Vol. 8, No. 1, February 2012
The magazine for informed internationals
What is the gain of going green? Benefits and costs of implementing a green gene to business
politics
economics
business
city life
Vol. 8, no. 1, February 2012
Thousands of Romanian citizens in Bucharest and 40 other towns and cities took to the streets over more than 10 days in late January, the longest series of protests in the last decade, expressing their anger with government austerity measures and calling for President Traian Basescu and the Boc cabinet to step down.
20
Green bricks Are Romania’s buildings ready to embrace eco principles?
44
Wind of change Wind power players are seeking clarification on vital legal issues
30
Waste not, want not Recycling is proving a profitable niche on the private sector
7. Debt de-coupling
40. green DAWN
The Government has written of the debts of railway operator CFR
Experts debated key issues at the Green Energy Power Breakfast
13. Growing profits
47. Draft law
Tiriac Holdings is planning to move into agriculture
Wind power operators respond to last year’s landmark legislation
16. Green homes
50. Cash injection
EU money is effecting an energy-efficiency revolution
Experts debated the crucial issue of healthcare funding at our forum
26. Bin there, done that
54. Life’s work
How EU laws affect Romania’s garbage system
President and CEO of AXA Life Insurance talks expansion
editorial
New Romanian politics: tarring everyone with the same brush Calea Mosilor Nr. 306, Bl. 56, Scara A, Etaj 2, Apt. 7, Sector 2, Bucuresti, Romania www.thediplomat.ro Publishers Adrian Ion adrian.ion@thediplomat.ro
Mirela Gavra mirela.gavra@thediplomat.ro
Editor-in-chief Dana Verdes dana.verdes@thediplomat.ro
Reporters Roxana Cristea roxana.cristea@thediplomat.ro
Magda Purice magda.purice@thediplomat.ro
Copy-editor Debbie Stowe Business Development Director Magda Ion magda.ion@thediplomat.ro
Advertising Sales Executive Nicolae Popoviciu nicolae.popoviciu@thediplomat.ro
Advertising Sales Executive Ioana Mihalcea ioana.mihalcea@thediplomat.ro
Design by Ocean2000 Have you got a story? Call our news desk on 021 2101336 office@thediplomat.ro
Do you want to place an ad? Call our sales desk on 021 2101336 sales@thediplomat.ro ISSN: 1584-8469 All rights reserved. No part of this publication may be reproduced or transmitted by any means without the prior permission of the Diplomat Media Group. Copyright 2011 Diplomat Media Group SRL
The Diplomat February 2012
O
nce again Romanians are in the spotlight of the foreign media. This time it’s not the usual round of accusations of corruption or criminality, but because thousands of citizens have been protesting in the capital and around the country for more than ten days, angry at the actions of the country’s leaders. As is usually the case, the situation is not clear cut. While before we were seen by Western Europeans as one of the most compliant nations when it came to austerity measures, docilely accepting them, the moment has arrived when Romanians are adopting the mantra, “I’m mad as hell and I’m not going to take this anymore.” The spark was triggered by the resignation of Doctor Raed Arafat, who is held in high regard by the public, and implicitly by the new health law, one that concerns all Romanians. So what persuaded people to brave the cold, rain and snow was not the wage cuts, pension recalculations or chaotic car tax. It was a law that concerns everyone and that must be well designed and formulated and its text written with utmost responsibility, because we cannot afford to change the law again and again with every change of government. Why did the authorities rush through this law when even the head of the Government – after the protests had started – admitted that it was unclear on the details and that some aspects included in the new law were misleading? Parts of the new law draft were left open to interpretation. The draft suggested that if the money were to be used and managed by private companies it would be better, as private firms would better track spending, which the State doesn’t currently do, but just settles deficits and budget overruns. The question is: why do we always have to turn to the private sector to ensure seriousness and professionalism, and why don’t we fix the state structures so that they actually do their job, the very essence of their existence? Why do we always have to choose the more complicated path when the simplest solution could be at our fingertips? Why do we always pass the buck?
To return to the protests, it is interesting to note the demonstrators’ demands. Leave aside the obviously impossible hopes such as wage and pension increases, because, if we are honest with ourselves, this is difficult given the parlous state of the 2012 budget, despite the more optimistic noises coming from International Monetary Fund officials of late. The protesters are also calling for the Government’s and President Basescu’s resignation and other such things, but overall their demand is just “to live better”, a theme of the president’s previous election campaign. I won’t go into details, but everyone can agree with me when I say that that there is really room for improvement here. I have never understood why we are condemned to be a backwater of Europe, considering that we are a rich country, where, without false modesty, we should have it all. But what is interesting is that among the protesters are people, apparently objective, who are against the opposition – bringing to mind the famous slogan under which the government and the opposition represent the same mess. I wonder then, why are these people protesting? Against whom, I understand, but surely if someone is protesting in the street they should also have in mind an alternative, a solution to the issue? It is only logical. But who? Because it seems almost infantile to say you’re against them all and therefore you have no opinion. Such people presumably fall into two camps: the kind who doesn’t vote, because they think all politicians are the same, or the kind who protests against all politicians denouncing them as thieves, but goes to the ballot box anyway and votes without revealing for whom. Tarring every politician with the same brush might help protestors – and the wider public – vent some fury over the predicament in which we find ourselves. But someone has to run the country. If we write off everyone, who will have the mandate to lead us out of these tough times? ■
“Why do we always have to turn to the private sector to ensure seriousness and professionalism and why don’t we fix the state structures?”
How transparent will the national energy market become? Author: Florin Dobre, Senior Associate at Pachiu & Associates. Florin provides legal assistance to clients active in the gas, oil and electric power sectors. www.pachiu.com
I
n December 2011, the European Parliament and the Council adopted a regulation in view of ensuring the integrity and transparency at the wholesale energy market level and of monitoring the trading of energy at European Union level (Regulation No. 1227/2011). The Regulation is mandatory and shall be directly applied in all Member States. ANRE’s accountability through its liability towards the Agency for the Cooperation of Energy Regulators (the Agency) could have positive effects on the market, to the extent that the Regulation is indeed observed and applied accordingly. The implementation of the Regulation is determined by the countless abuses recorded on the national energy market and by the cases of information manipulation which have constantly led to an unjustified and unfounded increase in consumers’ prices lately. It is worth mentioning that among the most common encountered abuses and cases of manipulation recorded on the energy market, there is the dissemination of false information regarding the evaluation of prices on the market, the issuance of counterfeit trading orders, by various means of information, with a view to mislead the market participants and to ensure a dominant position on the supply or demand of energy products. The Regulation therefore aims to prevent and prohibit the use of privileged information, triggering the generation of unfair trading conditions on wholesale energy markets at national and cross-border level. According to the Regulation, the privileged information are those information of a precise nature, that have not been made public, and that directly or indirectly refer to one or more energy products and that, if made public, would influence the price of the energy products in question. The Regulation also sets the guidelines for the creation of a new framework for monitoring the wholesale energy markets and provides a detailed description of the
obligations that the relevant authorities in the energy field shall have in creating the framework for the efficient monitoring of the market at EU level, in view of ensuring integrity and transparency. Therefore, the Agency has a significant role in constantly monitoring the energy market, including the Romanian market, in cooperation with the Romanian Energy Regulatory Authority (ANRE), by controlling and providing regular access to transaction records and based on the information sent by the market participants, transport system operators, suppliers, manufacturers, brokers and large consumers. At national level, the Regulation assigns a series of important obligations which must be fulfilled by ANRE and that may subsequently provide a transparent and fair framework regarding the trade of energy products. In this respect, ANRE shall monitor at national level the trading of energy products by establishing a national register that will include the identification data of market participants and the transactions performed by them. ANRE has the obligation to prepare this national register within maximum 3 months as of the date of enforcement of the Regulation. The national register prepared by ANRE, together with the national registers pertaining to the other Member States shall be transmitted to the Agency, which, based on the information contained in them, will create an European register. Moreover, ANRE has the obligation to immediately forward information to the Agency in case there shall be any suspicions that there were committed acts conflicting with the provisions of the Regulation, which would unfairly influence the wholesale energy markets or the prices of energy products. Upon the Agency’s request, ANRE shall be obliged to provide any information regarding the alleged breach, to begin investigations in relation to the alleged breach and to take the necessary measures for the remedy of the
alleged breaches. When the impact of the alleged breach shall lead to consequences at cross-border level, the Agency may also request the participation of other national authorities at the investigations. Furthermore, ANRE shall establish sanctions in order to stop and prevent market manipulation actions, and for the fulfilment of the above mentioned obligations, it shall be expressly provided that within 18 months as of the enforcement of the Regulation, the Romanian state must assign to ANRE investigatory and sanctioning powers. The Romanian State and ANRE shall therefore use its best efforts in order to enforce all the provisions of the Regulation until maturity date, namely mid 2013. It may be therefore concluded that by its enforcement, the Regulation will create a balance of prices on the electricity market, considering the interests of all participants and of the authorities involved. Finally, the Romanian State and ANRE shall have to ensure the transposition into the national legislation and the compliance with the Regulation under a close cooperation with the Agency, so as to secure and promote, at national and European level, integrity, transparency and open and fair competition on the wholesale energy markets, for the benefit of all energy consumers and of all participants to energy transactions. It will be interesting to keep track of the way ANRE will cope with the role it shall have on the national energy market under this new context and the effects that the Regulation shall have on the transparency of the energy market and of the prices of energy products.
politics
PSD deputies Viorel Hrebenciuc and Robert Negoita and businessmen Sebastian Ghita and Emilian Dinescu have come under investigation by the National Anticorruption Directorate on suspicion of money laundering, in connection with a case involving InterAgro owner, Ion Niculae, who is accused of benefiting from a preferential price for gas obtained from Romgaz. A second investigation has been opened into Niculae, APIA officials and InterAgro employees for fiddling European funds. In the InterAgro case, about 40 managers at Romgaz and officials from the ANRE (Romanian Energy Regulatory Authority) and ministry of economy are being investigated.
Law on euthanizing stray dogs pronounced unconstitutional The Constitutional Court has declared the law allowing stray dogs to be euthanized unconstitutional. The law permits stray animals to be put down after the local authorities carry out a public consultation. The announcement that it had been found unconstitutional was greeted with cheers by members of animal protection organizations who had protested during the sessions of deputies within the Parliament Palace, the seat of the Constitutional Court.
UDMR leader: no chance to amend Constitution before elections The leader of UDMR senators, Andras Fekete Levente, has said that there is no chance to amend the Romanian Constitution before the next parliamentary elections. Fekete said that the UDMR supports the revision of the Constitution because it contains many ambiguities, but added that it would be almost impossible to achieve the political consensus necessary to change it. President Traian Basescu said he would resume talks with parties on constitutional revision, commenting that the delay in this process is detrimental for development and the democratic process as well as for the flexible working of the state.
The Diplomat February 2012
Romanian citizens riot on street to protest against government austerity measures
Photo: fearghalonuallain
Politicians and businessmen investigated over InterAgro deal
Thousands of Romanian citizens from Bucharest and 40 other cities gathered in the streets in January in what has become the longest series of protests in the last decade. The focus of the gathering is government austerity measures, and demonstrators are calling for the removal of President Traian Basescu, as well as early elections. The unrest follows cuts to salaries, benefits and higher taxes, but the catalyst was the resignation of popular health official Raed Arafat. In Bucharest, thousands of protesters gathered at Piata Universitatii. Violence flared on January 14 and 15, when the police and gendarmerie used tear gas on demonstrators. As of Sunday night (22 January), more than 2,000 police officers were on the streets of the capital, according to official data. The citizens congregating in Bucharest and elsewhere
expressed their anger over the austerity measures and the Romanian Government overall, focusing on Basescu. The demonstrations follow several unpopular measures taken by the Government over the past two years. After receiving a loan of EUR 20 billion from the International Monetary Fund and the European Union in 2009, the State cut public sector salaries by 25 percent a year later as part of austerity measures recommended by the IMF. The January protests were described as the most vociferous since Basescu’s election in 2004. The early days of the unrest were followed by mass demonstrations organized by the opposition coalition “to formalize protest plans,” according to Crin Antonescu, liberal opposition leader, adding that the group disagrees with the way in which the Government has handled the citizen demonstrations. ■
Six months until new health law PM Emil Boc and President Traian Basescu met with Raed Arafat, the founder of the SMURD medical emergency service, whose resignation was “the unlikely catalyst” that sparked the violent protests in Bucharest and other Romanian cities. The former sub-secretary of the health ministry said that he would resume his post if the proposed changes were scrapped and a new law discussed. The minister of health, Ritli Ladislau, did not attend the meeting between the officials but, according to newswires, he was informed of the decision taken by Arafat. Doctor Arafat announced his resignation in early January over a disagreement
with government officials about the new health law and the decision to privatize the SMURD service. At that time, Arafat said that he was ready to return to the ministry if a new draft health law were discussed. Boc said that Arafat would be involved in drafting the new law. In the meantime, Doctor Andrei Georgescu, who had replaced Arafat as state sub-secretary, has returned to his former position at the University Emergency Hospital in Bucharest. According to Vasile Cepoi, state secretary within the health ministry, the new health law will be drafted within the next six months. ■
politics Orban: EC’s MCV starting to work against Romanian State’s interests The European Commission’s Mechanism for Cooperation and Verification “has become an instrument to work against the interests of the Romanian State,” said Leonard Orban (photo), the minister of European Affairs. According to the official, the tool has proved to be highly efficient internally but, extended to European level, the Romanian State’s interests are not being met. “Much evaluation is taking place in Romania regarding the utility of this mechanism. In my opinion, it is highly useful internally. Unfortunately, at the European level, we observe that, more and more, the mechanism has transformed into a tool which can be used against the Romanian State’s interests,” the official commented. “We would like to observe that this mechanism addresses all member states equally. It is fair that these rules, which are
harsher and more severe than the European legislation, be applied at the level of all European countries.” He questioned the view of Romania and Bulgaria as the countries beset by the highest level of corruption, and believes that, if the mechanism were applied to each country, the evaluation rankings could undergo interesting changes. ■
Government writes off over EUR 1 bln of Romanian railway system’s debt The Romanian Government has decided to write off the debts run up by the Romanian railway system, CFR, through a legal maneuver that overrides the existing legislation regulating the public debt. The special Government Ordinance was signed by the Ministry of Transportation and Infrastructure. Recently, the Court of Accounts found that the national railway company, CFR, had illegally spent EUR 13.4 million in 2010 through an international credit, and found the act “was committed in violation of criminal law,” according to the institution. The loan is said to have been granted by the Japanese Bank for International Cooperation for the modernization of the Bucharest-Constanta railway line. Of the total amount spent illegally, EUR 10.65 million was used for the purchase of 16 rail maintenance vehicles not covered by the loan agreement, and EUR 2.81 million represented improper payments to builders, effected by false estimates submitted for
manufacturers’ offers, general articles, expenses for consultants and CFR experts. The Court of Accounts reported, “During verification indications that a criminal offense had been committed were found: a change, without the legal provisions, of the destination of reimbursable funding by illegal use of a loan of EUR 10.65 million. The case will be referred to law enforcement and criminal investigation agencies, following the Court’s own procedures on these facts.” The Court concluded that the misuse of EUR 13.47 million was caused by mismanagement of the company and lack of personnel in the project implementation unit. The CFR leadership had objected to the findings identified in the inspection, but the team of inspectors agreed with the comments. The institution is seeking to establish the amount of consulting costs unduly paid, to recover the amount, and to establish the appropriate level of staffing on the project implementation unit. ■
Basescu sticks to guns over administrative reorganization President Traian Basescu has said that he will not abandon the idea of administrative reorganization, which is to be voted on with the elections to be held late this year and implemented gradually by 2016. He said that the current administrative organization of the territory had become a “brake” on the development of modern Romania and that nobody had a regional vision. The President maintains his opinion in spite of strong opposition from political parties and civil society.
PM Emil Boc sacks foreign affairs minister Teodor Baconschi
PM Emil Boc announced in the parliament session of late January the dismissal of Teodor Baconschi (photo) from his position as foreign affairs minister, due to inappropriate comments and public statements posted on his personal blog pertaining to January’s street protests in the capital and around the country. Baconschi received notice of his dismissal while he was attending the meeting of the Foreign Affairs Council (FAC) in Brussels.
No optimism over Schengen accession Leonard Orban, the minister of European Affairs, said that Romania’s chance of joining the Schengen Area, “does not seem too optimistic”, as the Netherlands is insisting that the country needs at least two positive MCV reports. According to the official, the interpretation of “positive reports” is ambiguous. The minister said that the Romanian authorities will continue preparations for Schengen accession, but they will also maintain their pressures for approval.
economics Banks and insolvency firms sell EUR 36 mln of real estate assets The largest banks and insolvency companies in the market will auction real estate assets with a combined value of over EUR 36 million over the next 12 months. The properties are located in Bucharest as well as Brasov, Iasi and Piatra Neamt. In some cases the prices are above the market values, the auction ads are not very visible, and interested buyers must buy a tender book and pay substantial guarantees (10 percent of the auction starting price), so interest in these assets is quite low. The most important real estate assets recovered from liquidation in recent years have been the commercial centers Tiago Mall in Oradea and Bucharest City Mall, and 129 residential apartments in My Dream in Pipera.
SIF 5 percent threshold law passes into law President Traian Basescu has signed into law the legislative act amending Law 297/2004 on the capital market. The legislative text – adopted by the Chamber of Deputies on 15 December – raises the maximum threshold of share ownership in SIFs. The deputies approved in plenary session, with 170 votes “for” and 63 votes “against”, the draft legislation to increase the maximum threshold held in SIFs from 1 to 5 percent of the total shares issued by each financial investment company.
2010 budget short RON 3 bln due to public institution irregularities According to the Court of Accounts Bucharest, the 2010 budget was deprived of RON 3.2 billion by central and local administration failures to collect incomes, illegal use of funds, salaries granted without compliance to the law, employment of staff in unbudgeted positions and breach of public procurement. “The most common irregularities were non-compliance in the expenditure of public funds, representing 4,584 cases or 90 percent of the total. The situation shows that financial discipline in public finance is frequently breached by those responsible for managing public funds,” said court inspectors. Other irregularities found by the Court of Accounts included: payments without supporting documents to prove the accuracy of the sums, travel rights granted over the legal scales, inap-
propriate fiscal and financial controls by inspection bodies. The Court of Accounts also said that the National Lottery (Loteria Nationala) had deprived the budget of RON 89.8 million. According to the court inspectors, the national lottery company used half of the sum on a contract with a private security company, suspected to have resulted from an auction in which the security company was favored. At the beginning of the year, the court found that the national railway company, CFR, had illegally spent EUR 13.4 million in 2010 through an international credit and that the act “was committed in violation of criminal law,” according to the institution. The loan is said to have been granted by the Japanese Bank for International Cooperation for the modernization of the Bucharest-Constanta railway line. ■
Standard & Poor’s could impact Euro financing costs for Romania
PwC: gold price to rise to USD 2,000 per ounce this year Extraction mining companies estimate that the price of gold will rise to USD 2,000 per ounce this year, according to a report by PricewaterhouseCoopers (PwC). Currently, spot gold is traded at around USD 1.660 per ounce. The price hiked last year by about 10 percent, but mining companies’ share value of the S & P / TSX Global Gold Index fell by 9 percent. In addition, the World Bank (WB) predicts an increase of 1.5 percent of Gross Domestic Product (GDP) for Romania this year, after a WB report released in June 2011 estimated an expansion of 3.7 percent of Romanian GDP. The downgrade is due to the vulnerabilities of the Romanian economy as a result of the debt crisis in the euro area.
