Vol. 8, No. 5, June 2012
The magazine for informed internationals
The promised land Following modernization and expansion, Romania’s airport network could reach new heights
politics
economics
business
city life
Vol. 8, no. 5, June 2012
President Traian Basescu (center) attended the NATO Summit in Chicago, where he met with US President Barack Obama (right) and NATO General Secretary Anders Fogh Rasmussen (left). One of the conclusion of the meeting was that the anti missile shield installed on Romanian territory would become operational in 2015. According to President Basescu’s statement, the whole of Romania will ultimately be covered by the shield. The summit also concluded that Romania and the United States would be able to talk about including missile defense as the third pillar of NATO security after 2015, to go with conventional forces and the nuclear deterrent.
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Get yourself connected Distribution and support scheme issues were on the agenda at a key industry event
14
Deep impact Mining projects could change the shape of the country, say players
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Forward to 4G Mobile internet and the upcoming 4G auction are shaping the telecom market
6. Voting variation
10. Underground economy
7. Taxing conundrum
11. Mall go
8. Going private
35. Times new Roman
9. Royalty rethink
46. Stock up
A uninominal electoral system has come into force The government is at odds with the IMF over VAT
State-run companies are set to be given private management The Ponta cabinet is set to revise exploitation remuneration
Metrorex is putting EUR 1 billion into its Otopeni link
Five-seven retail projects are tipped to reach completion this year Italian investors spell out their plans for the local market The BSE chairman says the capital markets can serve as a funding savior
editorial
The winner takes it all? 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 Advertising Sales Executive Nicolae Popoviciu nicolae.popoviciu@thediplomat.ro
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The Diplomat June 2012
W
ith elections knocking on Romania’s compromised politicians, for whom no party door, the current government coali- would take responsibility, could reach Parliation has finalized the latest changes ment by other route. A “precedent” is the case made to the electoral system so that MPs will of Marian Vanghelie, who was booted out now be elected on a single vote. The Cham- the Social Democrat Party (PSD) after being ber of Deputies recently approved the single questioned in an corruption case, but entered vote bill with 180 votes for, 30 against and Bucharest’s Sector 5 City Hall as an indepen26 abstentions, in an initiative led by Crin dent and was welcomed back into the PSD fold. Antonescu and Victor Ponta. Nor should we forget the cases of some local Under the new electoral system, deputies characters who crave a position in Parliament and senators who win the most votes in the and promise Romanians tens of thousands of ward they are contesting will be elected. In euro, for example Dan Diaconescu. addition, in districts where minorities make The Ponta-Antonescu system has many up over 7 percent of the population, their rep- detractors. During the parliamentary debate, resentatives will also receive an additional representatives of nongovernmental organiparliamentary mandate. The threshold was zations protested against the adoption of this removed and a provision that the ward bound- bill from the meeting room balconies. aries will remain the same as in 2008 was The Democrat Liberal Party (PDL) said it adopted. would appeal against the uninominal voting On paper it all sounds good: may the best system at the Constitutional Court. The man or woman win! But what does this voting announcement was made by Deputy Sulfina system mean? Barbu. She said the Social Liberal union (USL) The single vote system is currently used had, in a gesture of contempt for the Romain the United States nian people, voted to and Great Britain. increase Parliament Individual candito at least 481 MPs. dates are voted in She added that the directly, as opposed PDL had intended to to being taken from reduce the number of lists drawn up by MPs to 300, as evipolitical parties. It denced in a referenis a system of majordum it had organized ity voting, based on a while ago. a majority procedure Moreover, Cezar (voting on lists being Preda, president of a proportional system) and comes under the PDL Buzau, called the new arrangements formula “winner takes all”. “a bad system, which diminishes democracy” The system promises many wonderful – but for which the PDL had campaigned a things for which Romanians have protested in while ago. the streets. Experts say that under this system Even those who voted for the new system corrupt or compromised politicians cannot don’t seem entirely convinced it will do much sneak into Parliament under cover of par- good. Minority leader Varujan Pambuccian said his group had voted for the election law liamentary party lists. A direct vote for one candidate or the other expresses much more so the outcome of such a system was clear. exactly the electorate’s option. This would make it obvious that the system What’s more, this system promises to gen- should be redesigned, and the idea of a purely erate a parliamentary majority, which leads to uninominal system would fade away. “We greater political stability, essential if we look always conduct experiments. Things go wrong, at the list of major projects in which Romania after which we change direction, usually headcould be involved but to which it has always ing off in an even worse one. It all stops when said “in the future…”. things go very wrong,” said Pambuccian. The single vote system is not bullet-proof. If this is how our representatives think and Specialists say the system does not guarantee act, it does not bode well for our future. ■ that the popular vote is well represented by the end result. An example is the 2005 general election in Britain, where the Labour Party won a majority in Parliament with just 35.3 percent of the vote. In Romania, there is another danger:
“Under this system corrupt or compromised politicians cannot sneak into Parliament under cover of parliamentary party lists”
politics New government secures parliamentary backing
Chamber of Deputies passes bonus amnesty for state workers
The Chamber of Deputies has passed an amnesty allowing public servants to keep the bonuses they were paid over 2008-2010. Members of the Chamber approved the draft by which the salaries of public sector staff are established by contracts or collective agreements, and awards responsibility for them to local or county councils. The measure had broad cross-party support. The UDMR submitted the draft law on the amnesty to the Parliament in March on behalf of the 300,000 civil servants forced to return bonuses received over 2008-2010.
