 million last year,” said Zsolt Szalay, country chairman of MOL Romania.

The company’s turnover increase was mainly generated by its retail and card divisions and petrochemical and lubricant sales. Recently, the firm announced that it had invested EUR 2.5 million in a new filling station situated in Bors and in a fuel deposit in Tileagd.

Dana Ciuraru

BRIEFS VB LEASING ROMANIA GROWS NET PROFIT THREEFOLD IN 2008 é Volksbank Leasing Romania posted a EUR 160 million turnover in 2008, a drop of 22 percent year on year, but the company’s net profit grew threefold in the same period, following cost-cutting measures, the leasing company announced. In 2007, the firm signed leasing contracts worth EUR 205 million.

SPM INDOOR EXPANDS IN FIVE ROMANIAN CITIES é Indoor advertising Romanian company SPM Indoor Division increased its portfolio by adding six new locations in Bucharest-based Vitantis shopping mall, the Promenada Mall network in Sibiu, Braila, Bacau, Focsani and Suceava Shopping City. The indoor advertiser secured 27 locations in 17 Romanian cities and delivers consultancy and rental advertising services to clients such as Toshiba, Pepsi, Lipton, Kitekat, Whiskas, Mars, Nokia and Cosmote.

INSOLVENCY- A Chance for Debtors

BUSINESS REVIEW / March 2 - 8, 2009

debtor from the creditors' pressure & also offering equal chances between creditors in the debt recovery.

But what must be borne in mind is the fact that the debtor's premature, ill-faithed request for the initiation of the proceedings is sanctioned with its legal representatives'(management) liability for the creditors' damages.

In practice, acting as lawyers & insolvency practitioners alongside a team made up of economists, evaluators and experts with over 13 years of practice, we are able to offer our customers solutions for business recovery, for putting a stop to accumulating debts, or for the fast debt recovery without additional cost for providing the necessary resources to continue the activity.

Unfortunately, although the Romanian market has an impressive number of lawyers specialized in commercial law, there is a very small number of law firms in which you can find an insolvency department with a rich professional experience, among which: Stanescu, Milos Dumitru and Associates, Piperea and Associates& PricewaterhouseCoopers.

Given the evolution of the international crisis and market conditions which have already begun to worsen in Romania in the main areas of activity, we believe the business managers should take into consideration a detailed analysis made by specialists, which can lead to solutions for loss reduction in the near future.

In this respect, we strongly recommend traders to seek the insolvency practitioner's advice from the early stages, for a speedy & uncomplicated procedure.

Lorena STOIAN -Partner Deleanu VASILE-Attorneys at Law

ADVERTORIAL

An economy's maturity level is reflected in the manner and efficiency with which the insolvency law operates, both in the Courts' practice and in the traders' mentality.

Commercial insolvency should be regarded as an intelligent solution for preserving the available assets and for putting a stop to the increasing debt level, given the most important effect of initiating the proceedings, namely forbidding the creditors (including the state ones) to calculate interests, delay penalties & any kind of penalties to non-guaranteed debts.

We strongly recommend all traders to identify the insolvency state as early as possible using financial

indicators, by means of due-diligence checks performed by specialists.

We would like to stress the fact that art. 27 from the nr.85/2006 insolvency law expressly states the trader's obligation to declare the insolvency state within 30 days of its occurrence, or once this state becomes imminent. So, the insolvent debtors' initiating the bankruptcy proceedings is, at the same time, a legal obligation and also an intelligent and controlled way to face the creditors' pressure.

According to the insolvency law, starting from the day the proceedings are initiated, a series of effects appear ope legis, effects which are clearly in the debtors' advantage, among which: stopping any interests, penalties or delay damages for non-guaranteed debts from arising, so that these debts "freeze" in the amount they represent at the moment the claim is made; all the legal actions filed by third parties for the purpose of debt recovery are suspended; all the debtor's assets are sold free of any privileges or other securities, because their recovery is made either through direct negotiation or by public auction, under the Civil Procedural Code & recovering the debtor's own claims against its debtors is made with the exemption of stamp duties, unlike the common law where these are calculated to the requested amount(art. 42 of the law, as it was amended). Regardless of the solution the trader chooses from that point on (restructuring or bankruptcy), these specific effects are common.

The purpose of these measures is to increase the debtor's recovery chances by applying a plan of action that creates some "breathing room", sheltering the

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CALENDAR / WHO’S NEWS

EVENTS, BUSINESS AND POLITICAL AGENDA MARCH 2 é The Romanian Bureau for Circulation Audit (BRAT) launches cam-

paign “BRAT gives value to advertising” at its headquarters on Victoriei Avenue.

MARCH 3 é 11.00 – ING Bank Romania organizes press conference to announce re-

sults for 2008. Event takes place at Radisson SAS Hotel, Merope room. é 11.30 – The Association of Financial Organizations (ALB) organizes

press meeting on the results of the leasing industry at the end of 2008 at the Intercontinental Hotel, Rapsodia room.

MARCH 4, 2009 é 12.00 – Generali PPF Holding announces development strategy after

taking over ARDAF and RAI at the Hilton Hotel, Regina Maria room.

MARCH 6-8 é Project Expo Real Estate Fair takes place at Children’s Palace.

MARCH 11-12 é HR Club organizes the conference “The strategic partnership of the hu-

man resources function during times of economic decline” at JW Marriott Hotel.

MARCH 17-18 é Luxury Days take place at Carol Parc Hotel.

WHO’S LAURA DANCIULESCU recently joined KPMG as an advisory manager. She has 11 years’ experience working in leading Romanian companies. Her specialization includes development and business process restructuring, department implementation in the banking and financial services sector, acquisition projects and IT system implementation, as well as project management. She is a graduate of the EMBA programme of the University of Asebuss-Kenessaw, Atlanta USA. RUSSELL JOHNSEN, 49, was appointed GM of Provident Financial Romania.

He has worked for the Provident Financial group for 30 years, having joined Provident Financial in Great

NEWS Britain as territorial development manager and then become regional operations manager for the NW region of England. In 1991 he joined the headquarters of Provident Financial UK as anti-fraud manager.