The Diplomat February 2012
The decision taken in January by the rating agency Standard & Poor’s to downgrade nine European countries could increase the financing costs in Euro for Romania, both by the contagion of risk aversion showed by investors as well as by the banking system, since the mother-banking institutions will obtain more expensive financing on the market, according to Romanian analysts. “The S&P decision to reduce the sovereign rating for most of the Euro zone countries is very hard to digest news. In theory, the Euro zone should reduce the public debt and prove how it can raise the
revenues and for both issues, there is a need for time. Another solution would have been economic growth but the probability of that happening is much lower,” said the analyst Florin Citu. According to the chief analyst of Raiffeisen Bank Romania, Ionut Dumitru, the decision taken by S&P lacks solid arguments and he rhetorically asked why the ratings of countries as Austria and France had been downgraded. According to Dumitru, the S&P rating could harm the banking system, through the increasing costs of financing. ■
economics Emil Boc wants more measures to combat tax evasion Emil Boc has asked the ministers of finance and the interior to come up with measures to combat tax evasion, focusing on high-level evasion and stepping up inspections by mixed teams made up of representatives of all institutions involved. The request was made by the premier in a meeting of the Interministerial Committee to fight tax evasion. The meeting was attended by the two ministers, plus representatives of the National Revenue Agency, the National Customs Authority and the General Inspectorate of Romanian Police.
Lucian Anghel voted new president of BSE council Lucian Anghel, the chief economist of BCR (Romanian Commercial Bank), has been elected president of the board of the BSE (Bucharest Stock Exchange) council. The nominee list for members of the council comprised 15 professionals but only Anghel was proposed for president. The list included Valerian Ionescu, also of BCR, along with the current managers of the council, current president Stere Farmache, and members: Ciprian Zah, Mircea Botta, Siminel Andrei (Active International), Cosmin Uleia, Octavian Molnar (IFB Finwest), Lucian Isac and Dan Paul (Brokers Association). Other nominees are: Schroll Matjaz representing Franklin Templeton, the manager of the Property Fund, Adrian Lupsan (Intercapital Invest), Nicolae Ghergus (Confident Invest) and Narcisa Oprea (lawyer at Schoenherr & Asociatii and BSE shareholder).
Ioan Niculae made Romgaz serve InterAgro’s private interest Businessman Ioan Niculae, through various forms of incentive and networking with decision makers at the highest level, successfully made Romgaz SNGN work in the private interests of his company InterAgro. In addition, Niculae called himself the president of InterAgro Group, which consists of six chemical plants – although each is legally distinct – and policymakers from the ministry of economy, the ANRE and Romgaz treated him as head of the group, accepting his arguments.
10 The Diplomat February 2012
RA-APPS to sell first 130 out of 733 properties
RA-APPS, the authority that administers government properties, has started the sales procedures for 130 properties, including apartments located in the center of Bucharest, besides other commercial spaces, plots, villas and hotels, but excluding more expensive assets such as Clubul Floreasca (photo), Triumf and Mara hotels which have not been put on the list for the first sales. Many of the properties submitted for the list have previously been up for sale, without success. Other valuable assets are not included on this list, such as the house of the former Senate president Mircea Geoana. Real estate representatives put the total value of the 600 apartments in Bucharest to be sold through auction by RA-APPS at EUR 85-90 million, the most expensive be-
ing three buildings located on the Kiseleff Boulevard in northern Bucharest, each of which have been evaluated at around EUR 310,000. Late last year, the Government approved by ordinance the sale of 733 graceand-favor properties of a total of 1,100 real estate assets owned by RA-APPS. Another 108 courtesy homes will be put up for sale when their legal status is clarified. Within the state budget established for 2012, the Romanian Government plans to make EUR 164 million (RON 706 million) from the sale of the 773 residencies. Following a decision last month, the Government will exempt public institutions and RA-APPS from paying local taxes on their buildings, says the emergency ordinance on the sale of the state residences. ■
IMF advises Romanian Government to increase salaries and pensions The latest report by the International Monetary Fund (IMF) concluded in late December that the decision taken in Bucharest to aim for a cash deficit of 1.9 percent of GDP is likely to meet the 3 percent target included in the EU methodology but with certain consequences for Romania. Following the third evaluation report conducted at the end of last year, the freezing of pensions and salaries will constrain the budget even more, with further negative effects on internal demand and economic growth. Therefore, IMF officials advise the Romanian Government to consider slightly increasing public sector salaries and pensions during 2012, if the budget allows it. The report also underlined the country’s vulnerability in view of the uncertainty surrounding banks in Europe, since 80 percent of the local banking system is controlled by foreign lenders. According to the IMF, the recent decision by the National Bank of Romania (BNR) to cut the reference interest rate by 25 points could have been
Jeffrey Franks, IMF representative in Romania
premature due to the current instability of the capital markets. The IMF advises the Central Bank not to adopt too loose a monetary policy in the coming months, due to the pressure on the exchange rates and the possible capital vent. ■
infrastructure Bucharest-Pitesti motorway work goes on, in spite of Sema Parc developers Works to build a bridge over the Dambovita in order to link the A1 BucharestPitesti highway to Splaiul Independence will continue, according to bpv Grigorescu Stefanica. The law firm, which represented Bucharest City Hall, obtained a favorable verdict against the developer of Sema Parc SA in the proceedings initiated by the company to cancel the building permit no. 209/21.06.2010 issued by the mayor.
Low-cost flights to switch to Otopeni airport from March 25
Low-cost airlines will be required to operate out of Henri Coanda International Airport at Otopeni as of March 25, with a new schedule of flights for the summer, according to a Bucharest Airports Company spokesperson. The move is estimated to boost the cost per passenger by EUR 4.5, the fee paid by budget carriers using the airport at Otopeni. Currently, Baneasa airport serves as the local hub of several lowcost airlines including Blue Air, Wizz Air, German Wings and Vueling.
Pipera passage launch put back by a month Works on the 470 meters of the Pipera passage, which will link Calea Floreasca and Barbu Vacarescu in north Bucharest, are already completed but the launch has been postponed by a month, as works remain to be carried out on the auxiliary streets, according to Bucharest mayor, Sorin Oprescu. The 1,520-meter passage, designed to expand the two-lane Pipera street to six lanes, is estimated to come in at over EUR 33 million.
12 The Diplomat February 2012
MRDT starts auctions for EUR 190 mln of modernization works The Ministry of Regional Development and Tourism (MRDT) has initiated three auctions for modernization works in three counties in the South of Romania. The ministry is seeking private investors for EUR 189.9 million of modernization works to improve 23.5 km of county roads and 757.2 km of local roads in Teleorman, Ialomita and Arges counties. Ministry officials said, “The rehabilitation of road infrastructure will lead to an increase in tourist traffic in the region, with direct results for the regional development and retention of a larger number of young people in the area.” The projects are part of the National Program for Infrastructure Development (PNDI), comprising the upgrade of 10,000 km of regional and county roads in Romania. The program started last year and will run until 2015, while payment for the works will be made by 2020. In December 2011, minister Elena Udrea said that
several public-private partnerships were also expected to take shape in 2012 for projects such as: the national land register, in which companies including Samsung had voiced their intention to participate; the development of the airport in Alexeni, the Ana Aslan healthcare center, and the green residential compound in Ghencea. The ministry’s plans for 2012 also include revamping works at Constanta casino, due to start in 2012, said Udrea, and the start of expropriations at the Black Sea resorts, beginning with Eforie Nord. The ministry further has 12 tourism infrastructure programs, of which four have already been completed. Five of these projects are located on the Black Sea Coast and Danube Delta, and two have been completed. The projects completed in the Danube Delta brought about the largest increase in tourism in terms of area, 45 percent up against the previous year, according to Udrea. ■
A segment of Timisoara-Arad highway opens to traffic The highway linking Timisoara and Arad counties in Western Romania opened in December, almost four years since works started. The route consists of 33 km which join another 12.25 km of Arad ring road, according to the Ministry of Transportation and Infrastructure. The Arad orbital road will be completely open to traffic from spring of this year, until which time it will function as a national road and be one-way only. Both projects are estimated to cost EUR 264 million. Works on the Arad-Timisoara route were supposed to start in January 2009 but were delayed until June of the same
year. After the completion of 30 percent of the works, financial problems saw the two construction companies, FCC Construccion and Astaldi, cease activity in the area, but work resumed in January 2011, under pressure from the Ministry of Transportation. The works have been financed through a EUR 200 million credit from the European Investment Bank (EIB), while the Romanian government put forward EUR 70 million. According to official data, the 33 km between Arad and Timisoara cost EUR 140 million, while the 12 km Arad ring road is estimated to come in at EUR 124 million. ■
real estate Retailer Profi aims for 25 new openings for 2012 Discount retail chain Profi plans to open another 25 new stores in 2012. They will join an existing 108-shop network in Romania, 20 of which are located in Bucharest. According to Pawel Musial, GM of Profi Rom Food, the investment in one outlet is estimated at several hundred thousand Euro. “In the next two years, we plan to double the number of stores and we are on track to
achieve this sooner than we had planned. I believe there is room in Romania for about 2,000 Profi concept stores,” Musial told The Diplomat – Bucharest. Enterprise Investors, the fund that owns Profi Rom Food, is one of the largest private equity investors and venture capital firms in Central and Eastern Europe, managing EUR 1.7 billion across seven funds. ■
Irish investors plan to open ParkLake Plaza at end-2013 The EUR 250 million commercial center to be developed in east Bucharest by Irish investment group Caelum Development should be completed at the end of 2013, with construction having started. Cushman & Wakefield has been appointed exclusive real estate letting agent for the commercial center’s spaces. ParkLake Plaza will have a lettable area of 67,000 sqm, which will host a Cora hypermarket on 15,500 sqm, a Cinema City
multiplex, 200 shops, an entertainment and sports area and a food court with 20 units. The center will also have an underground parking lot with 2,300 spaces. The preliminary construction works will be managed by Apolodor and the Greek company Edrasis – C. Psallidas. According to Cushman & Wakefield officials, Caelum will also appoint a general contractor for the rest of the works. ■
Raiffeisen Vienna lends EUR 95.5 mln for Promenada Mall Raiffeisen Bank International is extending EUR 95.5 million of financing for the construction of Promenada Shopping Center in the Floreasca area of Bucharest, a project developed by Raiffeisen evolution. The development will have a rentable area of 35,000 sqm and will be structured on four levels, including 120 stores and 1,300 underground parking spaces. At the end of last year, Raiffeisen Evolution announced the completion of the sale of SkyTower office building in Floreasca City to Raiffeisen Property International GmbH, which is part of the Raiffeisen Bank International AG (RBI) group. The Romanian affiliate of RBI, Raiffeisen Bank SA,
will set up its new head office in Bucharest in the block. According to Raiffeisen Evolution officials, after the completion of construction works at the beginning of 2013, the lender will relocate to SkyTower, where it will occupy floors two to seven, and Floreasca Office, the seven-floor building located close to the tower. In the immediate vicinity, Raiffeisen Evolution is constructing its retail project Promenada Shopping Center. The total investment in Floreasca City was estimated at EUR 250 million. The design project started in 2005 and the construction permit was obtained in 2008. ■
Tiriac Holdings targets agricultural business, intends to buy 2,000 hectares Tiriac Holding, owned by businessman Ion Tiriac, might expand its current business portfolio to incorporate agriculture, due to the increasing potential of this segment in Romania. According to Ion Alexandru Tiriac, a member of the boards of different companies that form part of Tiriac Holdings, the firm plans to purchase up to 2,000-3,000 hectares of land. Tiriac Holdings also intends to start the construction of an office building near Piata Victoriei, to which it means to assign EUR 30 million. Other industries where Tiriac Holding plans to invest are IT and renewable energy.
Real4You Group gets PUZ for MegaMall project in Bucharest Austrian investment company Real4You Group has obtained the urban planning certificate (PUZ) for its 70,000-sqm project in Bucharest, MegaMall, located on the site of the former Electroaparataj plant, the mall’s co-exclusive leasing agents, Colliers and DTZ Echinox, have announced. According to them, the project is approximately 20 percent leased. MegaMall Bucharest will be developed at the junction of Iancului and Pantelimon roads, on the former Electroaparataj industrial platform. Real4You Group will develop other MegaMall shopping centers throughout Romania, in Satu Mare, Focsani and Targu Mures.
Patriciu searches for buyers for Mic.ro The 830-unit proximity retail chain Mic.ro is to shut down less than two years from its opening. The chain, operated by Mercadia Holland, a company owned by businessman Dinu Patriciu, has seen its business decline over the last few months. Last year saw the beleaguered retail network close several units, and from January this year suppliers were asked to cease deliveries. Sources on the market say that Patriciu is negotiating the sale of the Mic.ro business with the international chain 7-Eleven.
13
appointments A lexander P hilip Nekolar, 37, has been appointed CEO of Porsche Finance Group, replacing former executive, Kurt Leitner. He takes on this new responsibility after three years as CFO of the finance company. Nekolar’s background also includes three years at Porsche Bank Group in Vienna, managing the legal and financial divisions, as well as Europcar’s IT and HR departments for Austria and Slovakia.
Anca Stroe has been
Ionut Patrahau has
appointed marketing director of Danone Romania, and will also serve as a member of the board. Stroe has worked for Danone for five years, becoming brand manager for Romania and the Republic of Moldavia for two of the company’s brands. Stroe previously worked for Elite Romania and Johnson Romania.
been appointed CEO of private health network Regina Maria. The new director has extensive experience in services, having worked in banking for ten years. His most recent position was deputy general manager of Transilvania Bank.
Ioana Radu Motofei
of capital markets for Romania and CEE at the real estate consultancy services company CBRE Romania. The new manager will lead the funds and real estate services for owners and developers from the firm’s portfolio, drawing upon seven years of experience at CBRE London where he has consolidated his expertise within the Central London Leasing and Central London Capital Markets valuation departments. Before joining the CBRE Bucharest office, Dunne worked for the private pension manager Lothbury Investment Management.
has been appointed Henk Paardekooper partner at law will take over the firm Bulboaca & position of president Associates. Costin of RBS Bank in Teodorovici also Romania, following becomes partner. Motofei, 29, focuses the approval of the Central Bank. He will on litigation, corporate M&A and employment. replace Johan Gabriels, She has been a member of the Bucharest Bar who has led the bank’s operations since 2009. since 2005, and with the firm since 2007. Paardekooper specializes in emerging markets, Teodorovici, 30, specializes in banking, and has over 20 years of work experience. He corporate M&A and competition. In the same was previously in charge of the corporate and round of promotions, three lawyers were made 18x13.15cm.pdf 1 20/01/2012 µ.µ. associates – Raluca Ciocarlan, Voichita institutional assets of the non-core division of12:55senior RBS in London. Lefter, and Diana Mihaela Teodorescu.
14 The Diplomat February 2012
J ames H ey worth Dunne is the new head
investments AUSTRIA
USA
FRANCE
Wienerberger is considering making a new investment in a new factory in Iasi, an investment that would amount to EUR 22 million. The first steps were taken in 2011, when the firm leased 41 hectares of land in the county of Iasi, following a public auction attended by three players. Company-owned production facilities are currently located in the Gura Ocnitei – Dambovita, Sibiu and Tritenii de Jos – Cluj
Honeywell has announced it is considering opening a brake pads factory for cars near Ploiesti. Production could begin by the end of 2012 and would focus on innovative and environmentally friendly brake pads. The investment would be carried out by a group subsidiary, Honeywell Friction Materials. In Romania, Honeywell is present through several companies, counting 1,400 employees in 2010.
Eolenvest, a company controlled by the French group Filasa International, whose owner, the Lacoste family, has acquired three wind farms in Braila, with a capacity of 400 MW. The three projects need total investments of EUR 600 million. At the end of last year, the firm announced that it would start working on a 516 MW wind park in Suceava, investment which could reach EUR 780 mln. Works will be completed in the next two years.
GREECE
ROMANIA
Aluminum profiles manufacturer Alumil Rom Industry (ALU), part of Greek group Alumil, has signed a loan agreement with the Portuguese Millennium Bank worth up to RON 15 million (EUR 3.45 million) to finance a new aluminum-processing factory at Filipestii de Padure. The contract with bank includes an investment loan of RON 8.3 mln for a period of seven years, and a working capital loan of RON 8.7 mln, over two years. The firm will also be able to access letters of guarantee for up to RON 2 mln.
Monsson Group, a major developer of wind projects controlled by businessman Emanuel Muntmark, has started work on a 150 MW wind park, located in Pantelimon, north of Constanta County, in which it will invest EUR 250 mln. In total, companies controlled by Muntmark have developed wind farms with a total power of 2,400 MW, equivalent in size to more than three reactors at Cernavoda, but now only have 25 MW capacity, the intention being to reach 200 MW over the next three years. Work should be completed this summer.
Wienerberger plans to invest over EUR 20 million in new brick factory in Iasi
GREAT BRITAIN
Philip Morris to invest EUR 1 million in Otopeni factory
Philip Morris Romania will install a new energy efficient cooling plant in its production facility in Otopeni, through an investment of EUR 1 million. The move is expected to generate a 5 percent reduction in the factory’s energy consumption. According to Sergey Slipchenko, managing director of Philip Morris Romania and Bulgaria, in 2011 the company reported a record production, of which 80 percent was exported.
Honeywell to consider opening factory near Ploiesti
Alumil borrows RON 15 million from Millennium Bank to build new factory
Eolenvest starts EUR 780 million of investments in Suceava
Muntmark to build EUR 250 million wind farm
15
green buildings area. Also, we want to involve beneficiaries in this process, so they will have to come up with some co-financing, which is now being discussed. Priority works will target blocks of flats built over 1950-1990 that currently have energy losses and high maintenance costs.”
Authorities home in on green
The green initiative European money seems to be flowing through various financing programs, with around EUR 800 million available for energy-smart projects. Government officials, EU program managers and association leaders told The Diplomat – Bucharest about the current status of funds absorption, what projects are eligible for the financing and what’s next in terms of EU money for further investments. By Magda Purice
E
nergy efficiency is shaping up to be a hot topic again this year. In the first half of 2012, the Ministry of Regional Development and Tourism (MRDT) will present a new scheme for financing energy efficiency works through European funds. Representatives of the MDRT told The Diplomat – Bucharest, “This operation is intended to create complex works to improve energy efficiency, aligned to the latest changes included in the 16 The Diplomat February 2012
European Directive on the issue. The beneficiaries of these projects and funds will be local public authorities, in partnership with house tenants and f lat owners’ associations. The beneficiaries will co-finance the works to a certain proportion.” Razvan Murgeanu, secretary of state in the MDRT, previously said, “We want to carry out complex works to increase the energy efficiency of homes. We want funds to be available for the whole urban
Projects involving European financing through these laws and EU directives can also include the integration of renewable energy sources. “This is so that we can shift the discussion towards so-called ‘green houses’. There are many opportunities for turning a regular house into an energy efficient house, from using geo-thermal resources to solar energy, while the field of scientific research is still open to further innovations. The market evolution will be faster in the cities that deliver higher developing potential,” said MDRT representatives. So far, steps towards the development of domestic energy efficiency have been stipulated in GO nr. 18/2009 and GO nr. 69/2010, besides the regulations inserted into the Fiscal Code related to tax exemption for such works and constructions. These join the modifications and the adds-on to Law nr. 372/2005 on the energy performance of buildings, following the adoption into Romanian legislation of Directive nr. 31/2010 (EPBD - Energy Performance Building Directive). “We estimate that the segment of passive houses will gain ground in the next couple of years, due to their specific features, such as good heat insulation, integrated ventilation system, recovery of heat and the intrinsic financial advantages resulting from these features. The investment in building a passive house is 25 percent higher than a regular house,” added MDRT officials. Recently, Eugen Curteanu, state secretary within the ministry, told The Diplomat – Bucharest, “The general focus is to find an alternative to energy performance projects and so we are in advanced discussions with the EU in order to attract the four percent of EU funds, representing EUR 800 million, for the development of energywise buildings.” In response to this green approach, in April last year the ministry published a list of the projects submitted for publicprivate partnerships (PPP), which include infrastructure projects as well as the first eco-district in Romania, intended to be a pilot project for the implementation of a new model of integrated urban development in the country.
green buildings
“Any transaction, whether it is lending, selling or buying, becomes largely null if the legal papers don’t include the energy performance certificate too,” Eugen Curteanu, state secretary within the Ministry of Regional Development and Tourism
Savings come at a cost But how costly is it to build a house with low energy consumption? Steven Borncamp, president of the Romania Green Building Council, says, “Passive House is one of the more ambitious building standards from an energy performance perspective, typically requiring a greater initial investment, but compensated with very low operating costs. It is still very much a niche market, but there are many enthusiasts in Romania who are planning and constructing these houses. We do not have a list of the projects but we hear from many of the people we meet of their desire to have a passive or ‘off grid’ house.” Borncamp told The Diplomat – Bucharest that the costs of developing a green house can be much reduced by advance planning. “If energy efficiency is considered early in a project, there is often no, or negligible cost premiums of 3 or 4 percent for a green building project compared to a standard construction. Many green initiatives pay for themselves before the construction phase is finished.” He adds that more extensive planning efforts, for example, will result in less oversizing of heating and cooling equipment, fewer construction mistakes, and a better floor plan. “Many of the green lighting and controls solutions have payback periods of less than two years even before the planned removal of energy subsidies has
taken effect, and are now a requirement of more discriminating investors,” Borncamp adds. The issue of state incentives for investors, through EU financing or other kinds of tax exemption, is also important in order for the segment to be developed and further project opportunities to appear. “Home mortgages that reward energy efficient construction are very important, as are tax incentives that promote greener buildings. Impending and in force national legislation – often driven by European directives – related to energy performance standards and measurement, construction waste reduction and green procurement are helping drive the market forward,” Borncamp told The Diplomat – Bucharest.