Romania’s left-wing opposition ousted former Prime Minister Mihai Razvan Ungureanu’s cabinet after a wave of public anger against spending cuts and tax rises, the second government to fall in just over two months. The new government sealed parliamentary backing last month with a comfortable majority, giving it a mandate to keep an IMF-led deal on track until the election in November. The newly-appointed PM, 39-year-old Victor Ponta, and his Social Liberal Union (USL) control 232 of the 460 seats in Parliament and also gained support from ethnic minorities’ parties and the National Union for Romanian Progress (UNPR), which was part of the previous coalition. This gives it a clear majority with 284 votes in favor and 92 against, which pundits say could herald more stability in Romanian politics. Although Ponta says he is committed to the EUR 5 billion agreement with international lenders, investors are still wary of
his proposals to ease austerity by restoring public sector wages, which had been cut as part of a package of austerity measures. In the new cabinet, the vice PM’s post was assigned to economist Florin Georgescu. The only member of the previous regime to remain in his position is Leonard Orban, the minister of European affairs. The National Liberals were awarded seven ministerial briefs, including economy, defense, labor, transport, tourism and culture, while the Social Democrats have taken control of justice, interior, education, environment, and communications. The agriculture brief was given to a Conservative official while health went to Vasile Cepoi, previously secretary in the same ministry in the Boc cabinet. Cepoi is said to be the biggest surprise in the Ponta cabinet, as he was the architect of the new health law. In the Boc and Ungureanu cabinets, Cepoi led a team of specialists to align the proposals to change the health law. ■
Chitoiu to replace political appointees at helm of state firms The minister-designate of economy, Daniel Chitoiu, has said that he intends to replace all the managers at state-owned companies that were appointed for political reasons. He made the statement at the yearly meeting of economy advisors within the external ministerial network. The minister gave the example of Transelectrica, where, he said, “there is a battle between two groups of Democrat Liberals” due to which the
Transelectrica board had not met once in the last four months. The first private manager of a state company will be named this month with the first firms in line Transgaz and Hidroelectrica. Under the agreement with the IMF, stateowned companies including Hidroelectrica, Transgaz, Nuclearelectrica, Transelectrica, Romgaz, Oltchim, Tarom and CFR Calatori will get private management. ■
Hungary questions Romania’s treatment of minorities
The state secretary within the Hungarian Ministry of Foreign Affairs, Zsolt Nemeth, has said that while the relationship between Romania and Hungary has been defined by mutual respect in the last two years, he has concerns over the Romanian government’s treatment of its minorities, especially the Hungarian community, citing the law on voting right and the minorities laws. The official pointed out that of one of the first measures taken by Ponta’s cabinet was to cancel the opening of a Hungarian section within the University of Medicine and Pharmacy at Targu Mures.
Administrative reorganization and health law still on Basescu’s agenda
President Traian Basescu has stated that besides the review of the Romanian Constitution, two other big projects remain undone from his presidential mandate, the administrative reorganization and the health law. However, he said he plans to fulfill these commitments after the elections in November. Regarding the new health law, Basescu says that its main priority is to regulate the introduction of private management for hospitals and for the health insurance system. He described the laws on education, the labor code, criminal and criminal procedure code plus the commercial procedure and commercial law as the flagship achievements of his term.
politics Over 100 candidates fight for 6 district mayoralties in Bucharest
Some 109 candidates registered as mayoral candidates for the six districts of the capital, with the elections to take place on June 10. All six incumbents are running for re-election. The most sought after office is that of district 5, where Marian Vanghelie is currently in power. An average of 18 candidates are contesting each district.
Romania could assign USD 500,000 to Afghanistanbased NATO forces
The minister of foreign affairs, Andrei Marga, said that Romania could devote some USD 500,000 to financing NATO’s security forces in Afghanistan, a preliminary estimation before the NATO summit in Chicago in May. One of the priorities on the summit agenda was Afghanistan, with key decisions to be made on the country’s transition period which is estimated to end by 2015. Also on the agenda were institutional construction, consolidating security forces in the area, finance and NATO partnership matters after the alliance troops pull out of the region.
Romanian government willing to accept Dutch help for Border Police Prime Minister Victor Ponta has said that he is willing to accept advisors from the Netherlands or any other European state to assist the Romanian Border Police or the other custom services as part of Romania’s Schengen accession process, in order to prove to the European authorities that there is nothing to hide in the Romanian custom policies. “For Schengen, the Romanian government has a totally open attitude to embracing experts, of Dutch or any other European origin, both for the Border Police and custom services. Of course, things are in progress which exceed Romanian authority, the internal approach of Netherlands and our election campaign. I am determined that the current government will take the necessary measures encompassed within the Co-operation and Verification Mechanism (MCV) report of July,” said Ponta. According to Ioan Rus, the chief of the Interior and Administration Ministry, Romania is technically free of any duties
regarding Schengen. He said that he was planning several meetings with ambassadors and the Interior Ministries of European countries to discuss Romania’s accession to Schengen. The Netherlands is currently the only EU member state blocking Romania and Bulgaria’s bids to join the European passport-free zone. ■
Senators approve Ponta-Antonescu uninominal law
Basescu: anti missile shield is functional, protecting southern Romania
President Traian Basescu has said that NATO had decided to put into action the first operational stage of the anti missile shield, meaning southern Romania is protected against potential missile attacks. From 2015, the whole of the country will come under the shield’s area, after the Deveselu base starts operating. Besides the technical operational benefits, Basescu told the NATO summit in Chicago that a more important facet of this shield was the political signal and NATO and Romania’s cooperation. In the region, the shield is controlled from the Ramstein base in Germany and consists of a radar in Anatolia, Turkey, SM_3 rockets on frigates in the Mediterranean Sea and interceptors installed in Poland and Romania.
The Diplomat June 2012
Senators have adopted the Social Liberal Union’s uninominal law under which the parliamentary elections assign as winners the deputies and senators who get the most votes within their wards. The draft bill, which changes the previous election law, was adopted with 77 votes for, 9 votes against and 17 abstentions. According to the bill, the assigning of deputy and senator mandates will be done in one round. The initiators also proposed that, in the event of a tie, a
run-off be held two weeks after the first round to determine the winner. According to the current elections calendar, the local and parliamentary sessions will be held separately in June (local elections) and November (the legislative ones). The Social Liberal Union political alliance came to power by winning parliamentary approval on May 7. The former PM Mihai Razvan Ungureanu’s cabinet was ousted on 27 April after just two months in office. ■
economics Ponta: Situation in Romania ‘stable’
Erste: Crisis continues to hit local exports and investments
Recession in the euro area will probably continue in the second quarter, affecting Romanian exports and generating tension and uncertainties in Europe that could deter investors, with a negative impact on foreign direct investment in Romania, Erste analysts have said. Foreign direct investment totaled EUR 425 million in the first quarter, down from EUR 444 million in the same period last year. In 2011, foreign direct investment decreased by 13.6 percent compared to 2010, to EUR 1.917 billion, the lowest level in the last nine years.
PM Victor Ponta has said that Romania’s situation is stable and under control, and the NBR and government have the necessary tools to mitigate the effects of the crisis. The Prime Minister said that Ioan Mang, the former education minister, had stepped down, but that they had approved in a government meeting the necessary documentation for the largest credit line
that the World Bank has granted Romania, of EUR 1 billion, money that will be available in an emergency. In addition, the PM said that the RON had a much lower turnover than other currencies in the region. “Romania’s situation is stable. Things are under control, and the NBR has absolutely everything it needs to keep the situation stable,” said Ponta.■
Franks: IMF against tiered VAT
Reduced VAT for certain sectors or products is not beneficial to consumers as it often leads to payment avoidance and the IMF therefore does not encourage the principle of differentiated VAT rates, said Jeffrey Franks, IMF mission chief. However, the minister of agriculture, Daniel Constantin, argues that a 9 percent reduction in VAT on baked goods, where “tax evasion is 60 percent” could “free up hundreds of millions of euros” which are necessary to improve agriculture and make other investments.