In 1997 he joined the international division and in 2007 became member of the administration board of Provident Mexico as development director. He has an MBA from Durham University.

GABRIEL GRECU was appointed general manager of the National Company of Radio-communications (Radiocom) where he will be responsible for reducing costs and making the company more efficient. He previously held the same position until 2005. Before that he was the head of the Romanian Post Office. He replaces Mircea Cazan who was general manager until January 1 when he became a parliamentarian.

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

Event looks at Romanian tax, law & lobby changes in current climate Business Media Group, the publisher of this magazine is organizing the seventh edition of the one-day forum “Romanian Tax, Law & Lobby” at JW Marriott Grand Hotel Bucharest on March 10th. The debates within the conference are supported by top consultancy companies and law firms including PricewaterhouseCoopers, Ernst & Young, NNDKP and TaxHouse.

Romanian Tax, Law & Lobby takes an analytical approach to the hottest legal and financial issues on the Romanian business market. There will be high-level panel presentations and discussions from top foreign investors, banks, tax and legal experts concerning the latest changes and requirements in the tax, legislation and lobby field. This year’s edition is expected to host 250 participants and 16 top speakers who will share with the auditorium their views on 20 topics of discussion. The events will also include two workshops.

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Speakers participating in the event include Tudor Serban, state secretary in the Economy Ministry; Gabriel Biris, managing partner at Biris & Goran; Ruxandra Stoian, manager of human resource consulting at PwC; Angela Rosca, managing partner at Taxhouse; Enache Miruna, senior manager within Ernst & Young; and Anda Rojanschi, partner at D&B David & Baias; to name but a few.

Since its first edition, in 2002, Romanian Tax, Law and Lobby has become the most important specialized event dedicated to a highly select audience which includes investors, managers, financial directors, lawyers, consultants and industry lobbyists. Each year the event has become bigger and bigger, attracting an ever-growing number of participants, top speakers and officials interested in keeping in touch with the latest changes on the tax and legal markets.

Staff BUSINESS REVIEW / March 2 - 8, 2009

ANALYSIS

Local retail adapts to market shift Landlords are leasing for less rent, tenants are trying to delay down payments for store openings, while many long-awaited international names have decided to delay their announced local market entry. The local retail market is facing changes, and Retail Group firm, run by Ilan Laufer, has had to adapt. While taking care of leasing for the Cocor Luxury Store, the firm is also looking at shopping center development.

By Corina Saceanu

LAURENTIU OBAE

Bright lights: The Cocor Luxury Store has dramatically changed in the past few years, but the retail market looks to be facing a bleaker future

10

Retailers are much more scared now than they were last year, when they were keen to take on all sorts of projects, and everybody has now slowed down their expansion plans. “Nowadays retailers would like to delay signing contracts for opening new stores, because this requires making a down payment. They would rather sign contracts one month before the opening, to delay payment,� says Ilan Laufer, general manager and owner of Retail Group.

Retailers are eschewing new openings in this period, he explains. They are more reserved and want lower rents, but are still going for projects.

In a city with a lot of competition on the shopping center market, a retailer would need to shut down another store elsewhere in the city to open one in your shopping center, he explains. If there's

BUSINESS REVIEW / March 2 - 8, 2009

ANALYSIS Laufer believes. He says rents can be up to 50 percent lower nowadays.

RETAIL GROUP ADAPTS COCOR LUXURY STORE STRATEGY TO

MARKET REALITY

LAURENTIU OBAE

Ilan Laufer, general manager of Retail Group

no competition on the market, it's easier.

In some cities competition was announced but in the end not all projects were built, so if the city is a target for retailers, they go for it, mainly when openings are set for the following year.

Retail Group, which leases retail space in projects like Cocor Luxury Store, Ploiesti Mall and Reghin Shopping Center, has seen things changing on the retail leasing market. “From the negotiation point of view, retailers are in a better position now. They can get almost all they are asking for. But although they might have better leasing contracts, they are not selling as much as they used to, so the overall gain is not that big. Both developers and tenants are in the same delicate situation,” says Laufer.

Owners understand they need to have as few empty spaces as possible.

“Rents need to be lowered, but now there is the chance to become market leaders – one can attract retailers with lower rents, and after the crisis ends, the shopping center can emerge on top.

Current revenue is reduced, but on the long term this becomes an advantage,”

BUSINESS REVIEW / March 2 - 8, 2009

The Cocor project got the go-ahead more than two years ago, when the market was at its peak and when many large retailers said they wanted to enter the market in 2008 and 2009.

“The situation has changed radically, and so the expansion plans of large groups have shrunk. Now we have to face the new reality and keep our promises to the public by looking for alternatives, within the same quality, brand and pricing categories we had planned,” says Laufer. “Even though we didn't manage to bring the Gucci mono-brand store, because they are not coming to Romania at all after changing strategy, we have brought Versace mono-brand and Longchamp, among others. We have a multi-brand store which hosts Christian Dior, Kenzo and Christian Lacroix brands. We would have preferred them as mono-brand stores, but at least they're here,” the Retail Group general manager adds.

Confidences will have three multibrands, says Laufer, naming some other brands in Cocor: Roberto Cavalli, Baci Rubaci, Laura Biagiotti, Roberto Scarpa, Laurel and Bogner, Scervino Street.

Of the 10,000 sqm making up the retail area in the Cocor Luxury Store, Retail Group has managed to sign precontracts for 70 percent, “but we'll reach 100 percent soon,” says Laufer.

The firm had to turn away more than 200 brands which wanted to become tenants in the Cocor store, of which around 100 were the store's tenants before the overhaul. “We have also started to sign the first contracts,” said Laufer, adding that leasing on the project started in fall last year, after the pro-

ject's plans had changed.

With a deadline to complete works in November this year, the store will host brands such as Mac Cosmetics, Loewe, Longchamp, Gerard Darel, Sunglass Hut with its Luxotica brand concept, Douglas Exclusive, Samsonite with its first Black Label store in Romania, Cellini and Kulto with luxury watch brands.