Certificates to count in housing transactions Private developers will have to build only energy-efficient buildings and, in the case of rehabilitation of a building, take into account the energy certificate. So, according to the ministry’s projects’ claims, any building built by 2020 will boast a maximum energy efficiency rate, meaning energy consumption close to zero. EU legislation requires investors to at least consider the introduction of renewable energy resources for construction projects. So no business will be able to find tenants or buyers without an energy certificate.
Difference between EEFF and RoSEFF Credit line
EEFF
RoSEFF
Eligible companies
Private sector, any size
Private sector, only SMEs
Investment type
Energy efficiency
Energy efficiency and renewable energy
Maximum credit amount
EUR 2.5 mln
EUR 1 mln
Free technical study
Yes, for all investment
Yes, for investments exceeding EUR 250,000.
EEFF total financing
EUR 80 mln
EUR 60 mln
Number of participating banks
6
4
Timeline
2008- 2012
2012- 2014
EU grants
15 percent
up to 15 percent
SOURCE: EEFF – the EU-EBRD Energy Efficiency Finance Facility
According to the MRDT, such certificates will be the impetus for improving the heating systems in existing buildings, resulting in lower energy consumption from conventional resources. Under the current laws, constructions erected after 2005, and especially in the boom years after 2007, should already have, in theory, an energy performance certificate. The reality is different. According to the available statistics, over half of the total number of existing homes in Romania were built before 1970 and are now in a poor state, losing heat and consuming a lot of conventional energy. Regulations now require each building to have an energy performance certificate so it can be ranked within an energy class, from A (high performance) down to G. According to Steven Borncamp of the Romania Green Building Council, “The opportunities are project differentiation, better understanding of the importance of low operating costs by investors and owners, higher occupancy, and higher sales and rental values. In addition, the low energy performance of many of Romania’s current buildings creates a significant business case for renovations that maximize performance and optimize the use of space.” Curteanu adds, “A major reference in establishing the energy performance strategy for buildings is Directive 2010/31/EU and our proposal to introduce mandatory energy performance certificates in any transaction. Therefore, based on our legal proposal, any transaction, whether it is lending, selling or buying, becomes largely null if the legal papers don’t include the energy performance certificate too.” Interest levels vary, and officials from various relevant institutions, both state officials and association representatives, say
17
green buildings that there are compelling arguments in all areas across all building segments. “The business case is even stronger for lower earners who spend more of their income on energy efficiency. Therefore, while the projects may be smaller outside the capital, the frequency will increase dramatically, particularly with the removal of energy subsidies,” says Borncamp. He adds, “The challenge, certainly not unique to Romania, is that many construction quality issues are systemic in nature. It will take a concerted effort by innovative businesses, government and academia to put in place all of the mechanisms necessary to dramatically improve the current and future building stock. This challenge is, however, much more rewarding to solve than the challenges of obsolete buildings in a future of scarce resources.”
Green residential compound seeks private investors In March last year, Elena Udrea, minister of the MDRT, announced the launch of the first eco-friendly residential compound, consisting of 10,000 flats to be built in the coming years in Western Bucharest, in the Ghencea area. The housing project, developed in partnership with the National Housing Agency (ANL) and District 5, will target public servants: the army will receive 25 percent of the total housing units, the Ministry of Interior 10 percent, SRI employees 5 percent, other organizations like SIE, SPP and STS, the National Administration of Penitentiaries, 1.5 percent, while workers at the ministry of justice and general prosecutor’s office will be allocated 2 percent of the total homes. The project is at the feasibility study stage, with MRDT representatives expecting the first results in April this year. Curteanu says that the feasibility studies will be completed in the spring of 2012. After this, the MDRT will start organizing public auctions to select private partners. “Because of the size of the project – 10,000 homes built on a 101.5 hectare land plot – I think we must consider several private partners to develop this project in several stages,” says Curteanu. Besides this large project, Udrea announced at the end of last year that 250,000 apartments were planned to have their heating improved in the year to come, after only 14,700 flats were insulated in 2011 despite plans for the rehabilitation of 100,000. “The plans for this year might work as the EC has allowed the funds that remain unused by ministries to go to other programs and other ministries, such as the
18 The Diplomat February 2012
“If energy efficiency is considered early in a project, there is often no, or negligible cost of 3 or 4 percent for a green building project compared to a standard construction,” Steven Borncamp, president of the Romania Green Building Council housing rehabilitation program run by the MDTR,” Udrea said. According to the minister, a major problem for these insulation and heat recovery projects for old housing units is that “the ministry doesn’t receive any of the invoices issued by the city halls for the housing rehabilitation works and contracts,” so it cannot deduct the sums according to the law.
European funds available for SMEs’ energy-wise projects Since 2008, companies and investors developing energy-efficient projects have benefited from the EU-EBRD Energy Efficiency Finance Facility (EEFF). This is a grant-supported financing line for Romania from the European Commission and the
European Bank for Reconstruction and Development. Companies applying for this finance facility get free expert technical consultancy to plan an energy efficiency investment, loans of up to EUR 2.5 million per company from participating banks to finance the investment and 15 percent EU grants – up to EUR 375,000 per grant – when the investment is complete. According to Mark Velody, project manager of EEFF, Romanian banks involved in this facility service have borrowed EBRD’s entire EUR 80 million EEFF loan fund for Romania. So far, EEFF sub-loans for 83 energy efficiency investment projects with a combined value of EUR 59.5 million have been granted by participating banks, based on studies conducted by the business unit of GDF Suez company, Tractebel Engineering and through the EU-EBRD Energy Efficiency Finance Facility (EEFF). But even though the entire amount has been allocated by the six banks involved in the project, some lenders have announced that they still have EEFF funding for clients. The Romanian Commercial Bank (BCR), OTP Bank and Raiffeisen Bank still have money available from their financing, while the remaining participating banks, BRD, CEC Bank and Banca Transilvania, have said that they have exhausted their EEFF funds or have only small sums remaining. So far, EEFF financing has gone to approximately 34 projects developed by companies all around the country and in various fields, including cables, food, furniture, textiles, tourism, metal works, machinery and extrusion. In tourism, for instance, Olanesti Hotel, run by the company Olanesti Riviera, took out a EUR 663, 000 EEFF credit from CEC Bank, becoming the very first hotel to use the EEFF. The investment involved insulating the building, adding a solar-assisted hot water system for both the hotel and a related mineral water treatment center, and improving the efficiency of two boilers by replacing the burners and switching from light fuel oil to natural gas. A similar EEFF investment, worth EUR 383, 000, has been secured in Covasna, at Turist Covasna hotel, through a credit from Raiffeisen Bank. With the EEFF facility ending this year, the EU-EBRD financing is preparing for the second stage of the program, with the Romanian SME Sustainable Energy Financing Facility, RoSEFF. The new program, which will run from 2012- 2014, will provide EUR 60 million for loans supported by grants, dedicated to SMEs’ investments in energy-wise projects. ■
green buildings
Building a green business The thin green line between the costs and benefits of developing an energy-efficient building is determined by EU directives, Romanian legislation, the demand coming from multinational companies and the dilemma of developers as to whether to invest more and wait patiently for the returns or to focus on quicker gains. The Diplomat – Bucharest talked to the main companies involved in this market to find out if green will become the color of business or whether it is mere green-wash. By Magda Purice
“A
building is a citizen of the city and has an obligation to society,” a Chinese chief engineer and LEED AP at the Shenzhen Institute of Building Research used to say, according to representatives of Schneider Electric, another company involved in solutions on the developing market of green projects. Data provided by real estate consultancy specialists from the consultancy company The Advisers/ Knight Frank indicate that Bucharest’s modern office building stock is approximate 1.6 million sqm, of which 200,000 sqm is certified buildings or projects in the process of getting certification. “Looking at the deliveries of the last two years, most of the major office buildings are green,” says Horatiu Florescu, president and CEO of The Advisers/ Knight Frank agency. According to him, most projects over 10,000 sqm which have been started or announced in the last 12 months will get green certification. The same applies to
20 The Diplomat February 2012
the previously started projects such as AFI Business Park and Hermes Business Campus that will be delivered in 2012 or 2013. Besides Bucharest, the specialist sees Iasi and Timisoara as the two large cities where “green signals” have been emitted, although their stock is more limited than Bucharest’s. “I predict that we will witness the delivery of green buildings in these cities too in the next two or three years,” says Florescu. Razvan Nica, BREEAM assessor, BREEAM in Use auditor and LEED green associate at BuildGreen Romania, a company that specializes in BREEAM and LEED certification services, comments, “Bucharest is indeed a pioneer in this field, but don’t forget that the Nokia factory in Jucu was the first completed development certified against green building standards.” He adds, “We know that there are projects, now in the preconstruction stage, that seek to fulfill energy efficiency and sustainability criteria for future BREEAM or
LEED certification in Iasi, Timisoara, Cluj, Oradea and Constanta. Bucharest is one step ahead, but all major cities will follow it closely because the client requirements in terms of quality, sustainability and energy efficiency tend to be similar and the developer should cope with this new reality.”
Location trumps green Despite the increasing popularity of the green approach in developing office buildings, specialists from Knight Frank have summarized a series of barriers to the idea of green projects. Currently, the main reason a tenant chooses an office building is the location, in particular the accessibility of infrastructure and public transportation, with the green factor only taken into account afterwards. The difficulty of communicating and quantifying concretely the benefits of operating within a green-certified building also puts a brake on progress. For instance, Florescu says that both developers and tenants need “proof” of the
green buildings
“The taxes paid by a developer that plans to build a green project are higher and than for a developer of a regular building,” Ovidiu Sandor, general manager of City Business Center cost-related performance of such projects. “If you cannot communicate the practical benefits, the higher costs involved in a green building are quite hard to explain,” he adds. It seems to be a matter of communication between the builder, the architects and the tenants, governed by commercial calculations and efficiency. If, within the entire green energy field, state incentives are highly valued for such developments, for the real estate, “they can be a stimulus but don’t make the crucial difference,” argues Elsa Monteiro, head of Sonae Sierra’s sustainability department. “It is incumbent upon the owner/developer/manager to know the asset and value its return. In the case of shopping centers we are talking about a specific building with a particular consump-
tion of water, energy, waste and land use. As I have said before we need to find the right solutions that create a good payback time, efficient running of the building and thus a good return on investment.” The representative of one of the best known business centers in the capital, Wilbrook’s Platinum Convention Center in northern Bucharest, believes that the sustainable construction aspects are scarcely touched upon in existing legislation in Romania. “The sustainability criteria related to water, indoor air quality and waste management are not covered at all in Romanian regulations. Few public authorities ask for an energy performance certificate at the start of the construction of new buildings. Nothing is really implemented for existing buildings,” says Catalina Sandu, marketing manager at
Willbrook International. “Another aspect is that, unfortunately, there are no specific instruments/regulations used by the government or the local public authorities to encourage the use of local workforce and local construction materials in sustainable construction. One of the main problems is that the ecological topics are regulated only
21
green buildings at a central level. We think that the government should also give more subsidies to companies that intend to invest in a green building construction,” Sandu adds.
Green – a not so expensive business If energy-performance improvement is considered from the beginning, the costs of developing such a project do not exceed 4 percent of the entire construction costs, according to specialists from the Romania Green Building Council (RGBC). And the payoff can be significant: the operational costs of the building, meaning, for instance, the energy costs, are estimated to be 30 percent lower than those of a regular building. “Within an office building, the power used solely to light the spaces can make up an average of 25 percent of the energy entire consumption. But, by using natural light and photo-metrical sensors, the proportion can be reduced to 10 percent of the total,” say RGBC specialists. The Willbrook representative says that based on the company’s detailed calculations, green buildings can reduce energy use by 24 to 50 percent, CO2 emissions by 30 percent and water use by 40 percent. Besides that, the business benefits of going green are measured in 8-9 percent lower operating costs, a 7.5 percent increase in building value and a 3 percent rent ratio rise. Also, according to Schneider Electric representatives, operational costs account for 75 percent of the investment in a building. If a developer or building manager decides to upgrade or improve the building’s features to be more energy efficient, the costs could be higher than 4 percent. Depending on the technology, materials and architecture, it could work out at an average of 15-20 percent more expensive. “If
Office buildings and certification status Project
Developer
Certification
Investment (mln EUR)
Platinum Convention Center
Willbrook
LEED Silver
100
Ana Tower
GTC Romania, George Copos
LEED Silver
70
Floreasca 169A
Portland Trust
ongoing LEED
100
City Gate
GTC Romania
ongoing LEED
121.6
EuroTower
Cascade Group
BREEAM very good 110
Swan Business Park
Chayton Capital
BREEAM very good 50
Crystal Tower
Search Corporation
BREEAM excellent
Ploiesti West Park
Alinso Group, Domo Group, Piritex
BREEAM very good 350
Lakeview
AIG Lincoln
BREEAM very good 50
Hermes
Atenor Group
ongoing BREEAM
35
150
SOURCE: Romanian Green Business Council, DTZ Echinox, Colliers International, The Advisers / Knight Frank, Epstein, BuildGreen Romania
the decision to build green is taken in time, the investment costs decrease,” Horatiu Florescu, president and CEO of consultancy company The Advisers/ Knight Frank, told The Diplomat – Bucharest. While before 2007, supported by the existing law on green developments but with no direct pressure from the EU, real estate developers only used the “green” advantage as a marketing tool, the next few years brought the first certificated building. Florescu argues that 2010 was the first year of a new era in office building development, with two projects – The Lakeview by AIG Lincoln and Eurotower from Cascade Group. “From this moment on, with 2010 being the year when the green approach really took off, we are no longer talking about revamping conventional buildings with green features but green buildings developed as a greenfield investment,” says Florescu. Timing is crucial, adds Razvan Nica, BREEAM Assessor, GM of BuildGreen Romania. “The investment cost for a sustainable building depends on the moment when you decide to make it ‘green’ and the level of energy efficiency and sustainability targeted. If the decision is taken in the concept and scheme design, the principles and energy-efficient system can be easily included in the project without significant change or redesign costs. There are no sta-
tistics across the Romanian market but the LEED statistics – where the average cost premium for green buildings is between 0.5 and 6.5 percent – I consider it applicable also in our market conditions.” Another pertinent argument is that all the multinational and foreign companies starting operations in Romania or already operating here would want to operate from a building with green credentials – or, at least, some eco-related features. Although this segment is at the beginning in Romania, the first steps have been taken and green thinking is expanding to tourism hospitality units and industrial spaces.
Who has gone green? “We expect sustainability issues to become ‘unavoidable‘for the real estate sector. Green buildings currently comprise just two percent of the market, but we anticipate them becoming increasingly sought after as tenants look to cut operating costs and back up corporate environmental and social responsibility goals,” says Catalina Sandu of Willbrook International. But specialists from Colliers International think that there is too much talk over too little facts. “For now, we don’t see a strong trend in this respect. The investment in such buildings is high and at least the office buildings don’t opt for this type of financial commitment,”
“The difference in values depends on whether the project is a greenfield investment and the specific type of project,” Randall Tharp, managing director for Romania, Epstein 22 The Diplomat February 2012
green buildings
“The investment in such buildings is high and at least the office buildings don’t opt for this type of financial commitment,” Oana Adjudeanu, LEED Green Associate, Colliers International Oana Adjudeanu, LEED green associate at Colliers International, told The Diplomat – Bucharest. According to information provided to The Diplomat – Bucharest by Steven Borncamp, president of the Romania Green Building Council, there are eight certified buildings in Bucharest, at least twenty larger projects in pre-certification, and an additional thirty with plans to build green with a LEED or BREEAM certification a likely outcome. “I won’t comment on companies’ future plans, only to say that the majority of all big projects from important developers will be green buildings. The current economic challenges throughout Europe have both facilitated the shift toward greener buildings while hindering the immediately visible construction activity,” Borncamp told The Diplomat – Bucharest. “I would consider Floreasca 169, Procter & Gamble’s Urlati factory, City Business Center in Timisoara, Victoria Center and Swan Office Park very notable examples of green construction principles and quality. The Hilton in Bucharest is a great financial success story in improving the energy performance of its existing property with a one to three year payback period in cash expenditures for various initiatives,” he says. In commercial developments, like retail for instance, there are companies that have also adopted environmental certification models. One such, Sonae Sierra, known on the local market for River Plaza Mall, a shopping center acquired by the company in 2007 and located in Ramnicu Valcea, uses the “Environmental Management System”. Elsa Monteiro told The Diplomat – Bucharest, “This system covers the entire activity of the company from the procurement,
How the numbers stack up
design and construction to operation, and these standards apply to both the shopping centers we develop from the start and the ones we purchase.” A monitoring system put into use at its commercial center by Sonae Sierra yielded clear results. “After conducting a study of the shopping center’s operations and performance in terms of water, energy and waste, we were able to implement a set of five measures to maximize our efficiency. Overall, with a total investment of EUR 69,700 we could save EUR 50,600 per year and reduce energy consumption by 1,756 MWh per year, corresponding to 523 kg of CO2 emissions,” says Monteiro. “The result was that we have just received an ISO 14001 Certification for the Environmental Management System of River Plaza Mall. This is the first certification given to a Romanian shopping center for its EMS.” Investment funds are joining private investors and companies in showing an interest in green-type developments in real estate. “This option is positively perceived by investment funds. Compared with an occupancy rate of office buildings estimated at 75 percent in 2011, the significantly higher occupancy rate, reaching 90-100 percent of green buildings, is very attractive to investors,” says Elisabeta Teris, agency director of GVA ASCO Properties. Specialists from RGBC say the opportunities are project differentiation, better understanding of the importance of low operating costs by investors and owners, higher occupancy, and higher sales and rental values. In addition, the low energy performance of many of Romania’s current buildings creates a significant business case for renovations that maximize performance
New construction projects (%)
Existing buildingsretrofit/renovation green projects (%)
Operating costs decrease
-13.6
-8.5
Building value increase
+10.9
+6.8
Occupancy increase
+6.4
+2.5
Rent increase
+6.1
+1
ROI improvements
+9.9
+19.2
SOURCE: Green Outlook 2011: Green Trends Driving Growth, McGraw Hill Construction (2010), Epstein
and optimize the use of space. “The challenge, certainly not unique to Romania, is that many construction quality issues are systemic in nature. It will take a concerted effort by innovative businesses, government and academia to put in place all of the mechanisms necessary to dramatically improve the current and future building stock. This challenge is, however, much more rewarding to solve than the challenges of obsolete buildings in a future of scarce resources,” says Borncamp.