The PM, Victor Ponta, said that the VAT reduction was necessary and would be included “at the latest” in the draft state budget for 2013. Asked if he supports a reduction of VAT for agricultural products, Ponta said that was “a necessity” in order to decrease evasion, provide support for local farmers and bring a medium- and long-term increase to the budgetary income. “In terms of calculation we shall see when we can put it into practice,” said the PM.■
Minister of agriculture wants to extend ban on land sales to foreigners
The minister of agriculture, Daniel Constantin, said in a press conference that he will try to extend the ban on land sales to foreigners in Romania after the end of 2013, but does not know if he will succeed because the current term was imposed by the Treaty of EU accession. He said that, as far as he knows, Poland is the only country which has extended the ban, and that it has also supported the merging of disparate land plots, and as result the land prices are higher.
Ponta: Public sector wages to rise again in December
Following talks with IMF mission chief Jeffrey Franks, PM Victor Ponta said that the second installment of the public sector wage increase would come into force on 1 December, as agreed in negotiations with the fund. The salaries of state workers will not return to their June 2010 levels until next year because the government has decided to pay pension contributions first and cannot increase wages by more than 8 percent, said Franks.
economics NBR fears European banks will cut lending aggressively
Q&A
Dieter Schulz,
general director of Danone Romania, Bulgaria, Greece and the Adriatic countries
How did Danone’s business go in 2011? Danone’s turnover in Romania amounted to RON 503 million (about EUR 119 million) in 2011, up 5.7 percent y-o-y, while sold volumes were flat. The growth rate is below the one reported for the previous year – in 2010 the company’s business grew by 10 percent y-o-y. The decrease in purchasing power continues to be a challenge, but, overall, the local fresh dairy market has a lot of potential for future growth. How much did the firm invest in Romania last year? In 2011 Danone invested RON 16 million (approximately EUR 3.8 million) which went into the company’s factory near Bucharest. Some 90 percent of the products the company sells in Romania are manufactured there. Danone Romania processed around 65 million liters of fresh milk last year, through partnerships with 57 local farms. It is our biggest business in the region and I would say it is also the most successful. The biggest challenge we have so far in the region is Greece. What are this year’s targets? One of my main objectives will be to encourage the consumption of fresh dairy through health awareness programs so that every Romanian eats at least one pot of yoghurt per day. Statistics show that at present consumption amounts to only a pot of yoghurt every two weeks. Per capita yoghurt consumption in Romania is one of the lowest in the region. Romanians eat on average 5 kg of yoghurt each year, whereas consumption reaches 19 kg in Bulgaria, 11 kg in Hungary and 35 kg in France. This year Danone celebrates 15 years since starting operations on the local market. The company has invested RON 300 million since 1997 and now employs 738 people.
The Diplomat June 2012
The chaos that is threatening Greece and the banking crisis in Spain have revived the specter of another “credit crunch” in the region, say finance specialists. The National Bank of Romania sees the reduction of the excessive, disorderly and fast loans granted by banks in the euro area, termed “disintermediation”, on the local market as a major threat to stability. The problem has spread beyond just Greek banks, although their situation is the most precarious. “Disintermediation means decreases in loan volumes. It can occur as a consequence of changing the business model of banks after a crisis or because people want a lower level of
debt, and so they pay off loans and don’t take new ones. It may be a decision by banks, or the customer, or a combination. It is important that this disintermediation – which is otherwise normal after economic transformation – does not become excessive and disorderly,” said the NBR deputy governor, Cristian Popa. He added that the solution currently being discussed at EU level is the so-called Vienna Initiative 2.0, which involves an agreement on multilateral surveillance of banks, harmonizing approaches by regulators, and a dialog with parent banks and their countries of origin, so no particular group can make moves that would take other players by surprise.■
Private management to lead state companies from October Private managers will be appointed to public companies, under the agreement with the IMF, in October, starting with Hidroelectrica and Transgaz, said the minister-designate of the economy, Daniel Chitoiu ( photo), following discussions between the NBR and IMF. Hidroelectrica, Oltchim, Romarm and Electrica Supply are next in line, along with Tarom, SNLO, CFR, CFR Calatori, Nuclearelectrica, Transelectrica and Romgaz. In March, then minister Lucian Bode said that Oltchim, Romarm and Hidroelectrica would be the first state companies to get private management, followed by Electrica Supply. A government document drafted in March stipulated that the shortlist of candidates to lead Hidroelectrica, Romarm and Oltchim would be completed by
April 30 and the one for Electrica Supply drawn up on May 15, a step that would immediately be followed by the appointment of new directors. For Energy Complex Oltenia the shortlist of candidates was to be completed by May 15. ■
energy Government to rethink resource exploitation fees The Ponta cabinet has committed to rethink the payment system governing the exploitation of natural resources in accordance with Community provisions and the ongoing privatization process, once the audit of the previous government’s activity is completed. Papers submitted to the Parliament indicate that the government is considering, in the short term, improving the performance of state enterprises through restructuring in order to reduce their accumulated losses and restrict the arrears, which at the end of 2011 accounted for 2.6 percent of GDP. According to the document, another objective is to implement the corporate governance law by depoliticizing and professionalizing the management in key state enterprises. The auditing and evaluation of all contracts for goods, services and consultancy “in terms of need, timeliness and efficiency of decision-making” is another measure being considered. The report pledges that the government will focus on “the ongoing privatization process, especially where and when privatization brings responsibility and wisdom in managing economic assets and resources, but after the audit of the previous government activity” and is seeking to “clarify the actual situation,
The PNL president, Crin Antonescu, has said that if mining operations at Rosia Montana go ahead, in whatever form, they should be integrated into an overall national strategy. The Rosia Montana project would be worth more than USD 30 billion at current prices of gold and silver, compared with the USD 7.5 billion estimation in a study published in 2007, said Jonathan Henry, general manager of Gabriel Resources, the Canadian company that intends to exploit the mine.
Oltchim to be privatized in September, Cupru Min auction to be resumed
technical and economic, of the companies that are part of that process”. Modernizing and developing the energy sector “as the main engine of economic growth and competitiveness” is another objective of the government program undertaken by the new cabinet. ■
Franks: Privatizations off course, six companies tipped to attract investors Romania’s privatization timetable has slipped and some auctions are failing because they were not well prepared, said the chief of the local IMF mission, Jeffrey Franks. The IMF has decided to focus on six companies – Hidroelectrica, Nuclearelectrica, Romgaz, Transgaz and public offerings for Tarom and CFR Marfa – he added. Franks bemoaned the “continuing slippage regarding the timing of privatization, especially since many processes have failed for reasons that could have been prevented.” He added, “We are focusing on companies with a greater economic impact and the greatest impact on attracting investors. But are we not selling Romania’s crown jewels? Even the crown jewels need millions of investment to keep pace with technological developments and a growing economy. The state has no money and it must come from the private sector.”