“We are talking about a multi-brand store with the company that runs Camel and Frank Mueller. For casual wear we are talking to Tommy Hilfiger, Marciano, Timberland, Nautica, CK Jeans and Adidas Fashion,” says Laufer.

The firm is also targeting retailers which have left or are about to leave their shops on Calea Victoriei in Bucharest. Rents in Cocor are lower than on Calea Victoriei, which retailers have started to abandon, Laufer adds.

“We are trying to attract some of the brands which used to be there. Such brands are our target, some of them left their spots on Calea Victoriei because of the high rent, lack of traffic and shortage of parking space,” explains Laufer.

Rents in Cocor are similar to those charged in Bucharest’s shopping malls.

On the ground floor, a sqm of retail space goes for an average rent of EUR 120 per month. Higher spots come cheaper – on the fifth floor, the rent may be as little as EUR 40- 45 per sqm per month, according to the businessman.

The firm is also talking to coffee shop operators. “We have signed precontracts with four coffee shops. It is a segment where we have high demand from operators. Some of them are already on the market, some are new names,” the Retail Group representative continues.

RETAIL GROUP GOES FOR DEVELOPMENT WITH INVESTMENT FUND PARTNERSHIPS At the moment, Retail Group is

working on leasing four shopping centers in Romania and one in Chisinau.

On the side, Laufer says he intermediated Zara’s recent leasing of space in Unirea Shopping Center in Bucharest.

“We have had long negotiations. With Zara, it took less than usual. Negotiating a location usually takes around half a year, but in this case it took only two months to sign the leasing agreement,” explains Laufer.

“We are close to signing with Inditex for Zara, Pull and Bear, Bershka, Stradivarius and Oysho for Ploiesti Mall, where we have also signed preagreements with AAV Group, for its seven brands,” he adds.

For the shopping project in Reghin, the leasing firm is under advanced talks for Carrefour to become the main anchor in the project. The firm has already signed with Carrefour and Cinema City for the shopping center in Ploiesti.

Along with retail leasing, Laufer, who has previously worked for CB Richard Ellis, Balkan Real Estate Advisors, Time Out fashion brand and Winmarket retail chain, is going to develop shopping centers from this year.

“I would build a project where tenants would go. If I knew tenants were interested in a certain city, I would go there, instead of buying a plot downtown somewhere and having no tenants interested. I will first look for the retailers and then invest in the projects,” Laufer says of his strategy.

The firm wants to build averagesize retail parks, with small hypermarkets or possibly supermarkets on 3,000 to 4,000 sqm. The investment per project would be between EUR 8 and 10 million, and the firm is talking to several investment funds to cover a substantial part of the necessary investment. corina_saceanu@bmg.ro

11

ANALYSIS

COURTESY OF PEGASUS

Posting a fall: The deteriorating business climate is taking its toll on parcel delivery firms

Parcel firms fight to deliver results While 2008 was predicted to bring a 30 percent growth in Romania’s parcel delivery market, now it is all about consolidation.

As the B2B segment – which represents 50-100 percent of couriers’ overall business – declines, firms have switched their focus to consumer and growing economic fields. Some of the largest players told BR their ongoing strategies for tough times.

By Magda Purice

CONSUMER

BECOMES KING

Some B2B services-orientated parcel delivery firms are trying to adapt their business strategy to the new market demands. Ciprian Pulpa, executive manager at Fastius Curier, a regional courier company set up in 2002, says that the current business strategy – of all industries, not only delivery operators – will be to consol12

idate the custom-targeted approach.

The management intends to pursue a new business-to-consumer (B2C) segment and look closer at its books. The firm has two B2B divisions offering fast courier, express mail and package delivery services, but its same day-delivery “Prioritar” division has been vulnerable in Q1 2009, due to the greater cost and difficulties involved in providing this type of delivery service.

Besides Prioritar, Fastius Curier

delivers round the clock in Bucharest and Ilfov with its MultiMesager corporate division. “In 2008, the 24-hour delivery service posted a significant increase. But evidence suggests the segment of rapid delivery – within a few hours – will be more successful, especially in the corporate segment,” Pulpa told BR. To achieve this, the company might invest in enlarging its existing fleet, if it has the business to justify it. As a general trend, Fastius Curier estimates a more moderate growth in the B2B segment in 2009, and foresees satisfying figures coming from B2C. After 11 years of operating in Romania, Fan Courier is more optimistic, and hopes to see an improvement in the business environment in H2 2009.

Adrian Mihai, development manager at the firm, told BR that the company had estimated a 10 percent turnover growth in early 2009 but is now hoping to keep it at the same level as last year. In early 2009, the company enlarged its customer base by around 8 percent, from 11,000 at end-2008. It has assigned EUR 11 million of investment for this year, mostly from its own funds.

“The company’s ongoing investments will not be stopped because of the general crisis. Previously, we had considered taking out some bank loans to sustain the developments but this is no longer feasible,” Mihai told BR. In a business environment when all companies are cutting HR or training costs, Fan Courier has increased this type of investment by 20 percent in 2009, from EUR 300,000 last year. The firm has also signed a partnership, joining a European road transportation carrier network, thus moving into international-based delivery operations.

The delivery market is sensitive to the overall business climate. Fan Courier’s core business is 80 percentbased on B2B, with the rest targeting consumer-orientated courier operations. “In a paradox, the very fields which registered record growths in 2007 and H1 2008, such as financing, automotive and construction, have posted dramatic decreases lately. The largest volumes came from these segments in H1 2008 but this year is unpredictable and all the estimates made at the beginning of the year are now irrelevant,” said Mihai. Fan Courier had a turnover of EUR 40 million in 2008, a 40 percent increase on 2007. It expects a similar sum this year.

REBRANDING

AND EXPANDING

Rebranded as DPD as of 2008, Pegasus has been controlled since March

2008 by Armadillo GMBH, a company formed of GeoPost, the French postal company’s delivery division, and Turkish group Yurtici Kargo. Estimates put the deal at between EUR 6 million and EUR 9 million. For Pegasus, set up in 1997 and with a turnover of EUR 4.2 million in 2008, this year will bring consolidated road transportation delivery services due to the lower costs compared to air carriers, according to James Gray-Cheape, CEO at DPD (Pegasus).