Legislative outlook The 20/20/20 Directive from the European Union, approved last spring, stated clearly the energy performance standards to be attained by 2020 by EU countries: a 20 percent cut in energy consumption, a 20 percent drop in carbon dioxide emissions and 20 percent renewable energy within total energy production. Since last year, however, besides the announcement of large renewable energy projects by major operators of wind mills in particular, the directive has not made a huge impact. The construction sector, which is the largest producer of CO2 emissions, was almost dead last year and therefore there were very few projects to call to mind an environmental strategy. The most common and visible projects are insulation operations at old blocks of flats and the setting up of photo-voltaic panels for private houses. Once the European directive impacts local real estate developments more and more, the specialists of GVA Asco Properties, led by Elisabeta Teris, believe that demand for sustainable projects will strongly increase. “The new regulations will require public institutions, at least, to use only this type of building, with green certificates. Still, even if developers are
23
green buildings leaning towards green projects, the lack of clear legislation and the high investment costs compared with medium-term earnings and the lack of financing opportunities are the main factors hindering this trend,” Teris tells The Diplomat – Bucharest. Razvan Nica, of BuildGreen Romania adds: “Any incentives like a property tax reduction will be favorable for these certifications. If the authorities offer incentives for LEED/BREEAM certified buildings I’m sure that will boost certification
LEED versus BREEAM Common traits: Internationally-recognized green building certification system Measure environmental quality of buildings Promote sustainable buildings Provide market recognition for sustainable buildings Independent, third-party certification (BRE for BREEAM, GBCI for LEED) Volunteer schemes Based on life-cycle analysis Three-stages approach (assessment, design, construction/post construction) Ongoing improvement of the certification schemes (LEED 2009, BREEAM 2011) LEED content stronger on: Occupant comfort Internal pollution issues (VOC) Spaces Heat island effects Mechanical ventilation and air conditioning environment Reduced car mobility Less prescriptive, more discretion for designers More transparent, technical criteria publicly reviewed by members Easy access to information, easier feedback from the assessment body BREEAM content stronger on: Pedestrian and cyclist safety Much higher targets for cyclist Water efficiency Acoustics Integrates national/ European codes and standards More adaptive SOURCE: Epstein
24 The Diplomat February 2012
requirements because this project will be considered more profitable. I know there are some discussions at local and central authority level for a tax reduction based on the energy efficiency level, which will increase the demand for sustainability certification. We believe that a discussion for incentives based on sustainability certification is not applicable at this moment because we would need a reference standard – BREEAM or LEED.” Still, he adds that green projects are still at the beginning of the road, and fiscal incentives cannot be applied to an incipient market that is still taking shape. “If you look at the mother countries for this certification scheme, you will see that the tax incentives were set up by the authorities after the entire real estate industry followed them as sustainable references. I think it would be idealistic at this moment to expect fiscal benefits from Romanian authorities when fewer than 10 buildings are certified and half of the construction and real estate industry doesn’t know what this standard means,” Nica comments. Andrew Prelea, CEO of Ozone Homes, the developer of Avalon Residence in north Bucharest, says that reluctance towards “green housing construction” has a historical cause, with most people preferring traditional construction technologies. “Looking at the current market, we can conclude that, as long as it doesn’t involve any supplementary construction costs, the public would consider the advantages of a green house. Still, it is hard to change the mentality in Romania. From our experience, clients declare their wish to live in a different technologically-built house but, due to the costs, they tend to stick with the traditional features,” says Prelea. According to Ovidiu Sandor, general manager of City Business Center in Timisoara, a green-type building complex into which EUR 30 million has so far been invested, the current taxation system is not efficient. “The taxes paid by a developer that plans to build a green project are higher than for a developer of a regular building. The taxation is a percentage of the building’s value but, for a green building, the value is, of course, higher,” Sandor tells The Diplomat – Bucharest. He also suggests incentives such as tax reductions for certificated buildings such as BREEAM and LEED, or at least A-type buildings, in Romanian legislation. For him, a 30 percent reduction would be a starting point. The complex in Timisoara benefited from the engineering and building system management of Schneider Electric. “Schneider Electric’s main new contribution to
the construction of the complex has been the integration of building management system (BMS) within the structure of the buildings,” says Saulo Spaolanse, country president of Schneider Electric Romania. Though it might sound complicated, company representatives say that it is about simple solutions, such as integrating sensors to adjust the shutters according to the outside climate parameters. They say this is the first system of its type implemented in a building in Romania, adapting the building lighting to the meteorological conditions. “Another solution was the introduction of an innovative climate control system, which reduces the energy consumption by 40 percent,” adds Spaolanse.
The call for specialists Razvan Nica says that the biggest challenge for him when he started to do the first certification – Cascade EuroTower, in 2009 – was the lack of professionals familiar with the requirements of the sustainability standards for different areas. “But in time, based on experience in sustainable certification in the Romanian market, we consolidated our professional team. Of course during our project we provide knowledge and realistic solutions adapted to the Romanian legal and practice constraints for sustainability issues to design teams and now they are aware of what BREEAM and LEED mean and how they work. An opportunity for the Romanian market is the fact that there is knowledge available: we can learn from other markets what sustainability means, it is not necessary to experiment or research. We have available all UK experience in BREEAM, US in LEED, German in DGNB. We only need use them in order to have a better quality and sustainable building portfolio,” says Nica. He adds that in today’s economic climate, marked by fear and instability, all clients are looking to reduce their costs. “A BREEAM or LEED new building certifies to potential clients the quality, sustainability of construction and the energy-efficiency potential. The standards for existing buildings, mainly BREEAM in Use, are easier to follow and help the management of the building to operate it in the most efficient and sustainable way – this standard is focused more on management and operation than the construction itself and can be used with good results even to assess historical buildings,” Nica says. The company now has six ongoing projects for new development certification (both BREEAM and LEED) to include more than nine buildings, mainly offices and retail, and most of them in the concept/scheme
green buildings design stage. “As regards the existing buildings, we have two ongoing office building certifications and we are in advanced discussions with an important portfolio owner to certify his entire portfolio to BREEAM in Use standard,” says Nica. Auditors and assessors agree that a developer has to decide in the early stages of the project whether the building will be certificated BREEAM or LEED. The certification process consists of two stages: design and construction. The first stage, design, is the most complex one, when the project is adjusted to include the sustainable features of such constructions, according to the budget and the building’s characteristics. The second stage is based on the working site documentation and the execution of the final project. This delivers the final certification, according to information provided by the BuildGreen manager. The global engineering and consultancy services company Arup is significantly involved in A-class type and green buildings projects locally, and the local office leader Gabriel Hyde believes, “The green approach to architecture and engineering for buildings is a developing trend in Romania.” The company is involved in several such
12.5%
of total office building stock in Bucharest is made up of certificated buildings or projects in the process of certification projects in Bucharest, including the A-class office building Green Gate, providing the first new base isolated building in Romania, located in the capital’s District 5. Another green project, Grivitei office tower near Gara de Nord in Bucharest, engineered by Arup, is now in the design stage and is being developed by Austrian company S Immo. So far, zoning permission for the project has been obtained, and the company is now focusing on concept and design as well as preparing the application for the construction permit. Besides its commercial projects, Arup is involved in several public schemes,
such as the rehabilitation of the historical building of Bucharest’s Economy Sciences Academy (ASE Bucuresti) and works on the capital’s historical center.
Adding value, decreasing costs The Chicago-based architectural and engineering services company Epstein, through its Bucharest office, is also involved in green developments, and is a founding member of the Romanian Green Building Council. Its specialists outline the operational costs and most significant indicators of a green building, as reported by the owners of such projects. According to Randall Tharp, managing director for Romania at Epstein, the difference in values depends on whether the project is a greenfield investment and the specific type of project. According to Alinda Dudu, senior architect and LEED AP specialist at Epstein, the difference between LEED and BREEAM is complex but has much to do with the different scale and system used: LEED involved a 100-point scale (+10 bonus points) while BREEAM uses a percentage system, but both are internationally-recognized green building certification systems. ■
25
recycling
Collecting hopes W from new garbage law The challenge of selective waste collection has been widely debated in Romania in recent years and the results are far from hitting EU targets. But the new legislative framework passed late last year offers some hope. The Diplomat – Bucharest found out the new legal requirements and the hurdles Romania must clear to catch up with other EU countries. By Roxana Cristea
26 The Diplomat February 2012
hile the germs of a collection system in Romania existed in the period prior to 1989, the landmark year of social chance, during Romania’s EU accession and post-accession period it has not been a priority. From bulk collection and passing the target to selective collection, there remains some way to go. At present, Romania is second to last in the EU (above Bulgaria) ranked by the rate of recovery of waste, at just 1 percent – which means that 99 percent of Romania’s municipal waste ends up at the dump. By comparison, in Germany and the Netherlands the proportion of waste going to the cesspit is only 1 percent and in Austria and Sweden just 3 percent. “In my opinion, one of the biggest problems in the selective collection of waste in Romania is to offer an alternative to the public, creating an alternative to professional collection, so as to have a transition from a collection of garbage where the operator does or doesn’t do his job – and we saw after 1989 the mountains of garbage around waste containers – to an infrastructure of separate containers, so the citizen to whom we’re trying to explain why we need a selective waste collection system can see it,“ Gabriel Abos, president of the Environment Protection National Agency (ANPM), tells The Diplomat – Bucharest. Abos adds that the best results in the field will come when there is an economic interest. According to the ANPM president, currently plastic waste is going very well, and this is the area with the most intense economic movement. It also appears that Romania has good results in the storage of household waste. “Recently we have had more and more waste storage deposits, and they are managed in a proper manner. They are not like the usual deposits where at the first gust of wind the sheets of paper and plastic bags are flying in the air, they are totally something else: waste is collected, separated and placed in cells,” says Abos. A few years ago, the targets imposed by the European Union regarding the selective collection of waste made big changes in the Romanian system of waste management. “We will have a lot of work to do to meet the targets set by the EU,” adds the ANPM president. According to him Romania could easily achieve targets such as reducing the amount of waste deposited, considering that the recyclable waste processing industry is developing in parallel. “We have some pioneer cities in the recycling industry, like Buzau. We have a secure market
recycling
“We need a transition from a collection of garbage where the operator does or doesn’t do his job to an infrastructure of separate containers,” Gabriel Abos, president of ANPM in waste batteries. Waste oils, in turn, find their usage, tire collection is going well, paper is finding its way and I hope we will find a solution in the glass category. All the waste categories are slowly finding a solution,” says Abos, adding that Romania’s waste management is going through a period of adaptation. Nicolae Dinculeasa, senior adviser at MECMA, DGPIMA – Industrial Policy Department, notes that given the raw material crisis is becoming more pronounced, and Romania, as a European Union country, has obligations regarding environmental protection and targets for waste collection, recovery and recycling, there are more medium- and long-term objectives to accomplish in this field. According to him, the national legislation on recycling and waste prevention has improved the situation by promoting technologies that allow the production of items that do not generate large amounts of waste and through the implementation of Integrated Product Policy designed to promote goods and services that do not harm the global environment. Two other important goals are increasing the reuse and recycling of waste and getting the objectives of the EU Directives transposed into national legislation by promoting and participating in national or regional programs on this issue and improving the quality of products obtained by recycling. The development of the auto industry, equipment, installations, processing and recycling of waste and promotion by national research and development plans, proposals for research topics for areas deficient in terms of processing possibilities and Romania’s recycling ability in certain categories of waste (eg. batteries and accumulators, waste from electrical and electronic equipment, certain parts of vehicles, etc) and to detect and encourage reuse of the waste for other purposes than the traditional ones are also objectives. Another important aim voiced by Dinculeasa is to increase the investment volume in poor areas of recycling certain waste in Romania by attracting foreign partners and facilitating their contacts with Romanian partners.
While in other activity fields it is possible to measure the results, in the waste management field there are only statistics, processed with a delay of two years. In 2009 the volume of packaging waste recovered was 460,780 tons, of which 404,200 were recycled, which means that the recovery percentage was nearly 47 percent of all packaging on the market, according to the ANPM.
New law, old targets “I am convinced that all those people working in the environment are doing a job for the future because, as I have said, the twenty-first century will be the environment century or will not be at all,” said Laszlo Borbely, minister of environment and forests, during a conference in April, last year, at which measures to be adopted by Romania to meet the Framework Directive No. 98, 2008 of the European Parliament and the council on waste were debated. A major objective of the European directive is to make the European Union a so-called recycling society in which the citizen must avoid waste generation and should use waste items as a resource. The
head of Waste Management of the European Commission, Julio Garcia Burgues, said: “Unlike previous European legislation, which the new directive repealed, now the main focus is on five steps which set priorities in the legislation and policy of the prevention of waste generation and management. What I mean is that, in applying the waste hierarchy, the relevant authorities shall adopt measures which encourage their efficient management consisting of prevention, preparation for reuse, recycling and recovery, like energy recovery and waste disposal.” In order to adopt Directive 98/2008 in the national legislation, on the initiative of the ministry of environment and forests, in April the Romanian Government adopted
EU recycling and recovery targets for recyclable waste Waste type/ Year
2010
2011
2012
Paper and cardboard
60%
60%
60%
Plastic
14%
22.5%
22,5%
PET
42%
55%
Metal
50%
50%
50%
Aluminum
0
17%
21%
Glass
44%
54%
54%
Wood
12%
15%
15%
Recycling
42%
50%
55%
Capitalization
48%
57%
60% SOURCE: Eco-Rom Ambalaje
27
recycling the law on waste. “Because the law provides regulations to ensure environmental protection, it establishes the obligation to handle waste in a manner that does not have negative effects on the environment and public health, by encouraging the implementation of the waste hierarchy and reducing resource consumption,” said the minister of environment in April last year. “I hope that the money from the EU will allow all counties to have implemented the Integrated Waste Management System by 2015. We have contracts but the implemen-
coordination of the local authorities or intercommunity development associations with the purpose of keeping the communities sanitary. “The designated authorities of the administrative-territorial units have responsibilities in the area including the adoption of organizational measures necessary to organize the selective collection of waste for recovery, treatment and storage control,” the minister of environment told The Diplomat – Bucharest. GD no. 621/2005, with subsequent amendments, stipulates that the designated authorities of administrative units are required to organize, manage and coordinate the selective collection of packaging waste from households. However, according to
be approved during 2012 and two projects should be approved in 2013, according to the ANPM. The 18 projects have a total value of RON 2.6 billion, VAT excluded. “Waste sector projects are funded by the European Regional Development Fund and are aimed at achieving the following objectives: increasing the coverage of the population receiving municipal waste collection and management services of appropriate quality and affordable tariffs, reducing the amount of waste, increasing the amount of waste recycled and recovered, and setting up efficient waste management structures,” the minister of environment tells The Diplomat – Bucharest. In addition, in accordance with commitments under the Treaty of Accession
“In recent years, the waste management industry in Romania has recorded an upward trend and the number of new players has increased,” Lazlo Borbely, minister of the Ministry of Environment and Forests
tation of this system rests solely with the local authorities. They hold the auctions, they implement projects. I want to remind you that we are top in Europe regarding the number of signed contracts. In the last two months alone we have signed contracts for over EUR 800 million, and we are already, from this point of view, in 2012,” he added.
Fast steps to a stateof-the-art selective collection system Two years ago, the Ministry of Environment and Forests inventoried a total of 698 localities where selective collection projects had been implemented. These projects are carried out by organizations working with waste operators, supported by local authorities. In addition, in 27 localities pilot projects of selective collection are ongoing. According to the ministry, under the provisions of Law no. 101/2006 on the sanitation service of localities, following legal changes public service sanitation comes under the umbrella of public utilities and its services are carried out under the supervision, management and
28 The Diplomat February 2012
the contractual documents, the implementation of the selective collection of packaging waste must follow the following schedule: 2007-2017: national expansion and selective collection; 2017-2022: implementation of selective collection in difficult areas (collective housing, dispersed rural, mountain).
European funds for Romanian recycling system Priority Axis 2 of the Sectorial Operational Program Environment deals with, by Major Domain of Intervention 1, the development of integrated waste management and extension of waste management infrastructure, water pollution, soil and air caused by inadequate waste disposal. In this sector work is ongoing on integrated projects with investments in the construction of county landfills to European standards, closure of old, non-conforming building stations for sorting, composting and transfer stations, the purchase of containers for selective collection (this being part of recycling), and providing transport facilities. The portfolio of projects to be financed through POS Environment 2007-2013, in the waste management sector, includes a total of 37 projects. Of these, 18 projects were approved, for three of them the estimated date of completion was the end of 2011, 14 projects are expected to
and in compliance with Community legislation, EU funded projects should achieve the following performance: selective collection of packaging waste for 100 percent of the urban and rural population, ensuring by 2013, a total recovery rate of garbage of 60 percent, a recycling rate increased to 55 percent, detailed as follows: 60 percent for glass, 60 percent for paper, 50 percent for metal, 22.5 percent for plastics and 15 percent for wood.
High hopes “In recent years, the waste management industry in Romania has recorded an upward trend and the number of newly established companies who have declared their main activity the collection and recovery of recyclable materials from waste has increased from previous years,” says Lazlo Borbely, stating that the extension of the separate collection of packaging waste on a national scale is a prerequisite for achieving national targets for recovery and recycling, and municipalities, companies and public sanitation participation in the scheme should become mandatory. The local authorities have a very important role in achieving national targets for waste recovery because they decide where to put the containers for selective collection and sign contracts with companies specialized in waste management, contracts which should contain obligations related to selective collection. The main
recycling challenges related to recycling consist of diversified services in collecting, sorting and processing waste, and in changing attitudes of consumers by discouraging excessive consumption and waste of raw materials and encouraging responsible consumption and environmentally friendly behavior. “Recycling is a base component of Romanian industry, such as industrial activity itself, but especially by contribution to other industries by providing, at a rate of 100 percent in some areas, raw materials for production,” adds Dinculeasa. According to him, natural raw materials are becoming more limited and the costs of obtaining them becoming higher. This is the case around the world, and in these circumstances recycling provides the insurance required for secondary raw materials’ continuation and the development of industrial activity. “Recycling is therefore a necessity, but is primarily a liability arising from all European directives transposed into national law and Romania has assumed obligations regarding the annual amounts of waste to be recycled,” concludes Dinculeasa. ■
What changes does the new waste law bring? The project law on waste regime, which transposes Directive 2008 / 98 / EC on waste, was approved on October 18, 2011, by the Chamber of Deputies with 282 votes for and one abstention. The normative act initiated by the ministry of environment and forests was approved in April by the Romanian Government and in June by the Senate. The new law aims to establish the framework of measures to protect the environment and human health by preventing or reducing the adverse effects caused by generation and management of waste. Also, the law on waste aims to reduce the overall impact of resource use and increase efficiency through several measures: • The introduction of extended producer responsibility to enhance reuse, prevention, recycling and other waste recovery types; • Establish waste prevention programs based on the indicators adopted by the European Commission;
• The bearing of waste management costs by the original waste producer or by the current holders or previous owners of the waste; • Enforcement of such non-compliance with the provisions of this law; • Clarifying responsibilities of factors involved in the waste management system; • The distinction between preliminary storage of waste before its collection, collection and storage of waste before treatment; • Facilitate separate collection and proper treatment of bio-waste in order to produce compost without risks to the environment and other bio-waste based materials; • Measures to stimulate the creation of reuse and repair networks by supporting them, using economic instruments; • Introducing the notion of end-of-waste notion, prevention, reuse, preparation for reuse, treatment and recycling. SOURCE: Environment Ministry
29
recycling
Gold from the garbage pit To start a business using a raw material of which there is an endless supply seems ideally suited to these difficult economic times. The Diplomat – Bucharest spoke to Romania’s largest recyclers and associations to find the main problems and advantages of the garbage business. By Roxana Cristea
“E
nvironmental issues are technical, the solutions are economic and the approaches are emotional,” Sorin Popescu, executive director at Eco-Rom Ambalaje, tells The Diplomat – Bucharest in an interview about recycling and selective waste collection in Romania. According to him, the biggest problems in the selective collection system are a lack of involvement by the local authorities in terms of a strictly controlled sanitation system, nonexistent legislative levers regarding the vandalism and theft of containers, citizens’ reluctance to get involved in selective collection, and the failure of those authorities who do participate to communicate to their constituents that this is happening. “It is no wonder that in Romania the trash consumed per capita is 350-400 kg, but only 15 percent of this is packaging waste. In a Western country consumption is double, 600-800 kg, while the percentage of packaging waste is 40-60 percent. The selective collection system is specific
30 The Diplomat February 2012
to each European state, starting from the structure of consumption,” adds Popescu. In Romania about 400,000 tons of packaging waste – both domestic and industrial – is collected, according to estimates by EcoRom Ambalaje. Of this amount Eco-Rom gathered more than 300,000 tons, meaning more than 75 percent of the national quantity of waste. In addition, 15 percent of the total amount collected by Eco-Rom comes from the household flow (including selective collection and acquisition of the waste from the public). “All studies show that citizens want to have a selective collection system and that such a system is beneficial. Eco-Rom currently operates in 120-130 towns, covering a total of 5 million people. Of the 300,000 tons collected by Eco-Rom, 10 percent comes from the selective collection system implemented by the association,” says Popescu, adding that in 2012 Eco-Rom wants to expand to some new locations and to manage the selective collection of garbage across the entire city. At the same time, by extending
this project, the association has proposed that by 2012 at least 20 percent of the total waste collected come from selective collection. “Last year we had several selective collection projects, the most important in partnership with Eco-Rom Ambalaje which is being rolled out in several localities. In 2011, the new project in collaboration with Eco-Rom was the implementation of selective collection bags – a bag for paper and cardboard and another one for plastic were distributed to every house. We trialed it, and this year we will extend this project in some areas. In Bucharest the public responded very well. The problems were that much of it was picked up by street people,” says Bogdan Constantinescu, commercial director at the waste management company Urban. “We are now waiting to see the details of the new waste law, the conditions we should meet. One important thing is that the new law repealed Ordinance 16 which allowed the collection of recyclable industry waste,” adds Constantinescu. On the topic of the new waste law, Sorin
recycling Popescu believes that its most important aspects are that the law clearly defines for the first time extended producer responsibility, the clear responsibility of local authorities as to how they manage the waste, the obligation of local authorities to establish forms of collaboration and the transfer of responsibility for achieving objectives to organizations. “The law tries and succeeds through articles to bring a new spirit to the approach to this vast topic. In addition, the law outlines all actors involved and sets specific objectives in waste collection by 2020,” concludes Popescu. After the collection comes the waste sorting and finally the recycling process, which can bring a lot of money to companies, not to mention satisfaction, because they are helping to protect the environment.