Antonescu: Rosia Montana operations should be integrated into national strategy
The IMF official said that the new government will need to focus on listing Hidroelectrica, Nuclearelectrica, Romgaz, Transgaz and the public offerings of Tarom and CFR Marfa, even though “the Oltchim privatization is important.” Franks said that just because a state company is profitable this does not necessarily mean that it is well run. “Many state companies earn less profit than they should earn because of inefficiency, bad contracts or corruption (...) I’m sorry to say that we have not made adequate progress in the introduction of private management in state companies. I have even heard that there was an attempt to manipulate the process by involving people with political interests,” said the IMF chief. According to previous agreements with the IMF, Cupru Min and Oltchim should be privatized by the end of April. ■
The new minister of economy, Daniel Chitoiu, has agreed in a meeting with IMF and European Commission representatives to ensure Oltchim is privatized in September and that the auction of Cupru Min goes ahead immediately after the reevaluation of the company and environmental consulting. Asked when the tender for Cupru Min will resume, Chitoiu said that this would happen immediately after the Ministry of Environment provides the environmental documentation. “We must resume immediately, within four months. There will be a review of Copper Min after we receive notice of the environmental aspects and the tender will resume,” said Chitoiu. He added that the privatization of Oltchim will happen this autumn. “For Oltchim I will hire private management by June and in late September the privatization will go ahead,” said the minister.
Gitenstein to discuss moratorium on shale gas with minister of economy
US Ambassador Mark Gitenstein said he would discuss the moratorium on shale gas exploitation with the minister-designate of economy, Daniel Chitoiu, in order to find out his reasoning for it and how he will proceed with the Romanian government. Gitenstein said that he had not talked to the prime minister on the subject, but he knew the US position and the subject would be discussed with Minister Chitoiu.
infrastructure Bucharest-Ploiesti highway delayed again
The most recent deadline for the inauguration of the Bucharest-Ploiesti highway lapsed after work continued past May 15. The constructors attributed the latest missed deadline mainly to problems in building the bridges, of which the highway has 17 linking the two cities. Works on the 62-km highway started six years ago and the costs are estimated so far at some EUR 456 million, meaning a rate of EUR 7 million per kilometer. The new deadline for completion of this section is June.
Airports in Constanta and Oradea to get EU-funded revamp
Two airports in Romania, Mihail Kogalniceanu in Constanta and Oradea Airport, have received the green light to receive European money through POSTransport for modernization works. The improvements at Constanta will cost EUR 40 million, of which EUR 18 million has been secured from EU sources, and will be completed at the end of March 2014. The Oradea modernization project will cost EUR 32 million, with EUR 18 million financed by the EU.
Metrorex to put up EUR 1 billion to link Otopeni with city subway
Underground operator Metrorex is planning to organize an auction to assign the works on the subway segment that will link Bucharest with Otopeni Airport, a EUR 1 billion investment, according to the company. The segment is 14 km long and the number of underground stations is estimated at 12. The work contract is due for completion within 60 months from the start. The financing for the investment will be supported through a foreign loan guaranteed by the state and also money from the state budget. Meanwhile, in April, Metrorex said
that the call for bids to carry out execution works on subway line 4, to link Parc Bazilescu, Laminorului and Lac Straulesti, had received five offers from companies and consortiums, for a contract worth around EUR 200 million. Bids came from the German company Hochtief, from FCC Construccion (Spain), the partnership between Somet, Astaldi (Italy), Tiab and UTI, a consortium formed by Max Bogl Romania, which includes Max Bogl and Delta ACM, and another consortium of Aktor (Greece), Euro Construct and Arcada. â–
Bechtel to get back in the Transylvania highway game
National Railway debts double in Q1 of 2012
National railway operator CFR Calatori doubled its debts in January-March 2012, to RON 157.7 million, compared with the same period of 2011, due to the 32 percent reduction of state subsidies for fares, according to the company. Its commercial debts fell 17 percent in Q1 of 2012, while spending dipped 3 percent, and no debts to the state were recorded. Revenues shrank by 19 percent in the analyzed period, due to decreasing traffic.
10 The Diplomat June 2012
The minister of transport and infrastructure, Ovidiu Silaghi, stated in May that Bechtel will resume work on the Transylvania highway section linking Cluj and Vama Bors. The Romanian state owes RON 240 million to the US company but some RON 98 million towards the repayments has been secured, according to officials. So far, only 54 km have been completed from the A3 highway, seven years since Bechtel was awarded the project. From an initial estimated cost of EUR 2.2 billion for building 413 km of A3, some
EUR 1.25 billion has gone on the Bechtel contract and last year the total estimated cost of the A3 was put at EUR 3.8 billion. According to current estimations, the Transylvania highway should be completed by 2020, but may not be ready until 2026, 22 years after work began. The project started in 2004. In October last year, President Traian Basescu told a meeting with Romanian community officials in Washington that the World Bank (WB) should have advised Romania not to sign the contract. â–
real estate Auchan, Carrefour and Wallmart in the frame for Real’s CEE network German Metro Group-owned Real is in talks with French retailer Auchan over the sale of its Central and Eastern European (CEE) business, according to German publication Manager Magazin. The Real supermarket chain comprised 110 units at the end of 2011, of a group total of 426. The company’s officials did not confirm the reports but sources close to the companies said that the German group was open to all options: a full or partial sale deal, or keeping the division within the group. The German magazine reported that buyers could include retailers such as Carrefour or Wallmart.
The CEE region where the Real supermarket chain has expanded includes Romania, Poland, Russia, Turkey and Ukraine. The German chain entered the local retail market in March 2006, opening a first unit in Timisoara. This year, it closed one store, in Ghiroda, near the western city. According to company information, plans for 2012 include the opening of at least one supermarket in Bucurestii Noi in northern Bucharest. At the end of last year, the German retailer was running 25 hypermarkets in 18 cities countrywide, following an estimated total investment of EUR 550 million. ■
JLL: Five to seven local retail projects to be completed this year Palas Iasi project
Real estate consultancy company Jones Lang LaSalle estimates that between five and seven local retail projects might be completed this year, totaling around 180,000 sqm. The consultant estimated that the total shopping center stock in Romania currently stands at 2.3 million sqm, with one completion recorded this quarter – a small retail park of approximately 5,300 sqm developed by NEPI in Brasov.