For this year, company representatives are focusing on the ongoing rebranding of Pegasus and the development of new delivery services to include operational systems and the IT segment too. The firm believes the B2B segment will shrink in 2009, as a result of companies’ falling sales and cost-cutting measures. It says the future could lie online, following the European trend, and has high hopes for B2C. “We estimate a 20-30 percent increase in the B2C segment in 2009, following the increasing trend of online commerce in Romania,” said Sorin Ghinescu, the firm’s marketing & CR manager. This year, PegasusDPD expects y/y turnover growth of 40 percent, from EUR 6.4 million in 2008.

UPS

CONSIDERS IT TOUGH

“We have weathered many storms,” says Michael Mavropoulos, country manager of UPS Romania, which has been on the market for more than 100 years. “Should there be no economic recovery, as most experts are predicting, 2009 will certainly be one of the most difficult in UPS’s history.” But the firm will continue to make strategic investments, Mavropoulos told BR. The parcel company’s is relying on efficient express and logistical services to businesses to see it through 2009. The crisis has hit UPS’s fields of operation: US small package, international small package and supply chain & freight. It is company policy not to predict future results. However, according to its financial reporting so far, the group posted USD 51.5 billion of consolidated overall revenue in 2008, 3.6 percent more than in the previous fiscal year. UPS's total operating profit globally in 2008 was USD 5.38 billion, compared with USD 578 million in operating profit in 2007. “It is important to note that our 2007 operating profit numbers were affected by a USD 6.1 billion (one-time) payment to withdraw 45,000 teamster employees in the US from a multi-employer pension plan,” adds Mavropoulos. ■ BUSINESS REVIEW / March 2 - 8, 2009

Estates&Construction

MARKET

MARCH 2 - 8, 2009 / VOLUME 14, NUMBER 7

BUSINESS REVIEW FORUM

Manage your business environment !

City Mall shopping center falls in value by another 32 percent

LAURENTIU OBAE

Retail therapy: City Mall has plunged in value since its purchase in 2006

The value of City Mall Shopping center in Bucharest had dropped by as much as 32 percent at the end of last year, from EUR 59.7 million, its midyear value, according to APN European Retail Property Group, which owns the mall. This is the second biggest write down of an APN asset, after the 41 percent devaluation of the fund's Cuadernillos property in Spain.

The City Mall shopping center had lost EUR 28.5 million of its value at the end of last year, compared to the valuation mid-2008, while the drop is even greater compared to the purchase price of EUR 103.5 million paid in 2006.

“City Mall Romania has been written down by 32.3 percent due to a higher discount rate applied and higher non-recoverable costs from service charge shortfalls and property taxes as well as reductions in assumed market rental levels,” writes APN in its financial report.

The property produced EUR 2.5 million in income in the second half of last year, up on the EUR 1.9 million on H2 of 2007. The fund has secured construction permits for 5,000 sqm of offices at City Mall.

APN has a EUR 44.4 million debt facility from UniCredit Group to refi-

nance the mall. “The current decline in valuation may become a potential materially adverse event under the loan agreement,” writes the fund. However, “a default event which would trigger the bank guarantee being recognised as a borrowing with the bank is not considered likely to occur,” it goes on.

For some of its loans, APN has reached the limit the of loan to valuation ratio, while for others the default potential is mentioned. The fund is in discussions with Deutsche Bank and RBS to restructure some of these loans.

Corina Saceanu

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 HERASTRAU – apartment in new building: living, 2 bedrooms, 2 bathrooms, balcony, luxury furniture, A/C, guard1600 EUR/m. 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 DOWN TOWN – apartment in new building: living + dining, 2 bedrooms, 2 bathrooms, balconies, modern furnished, A/C, garage, guard – 1800 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. l BANEASA: – villa in compound: living, dining, 3 bedrooms, 3 bathrooms, A/C, garden, garage – 2500 EUR/m. … and many other similar options.

Phone/fax 312.42.10 Mobile: 0722.574.201(2) agency@atlasq.ro www.atlasq.ro 14

Irish Blackpearl starts construction and sales of 1,200apartment Mogosoaia project Belfast-based equity investor Blackpearl Property has announced it will start works and sales of the first development stage of the Mogosoaia project, comprising around 2,310 apartments. So far, the firm has spent around EUR 100 million on acquiring a total of around 18 hectares of land in areas of Bucharest such as Unirii and Mogosoaia, and countrywide cities like Baia Mare and Ploiesti. For this year, it has put aside EUR 20 million, with 50 percent of the amount secured from a UniCredit Bank loan. According to company representatives, works at the residential

units of Mogosoaia project will start in March, and within three months the developer will start construction of the first 62 homes in Baia Mare and 90 houses at its Ploiesti-based project.

In the Mogosoaia project, which totals 1,200 apartments, a studio will cost EUR 45,000 while a tworoom apartment will be priced at around EUR 70,000-110,000, not including VAT. The project in Baia Mare, built on 72,000 sqm of land in the center of town, will comprise 1,050 apartments and will also include 18,500 sqm of commercial space – retail, office and hotel – ac-

cording to the developer’s plans.

The Ploiesti-based project, spread on the almost 40,000-sqm site of the former Avicola plant, will also comprise a mix of residential and commercial. The site holds twostorey buildings which have to be demolished before construction begins. The second project located in Bucharest developed by the Irish firm will be set on 1.5 hectares in the Splaiul Unirii area. For the Mogosoaia project, Blackpearl partnered with the AIM-listed Lewis Charles Romanian Property Fund, according to the company.

Magda Purice

CBRE Eurisko: Three buyers made up 65 percent of 2008 deals The local real estate market saw transactions worth EUR 1.02 billion in 2008, according to a report from real estate consultant CBRE Eurisko. The sum is a drop of 64 percent year on year, according to the study. Last year saw less money on the market, with 65 percent of total transactions coming from only three investors.

One deal, in which RREEF Real Estate took over 78 percent of Bucharest office complex Upground, reached EUR 340 million, one of the largest transactions on the local real estate market. The Upground deal alone made up 33 percent of the total deal portfolio.