Old batteries charge big profits Recycling is a profitable business for Rombat, the largest Romanian producer of batteries for cars. Annually, the company can recycle 43,000 tons of batteries from both home and abroad. ”I think the battery recycling segment has primarily been influenced by competition on the waste battery mar-
Light at the end of the tunnel “The crisis has contributed to the approximately 40 percent drop in the quantity of light sources put on the market by Recolamp members, which is why the association revenues have decreased proportionally. However, the amounts of waste managed have increased and should continue to grow in the future,” Roxana Sunica, director of marketing at Recolamp, tells The Diplomat – Bucharest. Recolamp is the only association specializing in the management of light sources waste, bringing us to another chapter where Romania has to fulfill legal obligation regarding recycling, WEEE, or Waste Electrical and Electronic Equipment. In this difficult economic climate, Recolamp has optimized logistics flows, large containers were replaced with smaller ones in locations where storage is no longer justified, budgets in marketing and communication decreased – “in other words we have adapted to a new market economy,” sums up Sunica. However, market lightning sources contain a new kind of product: LEDs. Because of the many advantages that these sources have, the market is expected to grow in the coming years, because of the need to replace old
ing by 45 percent its annual collecting and recycling results. This waste was collected mainly from “business to business” generators of waste – office buildings, hospitals, public institution and industrial sites – but also from households through the Green Corner collecting network. In total, to date, Recolamp has founded and manages more than 7,000 such collection points. “This year we will continue to invest in Recolamp’s ability to collect for recycling, to grow faster the quantities of waste,” says the marketing director, adding that the firm will continue to expand its collection points – both those for large generators and for the public. In parallel, it will start actions that lead to greater use of the locations it currently manages. This is absolutely necessary, as now only 30 percent of existing Recolamp locations selectively collect light source waste. “We decided in 2012 to double the number of sites that gave the waste to Recolamp, and this cannot be achieved without further investment in the entire logistics system around
“In Romania the trash per capita is 350-400 kg, but only 15 percent of this is packaging waste compared to 40-60 percent out of 600-800 kg in the West,” Sorin Popescu, executive director at Eco-Rom Ambalaje ket, which contributed to higher commodity prices,” says Ioan Repede, CEO of Rombat SA, which in 2010 registered a turnover of over RON 280 million, up from the previous period, while shipments exceeded 2.1 million car batteries. According to Repede, the number of batteries recycled has grown steadily in recent years. “From our data we can say that over 90 percent of the batteries in Romania are recycled, similar to other countries in this region,” says the Rombat chief, adding that in recent years the company has invested significant sums in Rebat’s recycling facility in Copsa Mica, Sibiu County, putting into operation a modern oven plant and a new crushing and sorting installation of waste batteries. The investment in Rebat started in 2003 and has now reached close to RON 48 million, of which almost two thirds went into advanced equipment for recycling. Rombat has 665 employees and its market share at the end of the last year was 53.8 percent.
technology with the latest generation. “At this moment, Romania is the only country in South East Europe collecting and recycling waste lamps in a structured way. However, the targets assumed by Romania before the European Union do not take into account the geo-socio-political context,” our business, and so we are focusing on says Sunica. “Romania must collect and actual actions logistics, direct marketing and recycle 4kg of waste electrical and elec- communication activities,” says Sunica. tronic equipment per capita annually. So, we’re talking about a total of 84,000 tons. 2012 brings separate Light bulb waste represents only a small targets on aluminum part of WEEE. Obviously, that share is very “We started our activity with a pilot project small in volume; however, the management in District 4 in Bucharest with ten schools, of fluorescent tube and light bulb waste is having as partner the waste management very important in terms of environmental company Urban SA, then we expanded our protection because we are talking about activity to several counties – Brasov, Buchawaste classified as ‘dangerous‘.” rest, Prahova and Galati – to a total of 100 Recolamp Association collected and schools and 90,000 students. The project was recycled 158 tons of waste in 2008, 138 in to educate children about behavior regarding aluminum collection and recycling wherever 2009, 90 in 2010 and 130 in 2011. In those four years, Recolamp provided management they are,” says Adina Magsi, general manfor over 500 tons of fluorescent tubes and ager at Alucro. The non-profit association energy saving light bulbs burned, improv- became operational in October 2008, but
31
recycling
95,000 80% tons of waste paper were exported by Romania in 2011
12,000 the amount of waste in tons produced in a month by the inhabitants of Bucharest
260,000 the quantity of glass in tons on the Romanian market every year
116,641 cars were scrapped last year in Romania
50%
the number of Romanians who do not pay waste tax
4
killograms of electrical and electronic equipment waste per capita is the target imposed by the EU until 2013 32 The Diplomat February 2012
of Romanians are familiar with the term ”selective collection”
officially acquired legal status in May 2010 and aims to educate people about recycling and collecting aluminum. In 2010 it collected about 600 pounds of aluminum, and through a campaign with Remat Holding upped it to about eight tons last year, which is valued somewhere around EUR 6,000. “In 2012 we will have a new project called Every Can Counts, a new concept not only adopted by us but also by other countries in Europe, and we want to use this unique system to promote and collect aluminum cans,” adds Magsi. In addition to 300 schools in 10 counties that will be targeted, the scheme will be extended to public and private companies in office buildings, gas stations and owners associations. According to the director of the association, the amount of collected aluminum does not matter, but the group has some costs and wants a balance between what it invests and collects. ”We aim to collect more than last year. In 2011, the AMEPs collected 30 percent of the amount on the market, which meant that one of three units was recycled. In 2012 we have separate aluminum targets and I think it is 17 percent,” says Magsi. According to her, to fulfill the targets faster, more emphasis is needed on legislation, because if selective collection is obliged by law, it will happen.
Exports increase, imports decrease “The collection of waste paper is not a profitable business, but a super profitable one. Nobody will say they have collected waste paper, have separated it and don’t know what to do with it. Nobody who performs this activity will tell you they are losing money,” says Chiriac Constantin, CEO of the Employers Industry of Pulp and Paper (ROMPAP) of waste paper collection in Romania. According to him, 90 percent of the raw material used locally to make paper is waste paper, but the industry uses a small proportion of card and paper. The degree of waste paper collection has increased from 30 percent 15 years ago to over 50 percent in 2010 and 2011. “A ton of waste paper collected and inserted into the system saves between five and six cubic meters of cut wood.
1%
of the total waste collected in Romania is recycled Pulp is highly polluting. Acquisition and preparation of waste paper is two to three times less polluting, and investments are three, four times smaller,” says Constantin, adding that this is both good and bad – because the industry cannot produce all sorts of paper. In addition, the executive director of ROMPAP says that in the last two to three years the export of waste paper has greatly increased. In 2008 Romania exported 9,000 tons of waste paper, in 2009 around 50,000 tons, in 2010 about 75,000 and in 2011 between 90,000 and 95,000. This increase could support the consumption of domestic paper, reduce the reliance on imported waste paper and provide a large amount for export, especially to Hungary, China, Indonesia and India. ”To be able to sell at high prices, but also more easily, we should separate the paper into classes. Not everyone mixes drinks. If the collection is organized and the degree of collection increases, everyone in Romania will have a profitable business and we will have exports too,” says Constantin. Recently, the largest paper recycler in Romania, Vrancart, announced that it is planning to enter neighboring markets this year to sell its surplus of waste paper, while the share of company exports last year reached 5 percent of turnover. Last year the company increased the production of corrugated cardboard by 3 percent, while sanitary paper production decreased by 5 percent, following the market trend.
Greentech to invest EUR 8 million in 2012 in recycling station “As an EU member country, we will soon be forced to account for amounts collected and not the collection points we have set up. In my opinion we have two solutions: implementation of mandatory selective collection with the adoption of coercive measures, as most European countries chose, or the introduction of a deposit system (guarantee) for PET bottles and aluminum, as 10 of the European countries did. The collection rate of PET in countries where the system has been introduced exceeds 80 percent; in Germany it is 93 percent,” says Cristinel Dobrota, general manager at Greentech and Greenfiber Buzau, adding that to improve
recycling
698 20,000 60%
number of places in Romania with selective waste collection projects
number of employees working in the collection, transport, processing and recycling of waste
of packaging waste generated in Romania comes from the public use
the selective collection system it must first be implemented. Few selective collection projects implemented are run on a voluntary basis. No European country has achieved its objectives by voluntary selective collection, due to low efficiency, and so they subsequently resorted to mandatory selective collection. The company had a pilot project in supermarkets, in which people who brought PET products and later deposited them in a selective collection machine received a small sum of money back. ”We are happy with the results of the pilot project, the amounts collected are at the limit of machine amortization risk but most important is the confirmation that the deposit system would
have great results in Romania too. Citizens are willing to bring back PET bottles to the store in exchange for small sums of money,” adds Dobrota. Greentech, one of the ten companies he manages, has Taiwanese shareholders and is one of the largest recyclers of PET in Romania. To date its investments in recycling have amounted to EUR 35 million and consist of: equipment (the largest share), production halls and related fields. “This year we have an EUR 8 million project to increase the recycling capacity and to modernize existing flow,” says Dobrota, adding that in 2011 the company had a turnover of RON 115 million, a gross profit of RON 5 million and about 450 employees. In
addition, in 2011 it recycled approximately 35,000 tons of PET waste, sourced from sanitation companies, collection companies and garbage pits. The amount of PET waste in Romania recycled in 2011 was about 10 percent higher than in 2010. The figures for 2010 and 2009 are similar. ”Romania had a PET waste collection rate of 25 percent in 2010. The average for the EU plus Switzerland and Norway was 48 percent. In our area we have the following rates: Hungary 30 percent, Czech Republic 60 percent, Slovakia 48 percent and Bulgaria 25 percent. The biggest collection rates are in countries that have implemented the deposit system. In these countries the rate is above 70 percent,” concludes Dobrota.
33
recycling
The biggest recyclers i GLASS Tc Rom Glass - Bucuresti Gremlin - Constanta
PET Greentech - Buzau Esox - Olt Professional Recycling - Mures Robsylv - Caras Severin Polimerest - Prahova Replastica HDPE - Buzau Paper and cardboard Vrancart - Vrancea Ambro - Suceava Eco Paper - Brasov Petrocart - Neamt Pehart Tec - Alba Comceh - Neamt 34 The Diplomat February 2012
recycling
s in Romania Electronics and electrocasnics Ro- Ecologic - Mures GrenWeee International - Buzau Bene International - Bihor Ecorec Reciclyng - Bacau Grup Remat Holding - Bucuresti Stena - Bucuresti Computer Trade - Harghita Rian Consult - Brasov
Aluminium American Packaging - Bucuresti Hammerer Aluminium Industries - Arad Can Pack Romania - Bucuresti
SOURCE: Companies
35
recycling Biggest challenge: reaching the WEEE target “Let’s start with a chapter where it will be very hard to reach the EU target: WEEE. I am not aware of how the authorities chose the target of 4 kg per capita, which they negotiated, but the Romanian reality looks very different,” Gabriel Abos, president of ANPM, tells The Diplomat – Bucharest about the selective collection of electronic and electrical equipment waste. According to Abos, Romanians are emerging from a period when they did not have white goods in abundance and in which any product or part of a product was put to use in the household, such as electronic parts, transistors, printed boards and electric motors, which, in the hands of a good householder, didn’t become waste. ”As long as they can take out a component, they prefer not to throw the product out,” says Abos. Last year 20,000 tons of WEEE were collected in Romania, 25 percent less than in 2010 due to falling consumption, according to GreenWEEE, a company that collects and recycles WEEE.
Year
the Ministry of Environment things could happen fast. 2011 was a bad year because the take-back program didn’ t work,” adds Marius Costache, saying it was a shame to export WEEE, because Romania will lose resources, raw materials and labor force.
High performance incinerator in Slobozia “The incinerator that we’ll launch this spring, in April-May, is the only one in this area of Europe that can take waste with a high content of halogens, chlorine, at a rate of 10 percent,” Cristian Dragomir, vice-president of the board at Vivani Salubritate SA, tells The Diplomat – Bucharest about its hazard waste incinerator in Slobozia, in which the firm invested EUR 20 million. ”It has a capacity of 22,000 tons of hazardous waste per year, double that of its competitors. In addition, other incinerators have an imposed limit of waste with a high content of halogens of 1 percent,” says Dragomir. The center in Slobozia will be the first in this area to have platforms for household
million, up from the previous year when the figure was EUR 70-80 million. “In 2012 it will be at the same level as in 2011 in terms of turnover, meaning Vivani will reach EUR 80 million; we want to consolidate,” concludes Dragomir, adding that the firm is planning several new projects.
Pieces of glass are close to EU targets “In 2008, although the crisis had begun, and I’m talking about a crisis which had a big impact on consumption and companies’ turnovers, I was not scared. Although glass recycling was new at that time, I always hoped that we would all understand what the recovery of recyclable materials was about,” says Cristian Dumitrache, CEO at TC Rom Glass, the only glass recycling company in Romania. Established in 1992, the firm started its activity in trade, then seven years later switched to the distribution of glass packaging. The person who opened the way into the glass business for Dumitrache is the current
Total consumption
350.000 300.000 250.000 200.000
Consumption of waste paper in Romania
150.000
SOURCE: ROMPAP
100.000 2002
2003
2004
“In addition, there are many valuable WEEE that are lost by metal scrap centers because at the moment, companies that collect and sell scrap metal offer collectors more money than authorized collectors. I estimate that annually we are losing 30,000 tons of WEEE in metal scrap centers,” says Marius Costache, CEO of International GreenWEEE. The company, founded in 2008, is part of the same Taiwanese group as Greentech and Greenfiber. ”I do not think it is profitable for a company to do only one type of collection. Things change when you collect more waste. From our point of view a company would have very high costs for only one type of waste,” adds Costache. Regarding the EU target, the GreenWEEE director estimates that by 2015 the country will meet it. ”It’s a long process, things cannot happen overnight. If we were a priority for
36 The Diplomat February 2012
2005
2006
2007
2008
waste, industrial non-hazardous waste and hazardous waste, asbestos, waste treatment, an incinerator for industrial waste, physicochemical treatment, bioremediation station and sorting station for household waste in the same place. The Vivani platform will employ about 150 people. Last year, Vivani Salubritate SA invested in equipment for better sorting the waste for its needs, energy recovery and also developed partnerships with market players like Romprest and Urban. “2011 went surprisingly well considering the economic situation, we continued projects started in 2010, and we had a good market strategy. The company also continued to invest in mobile equipment and fixed installations,” adds Dragomir. In 2011, the German group to which Vivani belongs, Chinox AG, had a turnover of EUR 100
2009
2010
2011
general manager of the Greek group Yioula, Nickolaos Barlagiannis. “At the end of a discussion I had with Barlagiannis, we started to speak about glass bottles, and at that time I knew many wine producers. I told him how I saw the distribution of glass bottles in Romania and I convinced him,” says the head of TC Rom Glass. So, the company founded by Dumitrache and his wife started in 1999 to import glass packaging produced by Yioula Group in Bulgaria, at its Sofia and Plovdiv factories, members of the group since 1996 ( Stirom SA has been a member of Yioula Group since 2003), and in 2007 bought a machine to recycle glass. In 2007, TC Rom Glass started to produce secondary raw material from the glass packaging it recycled, with the production going solely to Yioula Group and Stirom SA. A decrease in consumption in the Romanian
recycling market generated a drop in production, and also hit turnover and profit. In 2011 TC Rom The waste road from trash to recycling plant Glass had a turnover of EUR 9.5 million, 1. Product reaches the market, is down from EUR 11.5 million in 2008. The into containers and put the waste to be consumed, and after consumption turnover comes not only from the recycling recycled in bags. 7. Waste goes through a new screening becomes waste. activity, but also sales of glass packaging. process in order not to damage the “The recycling station recycled glass 2. People throw the garbage into containers for paper, glass, plastic or metal. processing equipment. packaging from brewers, wineries and those who produce canned juices. Because 3. The garbage machine picks up the 8. Garbage is placed on a selected band, separate waste selectively collected: and will be pressured by specialized this crisis has worsened over the years and paper or plastic and metal. equipment. consumption has dropped, automatically the collection rate of waste has decreased,” 4. The truck goes to the selectively 9. After running through the equipment, collected waste processing unit. the waste reaches pallets grouped in says Dumitrache. In 2009, the company categories: paper, plastic, PET. recycled 12,400 tons of glass, in 2010 the 5. After arriving at the processing unit, the truck is emptied in the garbage 10.Pallets are placed in the loading area, figure fell to 12,150 tons and in 2011 it was sorting area. from where they will be transported to about 11,400 tons. the final recycling unit. One source of glass waste is the commer6. Employees separate the wrong garbage cial producers of beer, wine, spirits, juices Source: URBAN and cans, with pieces coming from deterioration in the bottling process. tons of glass in the market, coming from should be encouraged to get involved and the Another source is beer bottles: a period message should go out that recyclable mateafter bottling they deteriorate and the brew- Stirom, and imports of finished products rials should at least be taken separately to a ers want to replace them. In the horeca sys- that have glass packaging. tem, glass is collected by waste manageThe collection target set for 2012 is 60 collection point. The big problem is that we ment companies that have contracts with percent, which means around 95,000 tons. all generate waste, but I think there should TC Rom Glass and which represent a small “Figures show that we have almost realized also be a commitment from the part of the percentage of the amount of waste product the targets. Although there are educational state authorities,” says Dumitrache, adding programs and companies involved in this put on the market. In total, TC Rom Glass that he believes that the selective collection estimates there is about 150,000-160,000 responsibility, I believe that civil society of recyclable wastes is expensive. ■
37
The recast of the Directive 2002/96/EC on waste electric and electronic equipment fails to address the major concerns raised by the European appliance industry The Opportunity to improve Europe’s environment and improve its resource efficiency is wasted During the Trilogue which took place on 20 th December, the European Union policy makers came to an agreement on how to take the revision of Europe’s WEEE Directive forward towards a second reading agreement. Regretfully the agreement, voted by the European Parliament on January the 19th, fails to deal with a key issue: the large share of WEEE handled by operators not contracted by producers. Failure to correct Article 11.1 means two-thirds of WEEE falls outside Directive’s recycling requirement Luigi Meli, CECED Director General: “The decision to side-step the issue of what happens to WEEE handled by other operators is very disappointing. By failing to correct article 11.1 of the WEEE revision, policy makers have chosen to discard the fact that in today’s Europe WEEE is handled by many other operators that are not producers nor working on their behalf. Under this agreement, e-waste handled by these other operators will continue to fall outside the recycling requirements that e-waste treatment by producers have to meet.” “Policy makers have acknowledged that this is an issue during the revision process so it’s surprising that they have done little to tackle it in this agreement”. In April 2008, the combined Dutch WEEE recycling systems published a research report that showed that out of a total of 18.5 kg of WEEE that is generated per inhabitant per year, 14.8 kg (80%) is recycled but only 5.7kg (31%) is
38
recycled by the producer funded WEEE systems, with the majority of WEEE recycled by commercial collectors. There are many ‘official’ and ‘unofficial’ commercial collectors, which are handling WEEE from scrap dealers, retailers, municipalities or other. Producers cannot control these commercial collectors. Producers do not have enforcement powers to force WEEE or evidence of WEEE collection and recycling to be given to producer schemes. Member States, on the other hand, are the only ones in control of the key instruments to require data on all WEEE flows to be reported. Escaping WEEE problem will worsen as value of e-waste increases The failure to ensure all WEEE is covered by the directive’s treatment and recycling requirements means that Europe’s WEEE problem is set to get worse. The revised legislation will allow de facto cherrypicking. Materials such as copper, steel and aluminium can all be extracted from many discarded appliances. The problem will be worsened as prices rise along with demand for raw materials. Since scarce resources, such as rare earth metals, are more difficult to extract unless the WEEE is treated correctly, these will now be lost as waste. Meanwhile it is unclear what will happen to other materials that have little or no commercial value. Measuring the collection rate according
to only WEEE collected by producers’ compliance schemes risks leading to profiteering and to increasing the costs of WEEE compliance with no environmental benefit. Measuring the collection rate according to only WEEE collected by producers will mean that municipalities and B2B end users could sell their WEEE to third party actors who can then sell this onto producers at a later date when they need to comply with the collection target. This would mean that producers could be forced to pay a much higher price for compliance.