Bucharest has 775,000 sqm of modern retail space, representing one third of the total countrywide stock. The most significant retail project to come on the market this year is Palas Iasi, expected to be launched at the end of May. The company said that in Bucharest only two hypermarkets with attached shopping galleries are expected to be delivered, totaling around 32,000 sqm GLA. ■
Austrian S IMMO puts EUR 66 million into office building in Bucharest The Austrians from S Immo Ag fund are investing EUR 66 million in The Mark, a new office complex of 28,000 sqm to be built near Piata Victoriei in Bucharest. The project will comprise two buildings,
totaling a surface area of 28,000 sqm and an underground area of 12,500 sqm, 275 parking spaces underground and 44 above ground. The architects of the buildings are ChapmanTaylor. ■
Spanish Graells & LLonch starts EUR 200 mln logistics park in Cluj county
Spanish developer Graells & LLonch has started work on a logistics park in Turda, Cluj County. According to company officials, the investment is estimated at EUR 200 million. Graells & Llonch Turda is located 30 km south of Cluj-Napoca, in an area which has started to be developed recently, near the city of Turda, and has 235,000 sqm of GLA. The park is close to the A3 Bucharest-Oradea motorway and has a total land area of over 545,000 sqm, and buildable area of 235,000 sqm. Graells & LLonch also developed Prejmer Industrial Park in Brasov.
Riches to rags: Bellevue Residence facing insolvency
Gabi’s Development, the company behind the crisis-hit Brasov luxury residential compound Bellevue Residence, has sought insolvency at Brasov court law. The judicial manager of the insolvency file will be Casa de Insolventa Transilvania. Bellevue Residence comprises nine residential buildings of five levels built on Warthe Hill in Brasov, and was completed in 2010. The 148apartment project started in 2007, following an investment of EUR 30 million, financed 30 percent from private money, while the remaining funds came from a credit from Alpha Bank and buyers.
Popp leaves helm of real estate company Impact
Dan Ioan Popp, the founder of real est ate developer I mpact Developer&Contractor (IMP), has been replaced as president of the board of the company after a long association by Dimitris Sophocleous, who was chief financial officer (CFO) for A&D Pharma between 2008 and 2010 and also served as CFO of Romtelecom. The decision was taken at the latest Impact shareholders meeting. Popp will keep his position as member of the board and currently owns a 16.5 percent share package within the company.
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appointments MANUELA MERES is the new conferences and events manager at Hilton Sibiu. She will be responsible for the hotel’s conferences and banqueting services. Meres joins Hilton Sibiu from Athenee Palace Hilton Bucharest, where she held the position of PR and marketing executive and was responsible for the hotel’s marketing, communication and CSR campaigns.
JAMES HEYWORTH DUNNE is the new head of the capital markets and valuation department of CBRE Romania. His new role includes coordinating the valuation activities of CBRE Romania. Dunne worked at CBRE in London for seven years, during which time he consolidated his expertise in the valuation departments for central London leasing and central London capital markets.
MIHAELA PETRESCU has been appointed manager of the newly established division of retail leasing at real estate consultancy company Capital Property Advisors. Petrescu has over six years’ experience on the local retail market. She has so far been involved in leasing operations for local commercial and retail projects such as Arena Mall in Bacau, Era Shopping Park in Iasi or Mures Mall in Targu Mures.
DUMITRU DRAGOMIR was named CFO of retail chain Profi Rom Food, replacing the Dutch incumbent Carel Bruseker, who has overseen the chain’s finances since 2009, when the company was taken over by the investment fund Enterprise Investors. Before joining Profi, Dragomir supervised the financial departments at Ursus Breweries, Mol Romania, retail chain Artima and Albalact.
LAURA TONCESCU joins the law firm Nemoianu Attorneys at Law, the advocacy practice division affiliated to KPMG in Romania, as partner. Toncescu will provide legal consultancy to clients from banking, finance and insurance, mergers and acquisitions, and capital markets. She has over 14 years of experience in these segments, with more than half spent in financial services.
ALEXANDRE MAYMAT took over as head of BRD-Groupe Societe Generale. He replaces the former bank president, Guy Poupet. Maymat has held successive positions at BRD since 2001, at the bank’s subsidiaries in Paris, Cameroon, Chad and Equatorial Guinea. Between 1991 and 2001, he occupied a series of top positions at the Ministry of Finance in France and, afterwards, at the EC.
VREM MAI MULT DE LA NOI ÎNȘINE. Primul program și aparat DAVID de recuperare medicală a coloanei vertebrale, unic în România Prima policlinică într-un mall - Policlinica Sun Plaza Prima bancă acreditată să stocheze în România țesut de cordon ombilical - Banca Centrală de Celule Stem Prima maternitate privată din România care gestionează nașteri premature de 30 de săptămâni
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12 The Diplomat June 2012
investments GERMANY
STEAG acquires Monsson’s local 108 MW wind farm project
FRANCE
Auchan begins works on EUR 20 million project
German electricity producer STEAG has acquired the 108 MW Crucea North wind farm project in Constanta county, developed by Monsson Group, a private wind energy developer with a 2,400 MW portfolio of projects. STEAG will invest around EUR 200 million in the wind farm, which will have 36 wind turbines of 3 MW supplied by Vestas. Crucea North will transfer the electricity to a new transformer station in nearby Stupina, which will connect to Transelectrica’s 400 kV high-voltage national grid.
French group Auchan began works at the end of April on its third store in Bucharest, which will be located in the Giulesti district on the Grantmetal industrial site. Auchan official announced that the investment in this project would amount to about EUR 20 mln, a sum which includes the acquisition of 15,000 sqm of land and the costs of the 7,000-sqm hall. The firm bought the land, located on Boulevard Constructorilor, last winter, and in late March obtained the building permit from City Hall District 6.
ITALY
ROMANIA
Iulius Group, developer of Palas Iasi Mall, has announced that the complex has a new tenant, a debutant on the Romanian retail market, the Italian coffee shop chain C House. The C House Lounge Cafè, run under a local franchise, will have 70 seats and another 40 on the terrace. The Milanbased brand is present in 20 cities in Italy, France, Spain, Canada, the UAE, Qatar, Morocco and Cyprus.
Cluj-Napoca City Hall has secured European project funding of about EUR 15.5 mln, of which around EUR 5.9 million is non-refundable financial assistance, to establish a center of business support. Some 26 companies (18 micro and small companies, 6 medium and 2 large enterprises) will have space where they can operate (office space, workshops, audio-video production facilities) and organize events.