The CBRE study found 11 major deals on the real estate market in 2008, compared with 41 in 2007.

RREEF and another fund, Deutsche Gesellschaft fur Immobilienfonds (DEGI), contributed almost half of the EUR 1 billion. DEGI, part of Scottish group Aberdeen Property Investors Group, announced in March it had completed the purchase of Bucharest-based shopping center Iris, in a EUR 140 million deal with Avrig 35. Italian company Immobiliare GrandeDistribuzione (IGD) added EUR 198 million in 2008, following its 14-unit Winmarkt network development outside Bucharest. British investors which

signed deals in Romania last year were HSBC European Real Estate Fund, Danube Property Fund II and NBGI SEE Real Estate, CBRE says.

The local office market saw yields increase from 6.25 at the end of 2007 to a maximum of 9 percent at the end of 2008. The overall office market in the EMEA region suffered reduced take-up reflecting weaker economies and growing cost-sensitivity, according to the CBRE report.

For the main Western European markets as a group, demand is running at levels similar to those recorded in 2004-05.

Magda Purice

Kardan suspends projects in Eastern Europe Real estate investor Kardan NV, a Dutch-Israeli group which carries out activities in Romania through its subsidiary GTC, has suspended projects in Eastern Europe, said company representatives quoted by Bloomberg.

Kardan has halted property developments in the region and won’t take on new projects or buy additional land in Eastern Europe, chairman Alain Ickovics has said.

“I can’t say that everything is rosy. Wherever we feel that the market is weak, we don’t go ahead if we don’t have to,” said Ickovics. The number of property projects suspended did not exceed 10, the executive said,

without specifically mentioning projects in Romania. GTC SA, the Polish subsidiary of Kardan, has development activities in ten countries in the region, and has 16 percent of its complete and under construction projects in Romania, its second biggest market after Poland, with 45 percent, and followed by Hungary with 14 percent.

The firm owns 47 percent of the Galeria Buzau project, 13,300 sqm of net leasable area, which had an occupancy rate of 80 percent as of November last year, according to Kardan. The firm is delaying the opening of its Arad, Suceava and Piatra Neamt units. Apart from its Gal-

leria chain, GTC is working on several residential projects in Romania. The firm has recently said it had postponed works on its Garden of Eden residential project in Baneasa due to delays in obtaining the Urban Zoning Plan, and that it had had to re-design the projects to incorporate changes asked for by the local administration.

The company, which had said it was seeking to secure permits for its Bistrita and Galati Galleria units, has no liquidity problems, according to its representatives. GTC is also building City Gate office building in Bucharest.

Staff BUSINESS REVIEW / March 2 - 8, 2009

ESTATES & CONSTRUCTION MARKET

Basarab project gets green light from government through emergency ordinance The Basarab flyover project is back on track again after being re-defined as a public-utility project by the Bucharest General City Council (CGMB). Last week, the Romanian government issued an emergency ordinance instituting the expropriation procedures for private land in the area of the flyover.

Previously, works at the project had been halted when a group of non-governmental organizations, led by Terra Mileniul III, went to court opposing the flyover. In 2008 the project was ruled a non-public utility, which made it impossible for Bucharest City Hall to expropriate private land plots for the development. According to the NGOs opposing the project, construction would lead to the demolition of several historical buildings.

Started more than two years ago, the project could be completed this year, according to city administration. But Bucharest mayor Sorin Oprescu warned that due to the delays, two 68- meter high pillars located in the path of the flyover could crash in the event of an earthquake. According to Oprescu, the flyover project requires an investment of more than EUR 100 million of which the completed works have absorbed around EUR 35 million. The 2km long flyover is intended to ease the traffic around the North Railway Station area and connect Grozavesti and Nicolae Titulescu boulevards. The flyover is being built by Astaldi and FCC construction companies, which won the tender for the project.

Magda Purice

Austrian Starlight Suiten Hotel expands in Romania with Metropolis Center Austrian aparthotel chain Starlight Suiten Hotel, based in Vienna, has affiliated the 78 apartments within Metropolis Center compound, a EUR 37 million development by the Austrian company Soravia. The aparthotel chain owns three suite hotels in Vienna, two others in Budapest and has announced an ongoing project in Prague.

The Metropolis project, which comprises 29,000 sqm made up of mixed office and retail space as well as the aparthotel, is currently 90 percent leased and will be delivered in April this year, according to Soravia representatives.

So far, the Austrian developer has completed two office projects in

Bucharest, a 2,300-sqm office building called Casa Mosilor and the 1,000-sqm Smart office near Bucharest’s Otopeni airport, both of which were acquired by Equest Partners in 2007.

Its future projects include a shopping mall development on the northern rim of Bucharest, in Stefanestii de Jos, and a 66,000-sqm office project on Mihai Bravu Boulevard, also in in the capital. The latest plan, which will require a EUR 112 million investment, results from the developer’s partnership with the International Financial Corporation (IFC), which will provide the financing for the project.

Magda Purice

Equity investors hover to pick up land plots from distressed owners

BUSINESS REVIEW / March 2 - 8, 2009

versified types of properties put up for sale, compared to the last two years.

“Unfortunately developers are not willing to conclude transactions, but prefer to delay the purchase, waiting for a further price decrease and market revitalization,” according to the firm.

Despite a slight increase in sale prices, by 10-15 percent on average, recorded during the first months of 2008, the trend shifted in the second half of the year, when asking prices dropped by approximately 15-20 percent. In Bucharest and its vicinity, the fall was even higher.

Staff

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

The local land market has seen the emergence of a new profile of opportunistic investor, who is trying to take advantage of a less liquid market, says real estate firm Atisreal. “Heavily leveraged speculative investors have made way for equity investors which are looking for foreclosures or distressed sellers,” say Atisreal representatives.

This type of purchaser prefers lots with specific urban planning, located in attractive areas with high development potential. Last year, land shifted from a seller’s to a buyer’s market, particularly in the second half of last year.