Raporteur Karl-Heinz Florenz, the Committee for Environment of the European Parliament (ENVI) “Our industry successfully treats an estimated 1.5 million tonnes of WEEE each year. It will continue to treat all WEEE that is handed to it. It will continue to respect strong treatment and recycling requirements as laid out by the Directive. We urge policy makers to take another look at Europe’s fastest growing waste stream and accept that in addition to producers other operators that are not contracted by producers and who handle WEEE should be obligated to respect the same standards”. Developing harmonized collection, treatment and recycling standards can contribute to the realization of the environmental objectives of the Directive while giving industries a level playing field.
Profiteering in some markets led to costs arising from the WEEE Directive being inflated by up to 50 per cent. Europe’s e-waste problem: why it will get worse Luigi Meli: “More e-waste could have been properly recycled with an approach that laid out requirements to cover all WEEE. This would have contributed to a reduction in environmental pollution and improved resource efficiency in Europe. The opportunity has been missed.”
would also need to be established should the requirements be contained within a delegated act. The New Legislative Framework foresees a formal mechanism to object to a harmonized Standard to ensure that it is entirely satisfactory. Elsewhere CECED is disappointed that policy makers have opted for a progressively increasing collection target (45% after four years to 65% after seven years) based on EEE placed on the market rather than a collection rate calculated according to WEEE that is actually generated. The WEEE generated concept is only mentioned in the text as a possible alternative seven years after the year of entry into force of the revised Directive. Responsibility for collection targets have also not been placed with the one entity that could ensure enforcement: member states.
By lowering the ambition of the target, and proposing derogations for certain Member States, the Council and the ParStandards written by European Stan- liament indicated that one target, based on dardization Organizations represent the “Placed on the Market”, for all Member state of the art and participation in the States has its own drawbacks. highly technical preparatory process of A collection target based on the amount the development of the standard is open to all interested stakeholders, including of EEE Placed on Market would lead to a de Member States representatives, industry facto collection target that in some Member experts, enforcement authorities, envi- States would be impossible to achieve, due to the large increases in sales of EEE during ronmental NGOs, etc. recent years and because consumers keep Harmonized standards provide the EEE they have purchased for a longer requirements that are the same through- time and therefore not sufficient WEEE out Europe. is available. This is not an environmental Furthermore, the New Legislative problem as such. As long as the products Framework provides a mechanism for have not been disposed of by consumers questioning and correcting standards that they are not WEEE and do not create an are thought to be deficient, something that environmental problem.
39
energy event
Green themes power energy debate Securing the land, network connection, overcompensation, the uncertainties of the legislative framework and green certificates were just a few of the topics debated by the authorities, wind farm developers and turbine manufacturers at the Green Energy Power Breakfast event organized by The Diplomat – Bucharest. By Magda Purice, Roxana Cristea
A
lthough the secondary regulations regarding the support scheme for renewable energy producers were published in October last year, real estate issues remain a key concern for investors developing a renewable energy project.
Ciprian Glodeanu, head of energy and real estate at Wolf Theiss and Associates law firm “Law 220, which governs electricity production from renewable sources, entered into force this year. Although there is an applicable legal framework for renewable energy projects, putting it into practice is challenging. It is difficult to cope with the continuously litigation-orientated status of land and property titles. For instance, when a company developing a wind farm attempts to secure the land needed to start its project, it will find small, disparate plots of land. The owners will be hard to reach, hard to negotiate with, and sometimes speculative buyers.”
Adrian Borotea, corporate affairs manager at CEZ Romania “Securing land for a renewable project is
40 The Diplomat February 2012
the perfect scenario for litigation regarding property titles. It is challenging to conduct negotiations with multiple land owners, most of them speculative or hard to reach for discussions. It is vital for a wind energy project developer that the land provide access to the power network and so the land has to be secured through property title or succession. We collaborated very well with Transelectrica in order to get access to the power network.”
Adrian Goicea, country manager at Iberdrola Renovables “Iberdrola is working on completing the first wind park in the Dobrogea area this year. Although we ran an in-depth due diligence for the project, we faced many problems regarding the ownership of the land. Many owners had different demands regarding the purchase price for the land and so direct negotiations with them are mandatory. For each stage of the project, even if it is mapping a road or digging a ditch for cabling, there are always negotiations to get each small plot from speculators. It is true that the current law protects us through developers’ rights.”
Octavian Lohan, deputy general manager of Transelectrica “Problems with the land and the delays due to issues surrounding the property deeds, the constant demands of land owners and confusion regarding land ownership require a final decision in court for each step of the project and every payment involved. We have called for a law which enables us to use the land only following just compensation and not also after preliminary compensation, as the existing law demands both. For instance, we are still involved in a court case over a land plot where we have to demolish 12 pylons for a new line.”
Ovidiu Pop, country manager at Verbund Romania “As we are developing a 200 MW wind park in Casimcea, Tulcea, for which we have already started tests, we believe that the key to the success of each project lies in the partners and the financing schemes. It is important to have the financing and the banks, but also to find the partners, lawyers and consultants.”
energy event
Zoltan Nagy-Bege, GM of the regulations dept. in the energy efficiency field, ANRE: The number of green certificates for solar power will be reduced for some projects and in the event of overcompensation, starting January 2012
Overcompensation and imbalance costs In order to reach the target for 2020, the Romanian authorities say there is a need for only 4,000 to 5,000 MW installed capacity in local renewable energy projects. However, given the significant issues involved in securing the necessary financing and a possible readjustment of the number of green certificates, developers are doublechecking their plans for the local market.
Zoltan Nagy-Bege, GM of the regulations department in the energy efficiency field at the ANRE “I am surprised to hear it said that the ANRE would not approve the energy law. If there are imperfections we will be able to improve them. Over the next month, there will be discussions on drafting the new energy law and all players on this segment are invited to suggest their amendments and proposals in order to improve the existing law.” “The number of green certificates for solar power will be reduced for some projects and in the event of overcompensation, starting January 2012. It remains to be decided how the reduction should be applied and if it will apply to projects that have already started production or whether it should target a certain development stage of a project. In my opinion, this reduction should not be applied to projects where production has already started or a supply contract has been signed, or for those projects that have already obtained the functioning authorization. Following a Government Ordinance, it will be decided
Octavian Lohan, deputy GM of Transelectrica: We have called for a law which enables us to use the land only following just compensation and not also preliminary compensation, as the existing law demands both
Ciprian Glodeanu, head of energy and real estate at Wolf Theiss and Associates: It is difficult to cope with the continuously litigation-orientated status of land, often small, disparate plots, for which it is hard to negotiate
how the measure should be applied and to which stage of a project. Currently, there are some energy projects where the reduction scheme should be applied.” “Also, investors should pay attention because there are multiple projects on this market that have been intentionally developed incorrectly. A total of 16,000 MW installed power of renewable energy is a large volume which cannot be accomplished within five years. In order to attain the target for 2020, there is a need for only 4,000 to 5,000 MW installed in the local renewable energy projects.” “If the Romanian State made changes to green certificates, the European Commission would change its point of view. We had talks with the European Commission to try to establish a validity period of three years for the green certificates but the Commission did not agree, saying it might appear to be a conservation system. So we have a validity of 16 months. If we do not meet the quota in 2020, we will buy green energy to meet it. The only mechanism helping us now is the 16-month validity for green certificates.” “Also, what the law and the European Commission provides are internal rates of return (IRR), so an investor can see if the business is profitable or not.”
supervision, leading to the idea that in the next three years we will be talking about compensation.” “Our involvement as a developer comes at the end of the development process. Currently financiers, banks and owners of parks require long-term safety. We have seen a slowdown in the reciprocal steps of funding. We’re not talking about a lockdown but projects are being delayed. In addition, there are many cases where those who have invested will make changes to the refinancing or financing systems. In recent months we have seen that signal from developers and owners. Investing in a wind farm is not an investment for a year or two; it is a long-term deal.”
Catalina Dragomir, sales director at Vestas Romania “I have noticed that developers starting new projects are concerned that the ANRE will pressure them. A month ago the ANRE published its methodology for market
Maria Sabau, consumer manager at Monsson Energy Trading “We have benefited from European financing for the multiple wind power developments in which we are involved. The reduction of green certificates is drastic. For instance, we have wind parks that benefit from 1.03 green certificates while from 2018 there will be only 0.5 certificates. We have projects that currently benefit from less than a certificate. In the years since 2008, investments in these parks have significantly slowed. The entire investment process for such a project is currently affected. For instance, we cannot guarantee our cashflow to the level the banks are requiring, as the investors are also expecting a certain profit even in the worst case scenario. We hope in 2012 to be able to send a message both to the bank and the investors.”
41
energy event
Catalina Dragomir, sales director at Vestas Romania: We have seen a slowdown in the reciprocal steps of funding. Projects are being delayed. There are many cases where investors will make changes to the financing systems
Maria Sabau, consumer manager at Monsson Energy Trading: The latest changes in legislation made the banks perceive a higher risk and we believe that the legislation has to be adjusted from a technical point of view too
Ovidiu Pop, country manager at Verbund Romania: As we are developing a 200 MW wind park in Tulcea, for which tests are done, we believe that the key to the success of each project lies in the partners and in the financing schemes
“The latest changes in legislation made the banks perceive a higher risk and we believe that the legislation has to be adjusted from a technical point of view too. For instance, there are producers that choose to negotiate on price and they will have to pay for the imbalances in the system, since renewable resources usually fluctuate. In this case, we compared the production forecast that we made in 2010 with the costs of the imbalances. For us, the costs assigned to the imbalances in the system represent 30 percent of our total costs.”
investors fear that the market will see an excess of GCs in a few years. Furthermore, at present the legislation contains no specific provisions on how the State will assure the internal rate of return (IRR) it has guaranteed.
60 TWh, from a 4.6 percent consumption growth.” “For the period of 2015-2022, Transelectrica’s investment in the reinforcement of the power network targets EUR 500 million. Our current investment has so far targeted maintenance works on the existing power station network, which is old and needs repairs. We have not invested in the energy transportation network. By 2018, as included in our development plan, the new 400kV line between Gadalin and Suceava will be completed. Due to the current consumption, the need for supplementary investment in network development is not a priority, like the modernizing works on the power stations are. For instance, in Dobrogea there are several ongoing and announced projects. The maximum power that can be sustained by the national power network for Dobrogea is 3,000 MW. Also, in Western and South-Western Romania, excessive power production can occur and our network cannot collect and deliver this volume without investment.” ■
Mircea Rusu, project manager at RWE “The principle of overcompensation requires analysis and generates a great deal of uncertainty. “
A surfeit of green certificates As the price of green certificates (GC) is currently between EUR 27 and EUR 55,
42 The Diplomat February 2012
Octavian Lohan, deputy general manager at Transelectrica “I don’t see a problem regarding the green certificates for the next two or three years. The law deals in percentages, as every power producer should have a certain percentage of produced green energy.” “In 2010, we accomplished 33.56 percent production from hydro resources, while in the first 11 months of 2011, we attained 25.25 percent hydro-energy. In the same period of 2011, we reached 1.81 percent energy from wind and 0.24 percent from biomass.” “Regarding consumption, 2008 was the first year since 2000 when we attained 60 TWh, but the situation didn’t repeat itself in 2010. This year, we will again reach
renewable energy
Energy players hope answers are blowing in the wind Overcompensation, the support scheme change depending on variations in the total investment value, priority access to the grid and electricity network development are just a few topics to which The Diplomat – Bucharest along with the Romanian Energy Regulatory Authority, Transelectrica and lawyers are seeking answers. By Dana Verdes he wind energy sector has had its ANRE, tells The Diplomat – Bucharest. Technology dictates share of adventure in recent years as Currently, for electricity producers that support scheme
T
just from the legal framework point of view the secondary legislation needed two years of intense negotiations with the European Commission (EC) and as with any new law, things aren’t yet crystal clear. There are some issues that leave room for interpretations such as, for instance, overcompensation and further changes of the support scheme for electricity producers from renewable energy sources (RES).
GCs under scrutiny The overcompensation of wind farm developers was a hot topic on the agenda during negotiations. Initially the EC demanded that developers opt either for the green certificates (GC) support scheme, refundable funds from the state budget or nonrefundable money. “We proposed to reduce the number of GC. For this we have established a formula for each technology used, which means the same investment return rate for all developers. Investors disagree, but practically, these return rates are guaranteed by law,” Zoltan Nagy-Bege, GM of the regulations department in the energy efficiency field at the
44 The Diplomat February 2012
use wind power the internal rate of return (IRR) is between 10.7 and 12 percent. “We believe that these are reasonable rates even if the number of GC decreases. The calculations will be based on the investment costs which to some extent are linked with the actual investments. If the number of actual projects grows, the investment costs will decrease,” says Zoltan Nagy-Bege. Yet, Delia Vasiliu, partner at Pachiu Associates, tells The Diplomat – Bucharest that an aspect that seems problematic is the fact that there are no clear criteria indicating if a project is overcompensated or not. “How the IRR will be evaluated in order to consider a project as overcompensated is not yet precisely known, so that the investors, who develop large projects are waiting to see how things evolve,” says Vasiliu. Anca Velicu, lawyer at Schoenherr & Asociatii, tells The Diplomat – Bucharest, “Pursuant to the bill of law approving Emergency Ordinance 88/2011 - currently under debate with the Chamber of Deputies - there would be practically two years in which a GC diminishing due to overcompensation will not apply.”
Another issue signaled by investors relates to the possible changes to the current support scheme for RES electricity producers taking into account the investment modification depending on the technology used. “Here I must agree partly with investors. Again we are talking about a reduction in the number of GC, but a reduction in investment costs as a result of technological advances in the field. It is an absolutely normal phenomenon that when interest is growing in a particular field, the relative cost decreases and already we can see this phenomenon,” the ANRE official tells The Diplomat – Bucharest. He adds: “We agreed before the EC that depending on market monitoring of specific projects completed or under feasibility study, that we will monitor these costs and when the rate of return increases by more than 10 percent compared to those benchmarks we have to step in and adjust the scheme.” He adds that at first glance for photovoltaic parks the specific investment has decreased considerably since, say, 2010.
renewable energy
“To integrate the thousands of MWs we need EUR 500 mln. Yet, for 3,000-4,000 MW, the grid doesn’t require additional investments,” Octavian Lohan, deputy general manager of Transelectrica While initially it was around EUR 3.5 million per MW, currently the investment is estimated at approximately EUR 2.5 million. “So, we will first intervene for photovoltaic parks, most probably in the first part of this year,” says Nagy-Bege. According to him, there is again uncertainty from investors’ point of view, but the ANRE can state that the authorities will never go under the benchmark IRRs. “Each investor must decide whether that IRR assures an investment that deserves to be made or not. On the market there will always be investments for which the IRR will be better or worse. What we are going to do is to aggregate-monitor each resource investment cost and recovery rates and when for a certain resource it is noticed that the recovery rate has increased by more than 10 percent we will intervene,” says Nagy-Bege.
Grid expansion questioned Despite impediments investors’ interest is booming. Octavian Lohan, deputy general manager of Transelectrica, told The Diplomat – Bucharest that currently there are projects in electricity production from renewable energy sources of more than 10,000 MW. But Lohan asks: What certainty do we have that all these projects will be finished to persuade us to invest
millions of euro in over 1,000 kilometers of network, according to the latest statistics, in order to safely evacuate the energy? “We aren’t sure as we are still in a difficult period in which it is difficult to obtain financing for such investments. Not everything will be built, because as the ANRE said we will change the scheme after we reach the quota we assumed in front of the European Union,” says Lohan. He adds: “To safely integrate all these thousands of MWs we would have to make investments worth EUR 500 million. Yet, for 3,000-4,000 MW to which we committed to record by 2020, the grid doesn’t require additional investments from our company.” According to him, Transelectrica has invested insignificant funds as the interest in wind farms doesn’t have a long history in Romania. “The interest in these farms appeared only from 2008 when law 220 came into force. Two years ago, in full recession we couldn’t afford to grow – on the contrary we have just managed to finish what we had previously started, and for these new lines we have forecasted small amounts of money for studies, design and land acquisition, up to RON 2-3 million for each,” says Lohan. “Yet, the expansion plans are estimated to be done in the next 5 to 10 years as we didn’t know that we would see such great interest in wind farms.”
Priority access Grid access is also a theme to deal with when developing a wind farm project. “We are currently in discussions with investors and Transelectrica to find solutions that give them priority to deliver energy over other energy producers. It is also a learn-
ing process, as apart from hydro we do not have experience in renewable, particularly in wind. On this segment, the forecast will have a major influence,” says the ANRE official. “The green energy capacities which are currently operating do not produce large disturbances in the system. Yet, we expect to have some 1,000-1,500 MW installed by the end of the year, from about 700-800 MW currently. According to Transelectrica statements for up to 2,500 MW we should not have any problems,” Zoltan Nagy-Bege tells The Diplomat – Bucharest. According to the Transelectrica official, the legislation gives priority to those plants which receive GC, to the detriment of hydro power plants, which also produce clean energy, but do not receive green certificates. “Practically, we can stop the power plants with lakes, but the issue remains the power plants located on the water course, units which cannot be shut down. We will have to use clean energy in order to take on a larger quantity of electricity from wind farms. Also, we have the problem that there is no way to stock the electricity and also there was talk of a power plant with accumulation by pumping, but this will be realized when it is really necessary,” says Lohan.