Italian coffee shop franchise enters local market
Cluj-Napoca City Hall to invest EUR 15.5 million in business development center
Sensiblu to buy 90 Pharma City drugstores
The Sensiblu pharmacy network, part of A&D Pharma, will buy 90 Pharma City drugstores, part of Relad Group. With 400 units throughout the country, Sensiblu will consolidate its leading position on the pharmaceutical retail market in Romania. The takeover will be completed in June, when the process of rebranding and operational integration of new locations will begin. According to Ministry of Finance data, Hermes Pharma, owner of Pharma City drugstores recorded a turnover of RON 321.2 mln (EUR 76 mln) in 2010.
Ministry of Transport to invest EUR 175 million in Henri Coanda Airport
The Romanian Ministry of Transport has four ongoing modernization and development projects involving air and port infrastructure in Romania. The development project for the infrastructure at Henri Coanda Airport in Bucharest will be completed in 2013, following an investment of around EUR 175 mln. The money is coming from the ministry’s budget and credit. The ministry also has on its agenda a larger development project for Henri Coanda, for 2007-2022, totaling EUR 500 mln. ■
13
mining
Mining companies pit their wits against market challenges Romania’s ongoing exploration and production projects have endured their share of turmoil during the past few years. With proven reserves declining, the Romanian state doesn’t seem to have solutions for the multi-million euro projects in the field. One thing that is clear is that the government wants to change the royalties’ scheme. Market players shared their views. By Dana Verdes
“I
t is well known that in Romania around one quarter of the natural gas demand comes from imports, but what is less well known is that for oil, the import dependency is far higher: around 60 percent of Romania’s oil demand comes from imports. Furthermore, oil production has been in continuous decline for some years: Romania has been exploiting hydrocarbons for more than 150 years and these reserves are finite. Romania’s oil production peaked in 1976, at around 14.7 million tons, while in 2011 it was more than three times lower,” Johann Pleininger, executive board member responsible for exploration and production at OMV Petrom, told The Diplomat – Bucharest. In his opinion, huge investments are needed in order to maintain oil production, as are technologies and the latest equipment that would allow the country to recover more from the mature fields that it exploits and to explore at greater depths. “Last year, we managed to stabilize oil production in Romania, despite the high maturity of the fields. Most of the fields operated by Petrom are mature fields, with an average age of 40-50 years. The stabilization of production in 2011 was possible due to high investments in the last seven years. The company reinvested almost all of the operational profit before depreciation (EBITD), around RON 30 billion. From this budget, the largest part, around 65 percent, was invested in exploration and production (E&P), meaning almost
14 The Diplomat June 2012
Deepwater Champion Domino - 1
EUR 5 billion,” said Pleininger. According to him, the investments were focused on drilling development wells, workover activities and sub-surface operations, field redevelopment projects, production equipment, waste infrastructure, and equipment needed by E&P services. For this year the company’s E&P budget is RON 4 billion, which represents around 76 percent of OMV Petrom’s investment budget. “Our main objective is to consolidate the hydrocarbon business by offsetting the natural decline and unlocking our potential on the exploration and production segment. In Romania, this means, on one hand, field redevelopment, and utilization of advanced technologies in order to increase the recovery rate, modernization and optimization of installations in key fields as well as a number of partnerships with specialized international companies for production enhancement,” said Pleininger.
Gas discoveries ignite market
Rompetrol Group has intensified its investments in the E&P segment, especially on the gas side. Currently, the company has under concession five exploration sites – Satu Mare, Zegujani, Gresu, Nereju and Focsani. Over 2009-2011, the group allocated around USD 7 million to areas with potential oil exploration for the acquisition and processing of seismic and geological studies, company officials told
The Diplomat – Bucharest. “Earlier this year, the drilling of two exploration wells in the Satu Mare area (in the towns of Madaras and Moftinu) was completed, with production tests indicating the presence of hydrocarbon accumulations. To assess the free gas reserves further analysis and specific works are needed,” said company officials. Yet the most important news regarding gas discoveries came from OMV Petrom. One major find was at Totea, which saw the discovery of the biggest onshore gas and condensate production well in Romania, and the second was Domino-1, the first deep sea exploration well in Romania.
Domino-1 effect
The Domino-1 well is Romania’s first offshore deep water exploration well and has a total depth of more than 3,000 meters below sea level. It is located in the Neptun block, 170 kilometers offshore in water approximately 930 meters deep. Drilling operations started at the end of 2011 and ran until March. “In November 2008, OMV Petrom and ExxonMobil Exploration and Production Romania Limited signed a farm-out agreement under which ExxonMobil acquired a 50 percent working interest and a right to operatorship to the deepwater portion of the Neptun block in the Romanian sector of the Black Sea,” Ian Fischer, managing director of ExxonMobil Exploration Production Romania
mining Limited, told The Diplomat – Bucharest. He added: “In 2009-2010 Petrom and ExxonMobil conducted a 3,170 sq-km 3D seismic survey of the block. This was the largest seismic program ever undertaken in Romania and employed state-of-the-art technology. The deepwater Black Sea is an under-explored area and 3D seismic is the most accurate way to obtain data in areas where no other wells have been drilled. It is used to understand the physical characteristics of the rock below the surface and helps geologists predict the potential existence of hydrocarbon reservoirs. However, even with the information from the 3D seismic, in order to determine the presence of hydrocarbons you need to drill a well – called a wildcat well.” To support early exploration drilling in the Neptun block, ExxonMobil and OMV Petrom contracted Transocean’s Deepwater
data will determine the next steps,” said the OMV Petrom official. He added: “It is too early in the data evaluation and exploration process to determine whether the Neptun block will ultimately prove to be commercially developable or not. However, should further work confirm the technical and commercial feasibility of deep water gas production from the block, further investment during both the exploration and development phases could reach several billion USD with the potential for first production towards the end of the decade.” The ExxonMobil Exploration Production Romania Limited official says that it is too early to be specific about the size of the discovery and early estimates span a wide range, both at the high and low ends. “The joint venture is still evaluating this and more appraisal work will define it better. In considering value,
same for the Neptun project as it is for other major developments around the world,” said Fischer. Turning to the pending gas price liberalization, the OMV Petrom official said, “I cannot speculate on that at this stage, except to say that deepwater oil and gas projects, such as Neptun, require unprecedented levels of investment and many years of cash out before we see any cash back.”