The land market has seen more di-

Pullman Bucharest World Trade Center opens its doors

15

INTERVIEW Growth has slowed down considerably, in the fourth quarter of last year and subsequently into the first part of this year. It is my firm intention to still be the number one player in both value and market share at the end of this year.

However, I doubt that there will be a substantial increase in the number of our customers between end-2008 and end2009. In every previous year, we had an annual budget but I think looking ahead more than three months in the current uncertain economic conditions would be worthless so we are working on our quarterly budget.

LAURENTIU OBAE

Orange looks one quarter ahead RICHARD MOAT, CEO of mobile network Orange Romania, says the company has budgeted roughly EUR 200 million for capital investment in data services, the 2G and 3G network, but has changed its approach – looking only one quarter ahead.

By Otilia Haraga

What is Orange Romania’s investment budget in 2009?

We have a budget for capital investment which is pretty similar to the budget we had for 2008 (the 2008 budget amounted to EUR 200 million). We have invested EUR 1.6 billion in the business in total since we started and we have another EUR 200 million budgeted. Whether we actually spend that or not depends on the economic circumstances.

We have always been flexible in terms of how we allocate budgets but this year it is not so much a question of reallocation as it is about focusing on investments which can bring relatively rapid increases in revenue – and investing in data is one of those because we have seen a massive expansion in data revenues year on year and we hope that will continue into 2009.

16

What will be the main areas of investment focus this year?

We invested in expanding both our 2G and 3G networks in 2008, because whilst we had a comprehensive 2G network, the size of Romanian cities is expanding geographically, therefore we need more sites to be able to provide coverage for the new areas. We have continued to roll out 3G, particularly higher speeds for 3G: we now offer 7.2 Mb/s in 14 cities. In 2009, one of the key priorities will be to improve our transmission capabilities so that we can deliver 7.2 Mb/s right across all 41 major county capitals.

We will also continue to expand the 2G network, because that work is never really completed, as cities continue to expand in size. I’d say probably 90 percent of our budget is network related.

How do you expect your customer base to evolve this year in terms of new additions?

How many employees do you have at the moment? Will you lay off employees or reshuffle departments?

If you exclude the retail chain which has expanded substantially (we have roughly nine people in every shop and 101 shops and kiosks, so we are approaching 1,000 people working in the retail chain alone), the size in the rest of the business has remained relatively static over the last three years. In total we have 2,950 employees, if we include retail. We are not planning any headcount downsizing.

Data represented 10 percent of your total revenues last year. How much do you expect it to post this year?

I think it will be close to being double what it was. This time last year we began to sell laptops in our shops and at first we were only selling 100 a month.

But we continued and we gave better training and better incentives to staff and in December we sold well over 2,000 laptops, between 5-10 percent of the Romanian laptop market.

On the SME level, what measures will you take to attract more customers?

We will be looking to put a range of products for SMEs onto the market which will offer the best value for money. We will be revamping our offers for those segments only this year.

What sectors of your company will you apply cost savings to?

I will say virtually everywhere because some costs are discretionary costs which you can spend in good times and can choose not to if times are difficult.

There are obviously some categories of expenditure where it is more difficult to make changes, for example, quite a large proportion of our expenses as a mobile operator are interconnection fees.

Will you look at closing or relocating some stores?

I think that is theoretically possible but practically unlikely. Certainly we

have slowed down the rate at which we are opening new retail stores but if you look at it over a longer period of time, the trend is still going to be upwards because there has been quite a spate of operators buying indirect retailers to gain more control over their entire distribution network. And certainly one of our strategic goals is to have pervasive distribution so that we can have a presence in every part of the country and have the maximum control over that distribution. So those are goals that we will continue to pursue during 2009. Last year we invested EUR 5 million in the retail network but we still do not know what the sum will be this year.

So it means that if the opportunity for acquisition arises, you are ready to take it?

Yes, absolutely. We are always ready to do that. But if we are going to consider an acquisition, it will have to be a chain, because just taking over one or two at a time is too time consuming. We have just under 1,000 points of presence, if you take all our own stores and our partners’ stores. There are 101 Orange stores so the rest are indirect partner stores. The size of the stores varies: our smallest ones are about 80 sqm and biggest ones are 150 sqm. In rural areas you won’t see us opening our own stores but we do have quite an extensive partner network.

Why did you choose not to participate in the public bidding for the WiMax license?

There are a number of reasons. We have two times 7 MHz of spectrum in the 3.5 GHz band and we recently entered into a long-term partnership with UPC to run their two times 7 MHz spectrum band in WiMax. We put the two together, so we have a very credible block of spectrum there which services our needs.

How do you think the crisis will impact on the telecom market?

There is going to be slower growth.

There is 130 percent SIM card penetration and if you put that together with an economic downturn, there is bound to be slower or no growth at all. Also, competition will increase, since we now have the highest number of mobile operators in any country of the EU 27. Depending on what Romtelecom does with its new license, this could effectively mean another player. There will be more pressure on prices because of that competition.

The other major trend is that data will continue to be quite central in terms of our strategy and other companies’ strategy in 2009. ■ BUSINESS REVIEW / March 2 - 8, 2009

FEATURE pared with the previous year, according to figures from the Finance Ministry.

Foster believes that the increase in the company’s revenues came as a result of a more diverse services portfolio, especially as in the past two years the real estate market had registered a spectacular boom.

“When we first started our operations on the local market, some 7080 percent was covered by oil and gas projects. Subsequently we have migrated almost 60-70 percent towards real estate and now real estate makes up about 40-50 percent of our portfolio. The rest is equally split between blue chip industrial projects and oil and gas projects,” said the WSP official.

BETTING

ON ENERGY EFFICIENCY AND INFRASTRUCTURE PROJECTS

LAURENTIU OBAE

WSP Group wants to align itself with successful firms to ride out the tough times on the market

WSP Group follows multi-step plan in time of crisis WSP Group, which provides environment management and consultancy services, has identified the domains that the management hopes will keep the company competitive and profitable. Neil Foster, associate director with the group, told Business Review that his company is focusing on energy efficiency, renewable energy and infrastructure projects. He deems the latter problematic, due to the difficult public tender procedures in Romania.