“The evaluation of the IRR to consider a project as overcompensated is not yet precisely known, and investors are waiting to see how things evolve,” Delia Vasiliu, partner at Pachiu Associates 45
renewable energy
“There is no support to implement a system to cover the excess of GC. We will see something of a rebound from some clients,” Ciprian Glodeanu, head of energy & real estate practice at Wolf Theiss project, considering very often the restrictive requirements of the bank,” says Vasiliu.
Who’s paying for the GC surplus?
To be connected or nor to be connected The actual connection to the electricity transportation network comes with some impediments. “The technical connection notices (ATRs) involve network reinforcement costs. In the Dobrogea area they amount to several million and even tens of million of euro. I recently saw a case where this demand was a deal-breaker,” says Velicu. According to specialists, the obligation to rehabilitate and reinforce the grid falls to both Transelectrica and energy distributors. Yet, where there are more investors demanding to be connected to the network in a certain area the reinforcement investments must be made by the distributor/Transelectrica and the costs should also be supported by the interested investors. “Unfortunately the law does not say to what extent the investment for the enforcement and upgrading of the existing transportation and distribution grid is supported by the interested private investor, nor who pays first or when these funds will be recovered from the other party. The lack of clear regulation on these matters may lead to abuses from distributors and Transelectrica who do not assume such investments, claiming that such costs have not been budgeted and leaves it up to the investor whether to make the investment or not, assuming the risk of recovering the amount sooner or later, or to give up the entire
“For 9 out of 10 clients, the discussion starts with a question: What happens if in 20142015 there is a surplus of green certificates. Who will buy as GC give a product profitability and bankability?” Ciprian Glodeanu, head of energy & real estate practice at Wolf Theiss, tells The Diplomat – Bucharest on the issues that still need answers regarding investments in electricity productions from renewable sources. “Unfortunately there is no answer to this question, and what’s more there is no support to implement a system to cover the excess of GC. We will see something of a rebound from some clients. For instance, we have had quite a few discussions with some Chinese investors for which this surplus was of prime concern and they said that for now the investments on the local market are on stand-by,” says Glodeanu. In his opinion, a guarantee would have been for the authorities to agree to buy the surplus of GC. “Now that the GC market has new regulations, investors want to know what will happen with the surplus, but also what will happen if suppliers are not able to pay and declare insolvency,” says Anca Velicu, lawyer at Schoenherr & Asociatii. On this topic, the ANRE official told The Diplomat – Bucharest that the authority does not think the maximum limit of 12 percent of electricity from RES will be surpassed this year. “This year we will not see GC supply outstrip demand and most likely the average price of a GC will be very close to the maximum value,” says Nagy-Bege. Another aspect to be taken into account, say specialists, is what will happen in the future with the sale of electricity from renew-
“The technical connection notices involve network reinforcement costs. In the Dobrogea area they amount to even tens of million of euro,” Anca Velicu, lawyer at Schoenherr si Asociatii 46 The Diplomat February 2012
able sources. “We hear that there are discussions to introduce a tax for renewable energy transactions. The question is how high this tax will be,” says Glodeanu.
Approvals from the EC One aspect that needs clarification, say lawyers, is related to the projects with a capacity of over 125 MW which intend to be accredited to receive green certificates and which need authorization from the EC. “The legislation is very poor in this respect as the term power plant was translated from the European legislation with no direct correspondent in the national juridical literature and therefore there are some gaps in this matter. Even the ANRE does not have a unified opinion on this issue,” says Vasiliu. “Also, the notification procedure itself is not clear and detailed enough, for the moment being just known that the notification procedure is to be made through the Competition Council, individually by each investor having a project exceeding such a capacity.” According to Glodeanu, investors are asking what a 125 MW power plant means: several projects totaling 125 MW or projects with 125 MW at the connection point. Specialist estimate that this boom will last up to four years at the most, after which we aren’t expected to see additional greenfield projects on this segment, unless the technology price has fallen considerably. ■
renewable energy Three issues for Enel
Wind of change blasts through energy market A new law on renewable energy came into force late last year, providing some stability for the pioneering operators on this developing market. The Diplomat – Bucharest talked to the major players on the wind power scene to see how the new rules are shaping their plans, and what challenges and opportunities lie ahead. By Dana Verdes
“T
he first wind turbine installed in Romania was the Iridex-Ecoprod one. It was placed in the Industrial Park Ploiesti and had a production license from December 2005. And the first wind turbine in commercial operation was the one in Baia, Tulcea County, with a production license from February 2006,” remembers Andrei Dinga, of Holrom Renewable Energy at the Wind Power Romania, event put together by Green Power Conferences, of the beginnings of the adventure of investing in a wind turbine. From that time things have constantly changed. The market has been occupied by top international names in this industry with investments of several billions euro. The list includes firms such as E.ON, Enel, Monsson, Verbund and Iberdrola.
Windy spring for Verbund The Austrian company is developing on the local market a 200 MW project in two phases. “Phase one will be 100 MW and will be finished in March, while for the second part preparations are more or less ongoing and works will start in March or April depending on the climate. We expect to finish this phase in March 2013,” Mark Suer, head of renewable
project management at Verbund Romania, tells The Diplomat – Bucharest. According to Suer, one important challenge for the company in terms of local operations is the legal framework. “We started the project when we had a complete legal framework available and then we decided to invest a lot of money in these projects. It is also very important to have the right partner as the field is quite complex and a lot of people have different interests. You have to have a reliable partner, who knows the culture, to guide you through,” says Suer. Regarding the legislative changes in force since October last year, the Verbund official says the absence of some definitions and overcompensation issues are the most pressing. “The new regulations are lacking some key aspects, such as for instance the definition of a 125 MW plant, and my impression now is that there isn’t a clear answer,” says Suer. “Also, the interesting part is the overcompensation, which is a very smart solution from the authorities to check if everything that was assumed related to wind farm investments is correct and if there are differences in the end to reduce the subsidies. Even if I do not like it, it is a fair approach. But, I don’t know how they will do it practically.”
Enel Green Power Romania (EGP) has an installed capacity of 174 MW. The company’s wind farms and projects are located in Agighiol, Corugea, Valea Nucarilor (all in Dobrogea) and Moldova Noua (the Banat area). Carlo Pignoloni, country manager of EGP Romania, tells The Diplomat – Bucharest that to finance the local projects the company inked an a loan agreement with the Danish government’s Export Credit Agency (EKF) and Citigroup (as agent and arranger), for a 12-year financing of EUR 112 million, while the European Investment Bank is another partner for the firm’s projects here in Romania. Even for the Italian giant, things haven’t run so smoothly. “I would rather talk about the long lead of authorizations, instead of delays. Surely land rights are the most important issue, due to the ownership issues. Secondly, the EIA process is taking a significant amount of time. That said, we cannot say that the permitting process here in Romania takes longer than in other European states,” says Pignoloni. He adds, “As I have said before, we already have wind farms connected to the grid. The main issue in this respect is the grid itself because it has to be upgraded to allow proper access from green energy producers. There is a need for additional investments and these have to be properly planned along with the grid owner, in order to be implemented on time.” On the support scheme recently approved after a long process that started in 2008, Pignoloni tells The Diplomat – Bucharest that three main issues remain. “First, the IRR (Internal Rate of Return) monitoring must be implemented using well defined parameters that take into account all renewable generation issues. Furthermore, we’re concerned about
“The new regulations are lacking some key aspects, such as the definition of a 125 MW plant, and there isn’t a clear answer,” Mark Suer, head of renewable project management at Verbund Romania 47
renewable energy RES projects main dilemmas CURRENT ISSUES LAND Many very small land plots Inaccurate cadastral drawings Title verification is difficult Locating land owners can be difficult Communal boundaries sometimes change Lack of any form of exclusivity until very late in the process Notarial and cadastral system for land transactions often outdated
GRID Grid capacity is over-allocated Some grid connections are not viable while some projects that have grid connections are not viable Process of cleaning grid connections underway by ANRE and Transelectrica Bank guarantee needed to secure the grid connection Program of grid upgrades by network operator appears optimistic
ISSUES FOR THE FUTURE LEGISLATION Lack of clarity on wind farms above 125 MW and unclear procedures for requirements for notifying the EU Green Certificates have no floor price in reality Exporting green certificates should be possible, but much work remains to be done New regulations are needed to correct flaws in the renewables legislation Local authorities are slow to adapt to best practices and new laws with inconsistent application of legislation between different parts of the country Transitional provisions of new laws are often inadequate New Civil Code includes significant new obligations on registration of land rights in the Land Book There is a lot of confusion over best practice for Environmental Impact Assessments
GRID Uncompensated grid curtailment due to unspecified technical issues Balancing capacity and compensation remain unresolved SOURCE: Continental Wind Partners
48 The Diplomat February 2012
the lack of a mechanism hedging the sale of Green Certificates in case of excess supply of those certificates,” says Pignoloni. “The third issue, which is equally important, is that the disconnection of renewable generators from the grid at dispatched orders will affect the production when the source is available, while according to the EU directive 28/2009 for the promotion of renewable sources, such sources should be used at their maximum availability, obviously under safe grid conditions.”
E.ON targets greenfields The main objectives of E.ON Group in Romania – since taking over the former state-owned companies Distrigaz Nord and Electrica Moldova in 2005 – are optimizing its activities and strengthening its position on the local energy market, company officials told The Diplomat – Bucharest. In 2010, in view of ERO corporate governance, a new company, E.ON Regenerabile Romania, was integrated, the purpose of which is to develop a range of energy production projects from renewable sources. “The company is already involved in the development of several wind energy projects, mainly located in Moldavia. E.ON Regenerabile Romania has been developing wind energy projects, employing a rather conservative ‘greenfield’ approach, consisting of selecting, developing and monitoring projects from the very beginning of the project definition stage; out of the interesting development pipeline, the selected projects may involve an installed capacity of up to 200 MW,” company representatives told The Diplomat – Bucharest. However, they say the implementation of such capital intensive projects largely depends on the economic conditions in Romania, as well as on the regulatory framework for these activities. A welcome signal in this respect is the adoption of the support scheme for renewable energy producers, which is a good incentive for investors in this field; however, there are certain areas of the regulatory framework that may be considered, on a case by case basis, unclear, insufficiently defined or liable to be amended. “Romania’s investment potential in renewable energy production projects is estimated at about EUR 5 billion for the next few years, but these investments require a stable, fair and predictable legislative framework, and also a friendly business environment,” say company representatives. While investments in this market rely on medium- and long-term financial projections, any modification of the support scheme in the next two or three years, as the authorities have announced, will not bring the necessary
“Most of the projects are in the final stage of approvals. We want to build around 200-300 MW per year. ,” Sebastian Enache, executive manager of Wind Power Energy funds to Romania for such projects, add the E.ON Group officials.
Monsson Group has more in store Monsson Group has a portfolio of projects with a total capacity of 2,400 MW. Among them, a combined 750 MW of projects have already been sold to various companies, such as Continental Wind Partners, CEZ, ButanGas and Petrom, according to Sebastian Enache, executive manager of Wind Power Energy, a member company of Monsson Group. “Currently, 80 percent of our projects are in Dobrogea, which is the area of Romania with the best wind energy potential. Furthermore, after extensive campaigns and longterm measurements we determined the best areas in Banat and in Moldova, where we developed the other 20 percent of projects,” says Enache. And things aren’t stopping here. “Most of the projects are in the final stage of approvals. We want to build around 200300 MW per year. So, recently, along with
renewable energy Vestas Denmark we started the construction of the Pantelimon wind park, in north Constanta County, which will have an installed capacity of 150 MW. Monsson Group aims to make all 50 wind turbines operational this summer,” Enache tells The Diplomat – Bucharest. In his opinion, the crisis has made banks want more guarantees and more security, while making less money available. Also, he adds, in recent years the number of approvals has hiked, approvals have become much harder to secure because of project congestion while the land issue is getting more and more complicated. “No matter how strange it may sound, it has happened several times that land owners have five heirs, out of whom two have gone in Spain, one to Italy and one was deceased. Consider the complexity of such a problem and how long it would take to solve,” says Enache.
Iberdrola plans set back by ‘small formality’ Construction of a wind farm in Cogealac, Dobrogea, will begin this year, says Adrian Goicea, country manager of Iberdrola Romania.
Up and running RES projects*
* January 1, 2012 SOURCE: Wolf Theiss, Transelectrica
Unit
IP (gross) MW
Operator
Pestera
90
EDP Renewables
Valea Nucarilor
34
Enel Green Power
CEE Fantanele Est, CEE Fantanele 387.5 Vestand CEE Cogealac
Tomis Team and Ovidiu Development
Silistea
25
Romconstruct Top
Cernavoda 1
69
Cernavoda Power
Dorobantu
45
Wind Power Park
Cernavoda 2
69
Cernavoda Power
Salbatica 1
70
Enel Green Power
Mihai Viteazu
80
Eolica Dobrogea One
Salbatica 2
70
Enel Green Power
Corugea
70
Enel Green Power
“In Cogealac we have to solve a small formality, but this year we will begin construction. It is a long project and the work will last up to two years,” says Goicea. In addition to this 600 MW project in Cogealac, the Spaniards could complete work in March this year at their first investment in Romania, an 80 MW wind farm located in the
village of Mihai Viteazu in Constanta. “Of the forty 2 MW turbines that make up the project involved, twenty are already up. The station is also ready and we believe that by the end of March we will have around 80 MW installed capacity,” says Goicea. Currently, the investment per one MW of wind energy is around EUR 1.5-1.7 million. ■
EGL Romania – a partner for E-RES producers EGL is widely experienced in trading and origination and has been operating on the Romanian energy market since 2003. EGL Romania offers strategies and products to maximise revenue from your existing production and to secure revenue for your planned E-RES investments. This allows for better asset monetisation and better funding of your projects. Besides electricity and natural gas supply, through its centre of competence, EGL Romania offers a wide range of origination and trading services to existing or planned wind farms and other E-RES capacities. The Romanian team is focused mostly on developing its wind power portfolio in Romania to the highest professional standards by leveraging EGL’s experience in other European wind energy markets where it manages tens
of thousands of MW in wind power. EGL Romania offers the following products and services to optimise income and minimise market risks in E-RES power projects: market analyses and price forecasts; balancing responsibility and
physical handling of production; Power Purchase Agreements (PPAs). We are keen on offering a full-service energy package with a range of products and services that are tailored to optimally meet your demands.
EGL Romania offers a solution. Contact us at office@egl.eu and +40 21 230 33 23 Address: 14, Helesteului Street, RO–011988 Bucharest, Sector 1 Phone: +40 21 230 33 23; Fax: +40 21 230 33 35 E-Mail: office@egl.eu; Web: www.egl.eu
49
health event
Romanian healthcare system seeks to inject clarity into financing The main priorities of a new draft healthcare law and the potential funding structure of this sector were just a few of the themes of the Financing Mechanisms of the Healthcare System event, organized by The Diplomat – Bucharest. By Magda Purice, Roxana Cristea
T
he strategy for financing the Romanian healthcare system, potential funding mechanisms and European schemes currently in place all came under discussion at the Financing Mechanisms of the Healthcare System event, organized by The Diplomat – Bucharest and Noerr, at the end of last year. There were just some of the topics included in a new draft healthcare law proposed by the Romanian presidency, project which was withdrawn from public debate by president Traian Basescu, at the beginning of this year, after controversy over the future of the emergency rescue service SMURD, run by Raed Arafat. Doctor Arafat announced his resignation in early January over these disagreements with government officials. In the meantime, Arafat returned to the ministry and authorities announce a new draft law will be proposed by mid-year.
50 The Diplomat February 2012
The event, held this year for the fifth time, enjoyed the support of the Doctor’s College, Health Alliance, and health officials from the Senate and Chambers of Deputies, while the partners were New Kopel Group, Intercontinental Hotels and the British-Romanian Chamber of Commerce.
Main concerns of the new healthcare law Specialists from the healthcare system lamented the political involvement in this sector. They believe that priorities must first be set in order to find solutions for financing such a large system.
Vasile Astarastoaie, president, Doctor’s College “We do not have a financing system that can meet the public’s health needs. But con-
cern over this problem is everywhere. The first error made is that all sorts of systems are first built and then the strengths and weaknesses of those systems are examined. There is no philosophy by which to set health policy and then to build a system. When it comes to financing systems, we must start from the general theory of the State, which assumes responsibility for four areas: health, education, citizen and state safety.” “We need to make a difference when we build our health policy and finance it; we must take into account the priorities. In this case, the priority is the citizen or patient, an opinion that I also expressed in a Presidential Commission project.” “It seems that health is now a priority for the Romanian State. The State says that next year’s health budget has grown marginally, but effectively, the budget will
health event
Vasile Astarastoaie, president, Doctor’s College: We must take into account the priorities when we build our health policy and finance it. In this case, the priority is the citizen or patient
Vasile Nitescu, counselor, Health Commission of the Senate: Each time the health minister has changed one set of principles and structure has been replaced with a new set, resulting in the loss of large sums of money and lack of reform
Horia Cristian, secretary , Health and Family Commission, Deputies Chamber: The new law on the health system will not be debated in Parliament, the Government will put it through. The principles of democracy have required new amendments to this law
be lower, once the rolled-over debts and arrears of 200 days and more, plus inflation and the higher forecast for maintenance costs of the system are factored in. In this context, we’re speaking about a grant that the State is trying to pass behind the beneficiary: the patient. In a pluralistic and democratic society, technocrats have a role, but those who decide must be the beneficiaries. This is at the heart of democratic principles.” “Approaching the financing of the health system with the attitude ‘I won’t give any money until I want to’, Traian Basescu said he would not put any money into the medical system until the care reform is settled. That is a dangerous approach, because we are dealing with human beings, where psychological and emotional factors are involved.”
has been replaced with a new set, resulting in the loss of large sums of money and lack of reform. The problems are many and the old law has many flaws – it must be changed.”
contribute 70 percent of the funds, the copayment system 20 percent and optional insurance 10 percent. Today, 10 million Romanians from a total of 20 million pay health insurance contributions. One option could be every citizen paying 5 percent of their income into this health fund.”
Vasile Nitescu, counselor, Health Commission of the Senate “In the Romanian health system there is chaos both in terms of finances and the law. Every week we have amendments to the new law. This brings enormous problems. First of all, there is no longer a clear distinction between the state and private components. At the same time, the delivery of analysis services is outsourced, which benefits only the private health system, and this is not normal.” “Of course there are other problems. Each time the health minister has changed – and I think there have been 20 ministers so far – one set of principles and structure
Horia Cristian, secretary – Health and Family Commission, Romanian Parliament, Deputies Chamber “The new law on the health system will not be debated in Parliament, the Government will put it through. The principles of democracy have required new amendments to this law.“ “This year, the budget for the medical system has increased 4 percent, but lately it has suffered declines of 7-8 percent every year. A theorist would say that a system cannot be sustainable with a drop greater than 5 percent. Also, we have seen significant differences between the budgets granted by different states to the health system. In Germany, 10.6 percent of GDP goes into the health system, while in the US, it’s 15 percent. Money in the form of health system contributions comes from citizens; in Germany, this system funds 15.5 percent of income and unlimited copayment.” “While health expenditure is higher than GDP growth, we can say that all systems are heading towards bankruptcy. The silver lining is that we have a destructured health system and that no rule applies across the country.” “There are three levels in the financing of the health system. The majority would
Private health insurance makes headway Among the financial mechanisms expected in the new law, a major new aspect, and one that has prompted a great deal of discussion, is the introduction of private health insurance and the means of assigning the money collected.