E&P agenda
The OMV Petrom official told The Diplomat – Bucharest that the main objective in E&P this year is to further stabilize production volumes and unlock E&P potential, mainly
“There are two ways to hike state revenue: either we increase the level of royalties, or we raise the tax on revenues resulting from gas price liberalization,” Alexandru Patruti, president of the National Agency for Mineral Resources Champion drillship. The Deepwater Champion is a sixth and latest-generation heavy duty drillship specifically designed for access to and operations in the Black Sea. The vessel’s state-of-the-art capabilities enable the two companies to meet the technical challenges of drilling highly complex wells in deep water and to achieve the highest safety and environmental standards in operations, say company officials. “At the end of 2011 ExxonMobil and OMV Petrom commenced drilling at the first deep water offshore exploration well in Romania, known as Domino-1. With operations taking place 24 hours a day, the total depth was reached by the end of February and the work program was completed in early March. The total well depth was over 3,000 meters below sea level. The good news is that this first well confirmed the presence of hydrocarbons; however, much further analysis of the data collected is required to improve our understanding of the area and this work continues,” said Fischer. According to Pleininger, the next step is further exploration work at the Neptun block. “ExxonMobil and OMV Petrom have planned new 3D seismic acquisitions during 2012. At the same time we will continue to analyze the data collected at Domino-1. This is an ongoing process of data collection, analysis and integration. The evaluation of the Domino-1 well results together with the new seismic
though, it is important to remember that while the proven presence of hydrocarbons is very good news, we still do not know whether it will prove commercial,” said Fischer.
No shore thing
The deepwater area of the Black Sea is a virtually unexplored basin and the Neptun project is unique and unprecedented in the Romanian sector of the Black Sea, say players. “Because of the technical complexity, the cost of a deepwater well can be as much as 10 times higher than that of equivalent shallow water wells in Romania, and more data and analyses are required in the exploration phase to evaluate the commercial viability of the project. At this stage of a project we cannot disclose past or future expenditure projections, yet each of the two companies contributes 50 percent of the investment,” said Pleininger. He added: “Given the long timeframes, the high risks and costs of the projects we undertake, a key factor in enabling long-term investment decisions is the stability of fiscal and regulatory terms over the life of the project and market principles.” The ExxonMobil adds that for the American giant, challenges associated with political change and regulatory risks are not new, considering the company’s history. “Without fiscal stability, project economics and therefore investment decisions can be significantly jeopardized. This is the
through field redevelopment projects, production optimization and exploration. “Concerning exploration, our aim is to unlock the deep onshore and deepwater offshore exploration potential,” said Pleininger. For ExxonMobil the main focus in Romania is exclusively the deepwater exploration program at the Neptun block. “This is an important project and we are working very hard to evaluate the information we have already gained so that we can plan our next steps on the block. Deepwater wells are a major capital investment and the technical challenges associated with drilling at these depths are considerable, particularly as this area is unexplored, so this is where our efforts are currently directed,” said Fischer. According to Alexandru Patruti, president of the National Agency for Mineral Resources (ANRM), there are five other offshore agreements in the Black Sea, of which one involves deep waters where exploration activity is estimated to start this year. Also, there are the companies which won the ANRM auction –10 agreements – but these have yet to be approved through government decision. 15
mining
“It is too early in the data evaluation and exploration process to tell if the Neptun block will prove to be commercially developable or not,” Ian Fischer, managing director of ExxonMobil E&P Romania Limited
“The agreements were not signed under the Boc government as the Transport Ministry wanted to include some additional clauses in the agreements in order not to affect the national transportation program for highways – a procedure which took quite a while for additional negotiations, and when all things were settled the government change occurred. Such an agreement has to be signed by five other ministries besides the agency. The procedure now has to be resumed as the agreements were signed by the previous cabinet members and now have to be resigned by the current ministers,” Patruti told The Diplomat – Bucharest. He added: “For the oil segment we think that a new auction for new perimeters will be given a go after the ten agreements pass through the government. Last year the agency prolonged the exploration period by another three years both for Romgaz and Petrom. For the current exploration agreements almost 15 years have already passed, from a total of 30 years for a license.”
New royalties’ scheme
The ANRM official told The Diplomat – Bucharest that for oil and gas, discussions are ongoing over whether to hike the royalty levels once gas prices are deregulated. Once this process is completed the incomes of the companies that exploit oil and gas will significantly increase, and part of this additional
revenue should go to the Romanian state, argues Patruti. “Currently, there are two ways of doing this: either we increase the level of royalties, which does not entirely cover the price increase, or we raise the tax on revenues resulting from gas price liberalization. We tend towards additional taxation of companies’ revenues and not towards increasing the royalties as this is included both in the oil law and in the oil agreement currently in force. This reevaluation of royalties must be done with great care in order to maximize the state’s revenues but at the same time to keep the activity attractive for the companies,” said Patruti. The OMV Petrom official added that the company does not have a special status in this regard. “The royalties level was set by law prior to privatization and what was negotiated at the privatization was stability, until the end of 2014, because in the oil and gas industry the investment cycle is a long one and any investor needs stability and fiscal and legislative predictability for a proper business plan. As for the level of the royalties, this is not fixed but varies depending on the production volume at the respective field, the quality of the oil and the international oil price,” said Pleininger. He added: “We are aware of the Romanian government’s intention to revise the royalties’ regime and will answer any invitation for discussion. Industry needs a stable longterm fiscal framework and legislative stability to be able to meet the level of investments in the range of billions of Euro needed in the oil and gas sector.”
Rosia Montana on stand-by
One of the most discussed projects in the mining field in recent years is the planned
“Our main objective is to consolidate the hydrocarbons business by offsetting the natural decline and unlocking our potential on the E&P segment,” Johann Pleininger, executive board member responsible for E&P, OMV Petrom 16 The Diplomat June 2012
mine at Rosia Montana, whose future is still not clear. “Rosia Montana Gold Corporation (RMGC) is waiting for the existing environmental impact assessment procedure, which is well advanced, to continue and be concluded. More than ever before Romania needs jobs, strong investments and economic stability. These are crucial in an increasingly difficult European and international economic context. Nowadays, a responsible mining project can only be implemented in full compliance with Romanian and European legislation, using the best available practices. We are ready to build the first modern mine that will create thousands of jobs in Romania, for Romanians,” Dragos Tanase, managing director at RMGC, told The Diplomat – Bucharest. He added: “There is no legal impediment to the finalization in due course of the environmental assessment procedures. All we expect and ask for – as we always have – is to be treated fairly and the mining project to be evaluated correctly and transparently. Romania and all its existing and future investors deserve correct treatment. Once approved, the Rosia Montana project will contribute about 1 percent to Romania’s GDP and will generate thousands of jobs.” The ANRM official said that at Rosia Montana things remain on stand-by. “The company cannot obtain the construction authorization to begin the investment. We have one single black ball which is continu-
mining ously rolling through all governments and this is the Rosia Montana project. From a joint venture agreement signed – if I’m not mistaken – in 1996 and legislated in 1998, the investment still has not started,” said the ANRM president. According to company information, Gabriel Resources has so far invested some USD 500 million in developing this mining project and currently has 500 direct employees. Using a gold price of USD 900 per ounce, the mining project at Rosia Montana would contribute directly over USD 4 billion to the Romanian economy, which would generate a total potential contribution to the gross domestic product of Romania of over USD 19 billion, including the multiplication effects, according to company officials. “If at Rosia Montana construction authorization were obtained now, about three years would be needed before exploitation could start. It would be possible for Romania to cash money from royalties from the Rosia Montana gold for after three years if the investment were started today. Generally speaking at least 10 years are needed to start a new exploitation that would bring money to the state budget,” said Patruti.