By Dana Ciuraru

18

“This year will be a tough year, I don’t think that there is any doubt about that. But we have a strategy to follow in times of crisis,” said Foster of his company’s strategy in times of crisis.

He went on: “We have to align ourselves to the strong and surviving clients. There’s no point staying close to companies which will not succeed in the current climate. In times of crisis you don’t succeed by registering growth, but by seizing market share. We also have to be more efficient in what we do, to guarantee a better return on investment.”

According to the WSP Group associate director, the company has inked some strategic and informal alliances with Romanian service provider companies, including a group company in the Romanian oil and gas sector.

Foster said that the firm would diversify the nature of its clients and its range of services, turning more towards climate change consultancy, emissions management, sustainability solutions and eco design. As a result of this strategy, the company has started developing its transportation division, to expand on existing road and infrastructure projects.

“Romania has a real opportunity with the EU funds to which it has access. But there is an issue with public tender procedures, which sometimes delay the projects and lead to a lack of efficiency in completing them,” said Foster.

It remains to be seen what results the company’s strategy will yield. The firm has announced a decrease in its number of projects, which has persuaded it to cut its fees in order to keep being competitive on the local market. dana.ciuraru@bmg.ro

LAURENTIU OBAE

WSP Group joined the local market in 2004, around the time of the finalization of the privatization process of Petrom, which is now controlled by the Austrian oil and gas company, OMV. In fact, Petrom was the first major client of the UKbased company.

“We started working here in 2004, two years before actually registering the company in Romania.

We came to the country on the basis of doing a lot of work for Petrom.

So, initially we got involved in oil and gas projects for the major companies in this field, managing for instance environmental liability issues,” Neil Foster, associate director with WSP Group, told Business Review.

In 2007, the company reported a turnover of EUR 4 million and a net profit of EUR 210,000, while last year it had turnover of about EUR 6 million, a 50 percent increase com-

“Some of our ongoing projects include the Colosseum building, the largest retail center in Eastern Europe, and the certification for the first ‘green’ office building in Bucharest, the Euro Tower, a project of the Cascade Group, estimated to be completed at the end of the year.

We are also involved in the project for a major corporate headquarters in Bucharest,” said Foster. The WSP associate director says that there are good opportunities on the renewable energy sector as well.

“We are working on the feasibility studies for wind farms, studies which have been requested by three foreign companies. We estimate that we will finish them in the next 12 months,” he added.

One of the WSP divisions in Romania drafted the transport master plan and traffic management system for Bucharest, projects which are currently at the public consultation stage.

“Some 25 percent of our business represents road infrastructure projects. The election period delayed a number of significant projects by several months. We are talking about major projects like road design, construction or transport master plans for other cities in Romania,” said Foster.

The British firm currently uses Romania as a hub for its business for Central and Eastern Europe. In the long term the company is considering expanding to other countries in the region, but any such decision will depend on market conditions and the nature of the company’s clients, the WSP Group official says.

SURVIVAL OF THE FITTEST ON TOUGH MARKET

Neil Foster, associate director at WSP Group BUSINESS REVIEW / March 2 - 8, 2009

FILM REVIEW / EVENTS

FILMREVIEW: The Curious Case of Benjamin Button

Button up: Daisy deals with Benjamin’s oddity

Loosely based on an F Scott Fitzgerald short story protagonist, Benjamin Button lives his life in reverse: born with the constitution of an old man, he gets younger rather than older as the years pass, reaching his dotage as a newborn.

Though the premise has a touch of science fiction about it, this is not a sci-fi film, but an epic romance, that unfolds deliberately or plods interminably depending on how amenable you find it.

A framing device starts the story in a New Orleans hospital, in 2005.

As Hurricane Katrina bears down on the city, a terminally ill elderly woman asks her daughter (Julia Ormond) to read aloud from an old diary, belonging to Benjamin (Brad

Pitt). We learn that after his mother dies in childbirth, Benjamin’s hideous appearance drives his grieving father to abandon him on the steps of an old people’s home, where he is found by a kindly, African-American member of staff, Queenie (Taraji P Henson), who raises him as her own. It is here that Benjamin, now 12 but looking more like 70, meets the granddaughter of one of the residents, Daisy (Cate Blanchett in adult form), who, it transpires, is the woman dying in hospital.

The film will ultimately become their love story, but the ickiness of any hint of attraction between a pensioner and a seven-year-old girl postpones that part. Initially, The Curious Case of Benjamin Button is more of a coming of age (coming of youth?) tale, which sees Benjamin go out to work, get drunk and have sex for the first time, all in the incongruous form of an old man. Benjamin’s adventures take him to sea and to war before he and Daisy, now a slightly self-absorbed, bohemian ballet dancer in New York, re-enter

each other’s lives.

It’s very easy to be cynical about this movie. Aside from the obvious irony of anyone looking at Brad Pitt – at whatever age – and being repulsed by his ugliness, charges of excessive sentiment, Hollywood cliché and predictability can all be made. The film’s big “twist” – which comes fairly near the end – will surprise nobody who watches American movies. Some of the CGI effects used to make two near 40something actors look like freshfaced teenagers also jar a little. Too little mileage is made from the quirky premise in favour of conventional romantic development. And at two and three quarter hours, even fans’ patience will be tested.

But the power of this beautifully made, ambitious and moving film will sweep such concerns aside for most viewers. Benjamin’s peculiarity throws into sharp relief the tragedy of the human condition: love, loss, aging and death. The issues he and Daisy confront as they literally grow apart are universal ones, and the inevitable ending is an

effective tearjerker. The episodic plot, though slow-moving, includes some absorbing incidents, such as Benjamin’s affair with a British spy’s wife (Tilda Swinton) and the tale of a blind clockmaker, who builds his timepiece to run backwards after losing his son in the war, a reflection of the hero’s reversed aging. Some splendid characters also enrich the film, Queenie and her twinkly-eyed beau Mr Weathers, a garrulous, louche-living tugboat captain plus several idiosyncratic care home residents.