Cristian Hotoboc, president, Health Alliance “Nowadays, the medical system in Romania spends 5 percent of the state budget. The proposal in the new health law recommends keeping the value of the existing contributions unchanged and transforming the allocation of money collected, through the introduction of private health insurance houses. Actually, this is the main innovation brought by the new law. We expect a final version of the law to be published in the near future.”
Claw-back tax proves an inconsistent system The pharmaceutical market has rebelled against the claw-back tax which may, over the medium and long term, cause a series of negative effects on the distribution of
51
health event
Adina Geana, expert, health and health insurance, Amfiteatru Foundation: The new law must change the structure of hospitals. A new structure would provide greater flexibility and the running of a hospital similar to a company
subsidized medicines in pharmacies and the further development of local medicine producers on the local market.
Luiza Bedros, lawyer, Noerr “As regards the pharmaceutical market, which supports a significant part of the health system in Romania, the reorganization envisaged through the new law should not result in further chaos or a ’storm in a tea cup’. And the perspectives don’t look so good on the short term. The claw-back tax is further proof of inconsistency.” “The unhappy pharmaceutical producers could take the 104 / 2009 Ordinance, also called ‘the claw-back ordinance’, to the Constitutional Court. The ordinance has three direct effects on manufacturers. Some producers said they would not include some medicines on the list of subsidized drugs, even if it costs them sales.” “Others said they would try to monitor their quarterly budget, so as not to exceed the ceiling for subsidized medicines and risk paying the claw-back tax, at which point they would stop the distribution of such medicines in pharmaceutical networks. Others, in fact investors supporting a large part of the medical system, will wait for a couple of years after that, and if the budget calculations and their estimations do not prove sustainable, will pull out of the Romanian market, halt investments or further development and stop the distribution of drugs on the local market.”
52 The Diplomat February 2012
Cristian Hotoboc, president, Health Alliance: The medical system in Romania spends 5 percent of the state budget. The new health law recommends as novelty, the introduction of private health insurance houses.
Luiza Bedros, lawyer, Noerr: As regards the pharmaceutical market, the claw-back tax is further proof of inconsistency. And the perspectives don’t look so good on the short term
A bazaar kind of health market
Adina Geana, expert, health and health insurance, Amfiteatru Foundation
The lack of financial certainty and transparency of the health system’s income streams are among the trouble besetting the medical system in Romania. The new law should make a clear distinction between the types of health insurance, regulate the income streams in this system, establish financial predictability and engage all the players in the health system in an open dialogue.
Sergiu Negut, consultant “In a bazaar-type market, financial predictions are hard to make. Currently, there are three operational flows in the health system.” “The first flow of money is paid by the CNAS to state and private operators in the health system. The second stream is the money paid by citizens to the state and private operators, a more transparent flow than the first. And the last cash flow is the sums that do not appear anywhere, the ‘small considerations’ and tips given by patients to hospital personnel.” “None of the actors in the medical system is able to make any financial projection for the moment. The future health system must distinguish between mandatory health insurance and additional policies, taken out voluntarily. Also, the law should not ignore all the market segments, including the less transparent ones, and should consider the real actors instead of the theoretical ones involved in the health system.”
“We must be clear that the draft law still has to be revised and we are not discussing a final version just yet. From what I know, there are about six draft versions circulating among various bodies, containing significant differences between them. The common elements are the way that private and public hospitals respond or not to patients’ needs.” “The new law must change the structure of hospitals. A new structure would provide greater flexibility and help raise additional funds through bank loans, joint ventures and, in general, the running of a hospital similar to a company.” “Following today’s debate, the new health law must contain some references. First, representatives of the medical system must play an active part and engage in the dialogue to devise the new legislation for the health system. It should also effect a shift towards a ‘business’ concept, with a focus on financing mechanisms, identifying funding streams and the transparency of these flows. The new law should ensure predictability, based on health conditions and the necessary framework to allow financial projections on a medium term, at least. It is important that the old practice of ‘payments on services’ be translated into payment on the results of those services. Last but not least, in order to achieve the new law, we must build a statistical database that can lead to a coherent analysis system, which has been almost nonexistent so far.” ■
Another kind of beginning… Although Wine is as old as the world we live in, it continues to fascinate us every day. Today it is as surprising as it was back in Noah’s time – identified by the Bible as the first wine producer. Wine also inspires that same mystery, full of miracles, as happened at the wedding in Cana of Galilee. Wine is related to the cult of the Gods and their favorites, and is also related to the celebration of heroes, artists and poets. People offer it as an homage to God, while the Gods give mankind vigor and inspiration through Wine – a pleasant and audacious euphoria. During the Roman Empire, Wine spread its territory. Wine barrels, amphoras and different types of bottles reached Rome from all over the Roman Empire. But the most spectacular recovery for Wine was the night Jesus and His disciples shared bread and wine at the Last Supper. From that moment on, Wine became the indispensable drink for the new religion that spread rapidly all over the world. Monks, bishops, missionaries and priests favored viticulture, and the seniors could not remain insensitive to the prestige of the saints’ pleasant drink that also stimulated the senses. Later on, because of industrialization and fashion, Wine became more accessible, therefore nowadays all of us can enjoy this gift of the Gods. No other drink has had such a huge influence on European Nation values as Wine. It is not only present in everyday life, but also represents a source of existence, we can find it in mythology, religion, the arts and literature. It is, at the same time, a symbol, and also a legislative problem, it forms part of politics and aids diplomacy, and most of all it is an important element of fashion. During its long and fascinating history, Wine gained a well defined “human” profile.
Wine is not only a natural product, but also an intellectual one. First you have to imagine it, then you have to be able to decipher and really understand its character. The nature of wine resembles very much the nature of the people and the region where it is produced. Maybe this is why they say French wines are aristocratic, Italian and Spanish are more temperamental while Californian and Australian wines bear the mark of the most important technologies. Romania has always been renowned internationally as a large wine producer. The quantity of wine production in Romania ranks the country 10th in the world, although our wines are little known abroad, and the last years of transition have significantly influenced local viticulture. For us too the history is mixed with the Wine road, sprinkled with exceptional accomplishments and moments, but also with hardships, deprivation, bitterness and sadness that so often melted in the tears of the Romanian Wine. Ever since I was a child, I heard my father talking about the Feteasca Negra, Tamaiosa de Pietroasele, Cotnari, Tarnave, Jidvei and Murfatlar wine brands, and later on I appreciated them properly. I have always lived close to this world and perhaps this is the reason why I had many friends in the country or abroad that did viticulture or were wine collectors. I learned from them to cherish Wine and the people who produce it. As in every mysterious game, initiation has a primary role. After many years of travelling around the world, where I learned great things related to Wine culture, I decided to try, with fear and humility, to experience the road of wine producers, to live… another kind of beginning! It is truly a magnificent experience, both entrepreneurial and spiritual, which I hope to have the chance to share with you.
Profile
Dan Roman
Dan Roman is an entrepreneur, investor and IT professional with extensive activity, especially on emerging markets. In 1990 Dan Roman was among the first local entrepreneurs, and established one of the first private companies in the country, RBS Ltd. (Romanian Business Solutions), which became the IT market leader. Roman led RBS as general director and owner until 1995, when he sold it to IBM. In 1996 he became, in Vienna, regional director of the CER region in IBM, being responsible for Western Balkan and CIS countries. In 2000, Roman established his own company in Austria, eNet Data G.m.b.H., which was purchased in 2002 by S&T AG, an Austrian IT company listed on the Vienna Stock Exchange. Following the takeover, Roman was appointed senior VP of S&T AG and regional director. Since the middle of 2011, Roman has held the position of general director for Kapsch Romania. Before funding RBS, Roman worked as technical director for the IT Research Institute in Romania, being responsible for software development. Roman has a PhD in Informatics and graduated from the Polytechnic University in Bucharest. In parallel with his activity in the IT sector, Dan Roman also founded Innovation Group five years ago, which deals with cultivating vines and grape processing.
business leader
Ensuring steady progress With a solid economic background, Violeta Ciurel, President and CEO of AXA Life Insurance, tells The Diplomat – Bucharest about the company’s plans for this year, which include both launching new products and expanding the agency network country-wide. By Dana Verdes
W
e are on the fifth f loor of the office building in the Baneasa area of Bucharest where the AXA Life Insurance team handles its dayto-day operation to meet Violeta Ciurel, President and CEO of the company. She welcomes us into her simple, neat office, which reveals a methodical and actionoriented approach. Ciurel’s career encompasses more than 30 years of experience, both in Romania and abroad. The part of which she seems most proud is the 20 years she spent working with students at the Academy of Economic Studies. “Prior to 1997 my professional activity dominantly related to business, was exclusively linked with the education system. I consider it one of my greatest accomplishments that at 40 years old I earned the title of university professor,” Ciurel tells The Diplomat – Bucharest. In 1997 she left her “full time” university post to enter corporate life by joining
54 The Diplomat February 2012
ING Life Insurance, a firm which at that time was just entering the local market, and at which she spent eight years in Romania and another six in Amsterdam, at the company headquarters. “In Amsterdam I had three jobs, on a global or regional scale, an experience which helped me to better understand the financial services sector from a totally different perspective than just as a single market – especially topics such as private pensions, the pension reform, financial sector risks and links with international and European institutions such as World Bank, IMF, the European Parliament and European Commission,” says Ciurel. “Also during that period I coordinated several regional projects, some in collaboration with the World Bank, for instance, which were well received by the industry and different organizations. The results were appreciated by those for whom they were intended.”
The AXA challenge Violeta Ciurel took over AXA Life Insurance operations in September 2010, when she became the Chief Executive Officer (CEO) and President of the Administration B oard by winning the vote of confidence of the company’s majority shareholder, Omniasig Life Insurance, part of Vienna Insurance Group. “Here we started as from scratch with the small company acquired by the AXA Group, a company which, with a good team, has to grow despite all market difficulties,” said Ciurel. In a little over one year at AXA Life Insurance, Ciurel and her team has had to deal with both internal and external challenges. “First of all we had to reorganize the acquired company to a business model
that could meet the objectives of the company’s strategy and AXA’s way of doing business, which involved countless structural changes in terms of project management, implementation of a new business model, building the brand, as well as day-to-day operations and processes,” reveals Ciurel.
Who is Violeta Ciurel? Since September 2010 she has served at AXA Group as President and CEO of AXA Life Insurance Romania. Prior to that, in 2004 she moved to Amsterdam to become General Manager of Global Retirement Services, followed by General Manager for European and International Affairs and, since 2008, Regional CEO for Greenfields and Business Development for insurance and pensions Central Europe, all within ING Group. Ciurel worked for ING Group from 19972010 in different jobs in Romania and the Netherlands. She started as Marketing and Training sales force Director at ING Life Insurance, and then served as CEO of the company and Executive Director, Retail Distribution and Insurance at ING Romania for four years. Ciurel has also worked in the educational field, at the Academy of Economic Studies in Bucharest. She provided consulting activities for companies and international organizations, and assistance for different governments in pension reforms in emerging markets from all continents and has been involved in European pension projects.
business leader She adds: “Also, we had to revise the client and product portfolio and launch new products, especially on the life insurance segment. Another objective has been creating AXA brand on the Romanian market, as we are dealing with a new company that is not joining a completely unoccupied market, but a highly competitive one.” According to the AXA Life Insurance President and CEO, another company’s major objective is to develop its network of agencies, which currently exceeds 40 units. “Here we are in a full expansion process and our plans are to open another 20-25 units by the end of the year. It will depend very much on the market, as we have to take into account the unstable economic sector, with people being uncertain of their jobs and over-indebted,” adds Ciurel.
New products: safety vs. risk
With the majority of insurance policies being taken out by individuals, the company’s management is looking out for any changes in customer profile and behavior.
20-25
know the total costs of the health system in Romania: the basic package, the degree of collection, how the settlements are made, the operating costs, and how much capital will be required by the Insurance Supervisory Commission (CSA). So there are hundreds of problems here which need clarification,” adds the AXA CEO.
the approximate number of new agencies that AXA Life Insurance Small steps for plans to open by the the market Ciurel says that the company has already end of the year benefited from a share capital increase
“Our typical client is between 35-50 years old, university graduate or with high school education, lives in the city and has a family and children. We’re seeing increasing interest in insurance with guaranteed technical interest, which includes a savings component. We will launch a new product this year on the life insurance segment with an investment component, which will include investment funds with different degrees of risk,” reveals Ciurel. Moreover, she adds, the health insurance segment looks promising, in case of the health reform will happen but not without caveat. “First of all we need to
this year and expects further support from the shareholder next year as well. “As we are in a full investment phase we needed a capital infusion to finance the company’s development plans and we plan to do the same next year,” she says. With ongoing development plans, the company is keenly watching what’s happening across this competitive market. “In my opinion, this year we will not see dramatic changes compared to 2011, only a slight advance of 2-3 percent. I see a fairly constant level of premiums both on life and non-life insurance,” concludes the businesswoman. ■
IN THE NAME OF EXCELLENCE WE STAND UNITED Centrul Medical Unirea and Euroclinic become the largest private health care network
55
events Scholarships in Italy: Intesa Sanpaolo Bank is providing for the fifth year a program of scholarships in Italy for high school students in Romania. The project, Generic Intercultura Scholarship, is open to ninth and tenth graders from any school in Romania. The value of the scholarship is EUR 12,000, which covers all integral expenses, including transport and accommodation.
Fitness club limbers up: World Class International has opened its sixth fitness club in Bucharest, the World Class Health Academy Upground, in the Pipera area. The new 3,000 sqft location, which employs 25, cost EUR 2.6 million, of which over EUR 600,000 was invested in sports equipment. New manager: Stephane Barbazan is the new general manager of Novotel Bucharest City Centre, replacing Philippe H. Drivon. The appointment was announced by Luc Gesvret, country manager for Accor Czech Republic and Romania, during a cocktail held at the hotel. With wide experience in the hospitality field, Barbazan’s last assignment was the management of the five-star Grand Mercure Oriental Ginza in Shenzhen, China. A French national, he has spent 22 years in the hospitality industry, with extensive international experience in Europe, the Indian Ocean, North Africa, North America and the Caribbean.
Expensive painting: A Tonitza work has become the most expensive painting sold in Romania, surpassing the record set in spring 2011 by Grigorescu’s “Fata cu margele rosii”, which went for EUR 270,000. The painting “In iatac” by Nicolae Tonitza was the centerpiece of this year’s Winter Auction and is the most valuable nude ever made by the artist and put on sale. The nude went for EUR 290,000, setting a new record.
Orthopedics and traumatology hospital: MedLife has announced the opening of the first hospital in the country dedicated to osteoarticular system diseases – the MedLife Hospital for Orthopedics and Traumatology. The investment in the new facility was EUR 8.5 million. The hospital has a surface of 2,000 sqm and three operating rooms, outpatient facilities, a radiology department and medical imaging, a physiotherapy and rehabilitation department, an emergency laboratory for analysis and rooms with one and two beds. 56 The Diplomat February 2012
Wine collection: Aurelia Visinescu officially launched the 3 Fete Negre wine from the private collection ANIMA. The drink is a blend of three wines of the same variety, Feteasca Neagra, from three different years, 2007, 2008 and 2009. The unique blend will be available in a limited edition of 2,500 bottles, and distribution will be exclusive, through only one shop (Vinexpert) and one restaurant in Bucharest, as well as several restaurants in other large cities around the country.
events Diplomatic occasion: President Traian Basescu met the officials of diplomatic missions accredited in Romania, as part of the annual meeting of the Romanian President with the ambassadors. During the gathering, Basescu outlined diplomatic issues that need to be addressed, such as the conflict in Arab countries, along with the wider context of general turmoil and economic uncertainty. However, he made no statement on the ongoing street protests which were taking place in Bucharest and around Romania at that time.
Taxation book: Gabriel Biris, lawyer and founding member of the law firm Biris Goran launched double volume “Despre fiscalitate”, at Universul Juridic Publishing House. The first part of the book is called “On Taxation and Competitiveness - Principles, Problems, Solutions” and the second “On Taxation and common sense - the author’s opinions in the Romanian media.”
Highway check: PM Emil Boc and the minister of transportation, Anca Boagiu, checked the status of works on the Bucharest-Ploiesti highway section, in their first visit to the site this year. Works on the 62-km highway are running behind, delaying the completion deadline of December 2011 to April 2012. The section is part of the 173-km road linking Bucharest to Brasov. Works on the BucharestPloiesti segment will cost EUR 450 million. Danish Presidency of the EU Council: Teodor Baconschi, the recently deposed foreign affairs minister, attended the conference for the launch in Bucharest of the Danish Presidency of the EU Council (Q1, 2012), organized by the Embassy of the Kingdom of Denmark and the European Commission Representation in Romania. The conference took place in the presence of the Ambassador of the Kingdom of Denmark, Michael Sternberg, head of the European Commission Representation in Romania, Niculae Idu and other diplomatic representatives accredited in Bucharest. European affairs minister Leonard Orban also attended the event.
Ski lift: Elena Udrea, The MDRT minister has inaugurated the EUR 28 million investment in the expansion and modernization of the Poiana Brasov ski area. The project was started in 2009 and consisted of the construction of new slopes, the improvement of existing slopes, installing snow machines, building a reservoir, installing new lifts and related infrastructure.
57
city life Music to be the food of love as Directia 5 play on Valentine’s Day again Romanian band Directia 5 continues their series of Valentine’s Day concerts in 2012, with a show at Sala Palatului in Bucharest. The band will take to the stage with some of Romania’s most popular female voices: Monica Anghel, Paula Seling, Giulia and Anda Adam, with whom Directia 5 has collaborated over the years. A special guest will be the famous accordionist Marian Mexicanul. Directia 5 will perform the most romantic songs from their 20year career. Tickets, priced at RON 50, RON 70, RON 100 and RON 150, are available from Sala Palatului, the Diverta network, Germanos, Vodafone, Orange, Domo, Humanitas and Mihai Eminescu bookstores and online. Last year, Directia 5’s Valentine’s Day concert was attended by over 4,000 fans and the setlist included 28 songs. ■
Sighisoara Blues Festival returns for eighth run
Sighisoara Blues Festival 2012, the eighth staging of the musical event, will take place between February 23 and 25 in the historical town. Under the slogan “for those who love the blues”, the event will welcome the top names of the blues world, including Samuel James, Johnny Winter, Samantha Fish, Sakura S’Aida, Bob Brozman, Corey
Harris and Rasta Blues. Performances will start at 19.30 in Sighisoara’s Mihai Eminescu hall. The price of a ticket for one evening is RON 100 (which includes two concerts). Access will be allowed until 20.15 hours. Tickets can be purchased from the reception of the Sighisoara Hotel or from the box office one hour before the show.■
Netherbird to fly back Romania Swedish group Netherbird will perform in Romania again, according to an announcement posted on the band’s official Facebook page. Concerts will take place on February 19 and 20 in Satu Mare and Cluj-Napoca. The band’s latest release is Shadows and Snow, launched by Scarecrow Music Group on August 20. An extreme metal act with influences from death, black metal and hints of doom metal, the band was formed in Stockholm in 2004. Netherbird are noteworthy for releasing their first three releases online and also for their rapidly shifting line-up, with two members forming the core of the group. Adrian Erlandsson, the drummer of At the Gates, Brujeria and Paradise Lost, bands known for their work with Cradle of Filth, Code and The Haunted, was part of Netherbird from 2007-2010. The artists performed in Romania last year at the Samfest Rock festival in Satu Mare. ■
Rhythm... more rhythm… the best rhythm The National Dance Company of Ireland is bringing Rhythm of the Dance to Romania for the third time with a brand new show, “Rhythm... more rhythm... the best rhythm”. The dance and authentic folklore show will take place on February 19
58 The Diplomat February 2012
at Sala Palatului (Palace Hall). Using modern forms of art, impressive sound and lighting, dance, live music and bright costumes, Rhythm of the Dance aims to bring the past into the present, keeping the Irish tradition of steps, which are pre-
sented in a modern and innovative format. Rhythm of the Dance has set new standards in Irish entertainment, and the company is ranked as one of the most popular in the world, with over 4.5 million fans worldwide. ■