The Curious Case of Benjamin Button may not quite be the important epic it wants to be, but as a love story that touches on the tribulations we all face it is an emotive tour de force.

Debbie Stowe Director: David Fincher Starring: Brad Pitt, Cate Blanchett, Taraji P Henson, Julia Ormond, Tilda Swinton On at: : Hollywood Multiplex, Movieplex, Studio, The Light

Three NGOs implement projects Heritage restaurant reopens for children with Cosmote funds

BUSINESS REVIEW / March 2 - 8, 2009

nancing, social and psychological assistance, medical services, food and clothing. Hospice Casa Sperantei will use the funds to offer medical, social and psychological services to 50 children from Bucharest who have been diagnosed with terminal disease and their families.

The Child’s Phone will use a part of the proceeds to launch an online forum where abused children can ask for support. The rest will be used to keep the child phone line running.

Otilia Haraga

Francophone Belgian Movie Festival kicks off The Francophone Belgian Movie Festival has kicked off in Bucharest and will run until March 5 at the Elvira Popescu movie theater. The festival was opened with the Romanian premiere of “Ou est la main de l’homme sans tete?”

(Where is the hand of the headless man?) by Guillaume and Stephane Malandrin, who attended the premiere in person. The movie stars Cecile de France, Ulrich Tukur and Bouli Lanners and received a Bayard d’Or prize for best image at the Francophone Film Festival in Namur. Cecile de France also received a Bayard d’Or Prize for best actress for her role.

STOCKEXCHANGE

Three non-governmental organizations – Save the Children Romania, Hospice Casa Sperantei Foundation and Telefonul Copilului (The Child’s Phone) – each received EUR 15,000 following the campaign Love Messages from Cosmote Romania. These proceeds represent a part of the sum the company earned from text messages.

Save the Children will use its EUR 15,000 for a project in Cluj-Napoca where 70 poor children will be re-integrated into school with the help of fi-

LAURENTIU OBAE

LAURENTIU OBAE

Cosmote has donated money raised from text messages

Heritage will reopen with a cocktail party on March 18, after being closed for four months. Businessman Dinu Patriciu, who bought 30 percent of the shares in the business for EUR 500,000, decided to temporarily close the venue for renovation. The eatery also has a new general manager, Simona Mardale, and a new head chef, Richard Nael. Heritage is known as “the bankers’ restaurant,” since the majority of the shareholders are from the banking world.

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EVENTS

James Blunt plays ‘beautiful’ hit Madonna concert ‘causes a commotion’ for organizers songs in Bucharest

The Material Girl will take to the stage in August

The former army officer wowed the Bucharest crowd with some of his biggest hits

British pop singer and songwriter James Blunt held a concert at the Polivalenta Hall in Bucharest last week. The artist, whose hits include You’re Beautiful, 1973 and Goodbye, My Lover, played these and more of his famous songs in front of a crowd of approximately 4,000 people who braved freezing, snowy conditions to see him play.

A former officer in the Life Guards branch of the British army, Blunt rose to fame in 2005 with the song You’re Beautiful. Since then, he has received two Brit awards and a Grammy for best male performance in 2007. He was also the recipient of five other Grammy nominations in 2006.

Otilia Haraga

Further details of pop icon Madonna’s Romanian gig were announced last week by organizers EMag!c Entertainment and sponsor Vodafone Romania. She will be playing Bucharest as part of her Sticky & Sweet tour for the promotion of her latest album Hard Candy.

The diva’s performance, which will take place in Izvor Park on August 26, will be arguably one of the most impressive stagings in

Bucharest, and will require the participation of 1,200 people in total. Prior to the concert, the organization team will take seven days to erect the stage and arrange the venue. It will take three days post-concert to clear the area. The equipment will be transported in 100 trucks. There will be a platform brought especially from Italy that will be 14 meters high and 40 meters deep and half a kilometer of bars. The stage will be made up of two modules that will span over a surface of 100 by 50 meters and will weigh approximately 100 tons.

Negotiations to bring the singer to Romania started a year ago. Izvor Park was chosen to be the venue since the Lia Manoliu stadium, which could have hosted such a large scale event, is unfortunately not available.

Laura Coroianu, managing partner of EMag!c Entertainment, said Madonna did not have any special requests, apart from a children’s playground.

Otilia Haraga

Blue Monday Gala showcases cream of the crop of local blues & jazz scene Hard Rock Cafe opened last week its Blue Mondays series with a gala that featured some of the best artists on the local jazz & blues scene. Musicians such as Maria Raducanu, Mike Godoroja & Blue Spirit, Marius Popp, Alin Constantiu, AG Weinberger and veteran Johnny Raducanu followed each other on stage at the show. “Blues and jazz have the power to convey experiences, feelings and sensations that maybe no other musical kind can do with so much intensity,” said Godoroja during the show. Blue Monday is the latest series of concerts at the Hard Rock Cafe for blues and jazz fans.

Yucca Piano Bar & Restaurant tinkles ivories, tastebuds

Romanian classic painters go under hammer COURTESY OF YUCCA

Yucca Piano Bar & Restaurant opened last week in Bucharest, opposite Mall Vitan. It can cater for 120-150 customers at a time and includes a lounge area. The restaurant addresses gourmet diners who can choose from a variety of Romanian and international dishes by chefs Valentin Eugen and George Mustatea (who prepared dinner for former US president Bill Clinton when he came to Romania). It also has a selection of local and international wines. The opening was attended by business people and local VIPs who were entertained with a live jazz session from Marius Mihalache.

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An art auction is being organized by Goldart gallery for March 1. Up for grabs will be paintings by Romanian greats such as Nicolae Grigorescu, Iosif Iser, Nicolae Tonitza, Corneliu Baba, Catul Bogdan, Theodor Pallady, Samuel Mutzner, Iacob Brujan, Constantin Piliuta, Nicolae Vermont and Camil Ressu, among many others. The auction will also introduce under the auction hammer a large range of 20th century jewels, decorative art objects, 60 antique books and several bronze sculptures.

The objects on display can be seen prior to the auction in an exhibition on February 27 and 28.

BUSINESS REVIEW / March 2 - 8, 2009