Shale or return?
Romania’s oil and gas reserves will last – at the current rate of exploitation – for up to 15 years. In the oil industry the 15-year horizon is the short term. “If we do not continue exploration both of conventional resources as well as the deep water areas from the Black Sea and deep structures of more than 4,000 meters onshore, in 10-15 years we will find ourselves in the situation of having exhausted all of Romania’s proven reserves. If this happens we will have to import everything, assuming no alternative resource is discovered,” said Patruti. The topic of shale gas drilling is currently being discussed all over the world, the ANRM official says. “The European Union has expressed its view on the matter, saying that the exploration and exploitation of shale gas is covered by current legislation so no additional regulations are necessary. However, a commission has been set up which includes Romanian experts from the Environment Ministry and the National Authority for Mineral Resources (NAMR). Every country decides its own position on this topic,” said Patruti. His statement was made in the context in which the Romanian government approved in March this year oil concession agreements for exploration, development and operation
between the NAMR and Chevron, the second largest US oil and gas group, for the perimeters of Constanta, specifically Vama Veche, Adamclisi and Costinesti. The Victor Ponta cabinet is seeking to establish a moratorium on the exploitation of shale gas until the studies that are ongoing at European level establish the environmental impact of shale gas exploitation through hydraulic fracturing. The ANRM official says that such a decision could be taken either economically or politically. There are two countries, he says – France and Bulgaria – where the decision on shale gas drilling was political. There is also the example of England which stopped the experimental exploitation program for a period of time until it had the results of a study conducted by field scientists. The research found no link between earthquakes and shale gas exploitation and a result the restriction was lifted and works carried on. “What is important is that Romania should present its view on this matter. Prior to this cabinet the Romanian government’s view was to encourage exploration and, if it is possible, exploitation as well. We will talk about exploitation in Romania just after a couple of years – in my opinion a minimum of five years is needed,” said Patruti. ■
17
airports
Airport infrastructure on a wing and prayer
With 16 airports in Romania, of which 12 are ranked as international, the local aviation infrastructure needs investment in modernization and expansion to adapt to wider demand. Currently, there are four ongoing modernization projects for local airports, yet the Romanian authorities are ready to offer red-carpet treatment to foreign investors. The Diplomat – Bucharest asked the main airport officials, authorities and private companies involved in the sector about the business’s destination. By Magda Purice
M
ay 9 was Henri Coanda International Airport’s busiest day in its over 40-year history, with 58 charter flights bringing to Bucharest over 12,000 passengers, supporters of the two Spanish teams contesting the UEFA Europa League final. In two days, over 25,000 passengers passed through the airport. According to Tarom officials, the airport had no problem in handling the flux and flight schedule, as Otopeni’s usual traffic is 10,000 passengers daily. However, with aviation infrastructure in Romania comprising 16 commercial airports, some say that this is sufficient to handle Romania’s incoming traffic, while others argue that airport developments should be effected according to the region and business expectations. For instance, according to Gheorghe Racaru, group strategy and corporate planning manager at Infra Group, the company 20 The Diplomat June 2012
that is planning to build an airport south of Bucharest, Brasov doesn’t need an airport, as western Romania already has too many. Nor, he adds, does Henri Coanda have any reason to expand in northern Bucharest on the short term. The manager told The Diplomat – Bucharest he may advocate for the project at Adunatii Copaceni to pick up the “low-cost” traffic from the southern half of Bucharest. However, many players say that airport development infrastructure must reflect the local supply and meet the incoming demand. Airports’ more urgent need is not an expansion of their number but firstly their modernization, starting with the main airport in Bucharest. According to the Ministry of Transport’s Directorate for Civil Aviation, the existing airport infrastructure in Romania meets the current traffic needs. Of the 16 hubs, 12 are officially ranked as international airports.
Four investments taxiing for position
According to the General Directorate of Civil Aviation within the Ministry of Transport in Romania, there are four ongoing modernizing and development projects involving airport infrastructure in Romania. Dan Machita, superior counselor within the directorate, told The Diplomat – Bucharest that the infrastructure development project at Henri Coanda Airport in Bucharest will be completed in 2013, following an investment of around EUR 175 million. According to the official, the money is coming from the ministry’s budget and loans. The ministry also has on its agenda a larger development project for Henri Coanda, over 2007-2022, totaling EUR 500 million, which is currently in the feasibility stage. The third project targets the renovation of the stationary platform for aircraft at Mihail Kogalniceanu Airport in Constanta. The proj-
airports
“In northern Bucharest, there is no space to develop an extension of Otopeni international airport and even less a new airport,” Gheorghe Racaru, group strategy and corporate planning manager at Infra Group ect will cost around EUR 40 million and will be completed in 2013. The money will come from European financing through the POS-T operational program for transport and ministry funds. Meanwhile, modernization works will be accomplished at Suceava Airport, also financed through POS-T and the state budget, with the completion time estimated for 2015 and a similar total value to Kogalniceanu. Currently, the ministry has several other modernization and expansion projects on its to-do list, also financed through POS-T cash, targeting airports in Delta Dunarii Tulcea, Baia Mare, Oradea, Arad and Craiova. As the directorate official stated, the man impediment to developing more projects is identifying the financing sources, as the European funds available though POS-T 2007-2013 have been spent. “There is the possibility of reassigning funds for POS-T or the postponing of projects to be financed through POS-T 2014-2020,” said Dan Machita. In Romania, currently, there are 16 airports with concrete runways.
Thinking beyond the numbers
Werner Weihs-Raabl, head of infrastructure finance at Erste Group, told The Diplomat – Bucharest that a EUR 150 million modernization project at Henri Coanda
Airport was recently completed. BCR financing contributed EUR 50 million of the amount, while BRD-Societe Generale, the other participating bank for this project, financed other EUR 50 million. The agreements were signed in 2010, as the third-stage modernization project at Henri Coanda Airport by the National Company Aeroporturi Bucuresti. According to Weihs-Raabl, because airport development is mainly driven by local counties and authorities due to the lack of private investors, the local authorities should think beyond business plans and numbers when developing airport projects and consider the connected benefits.
Legal eagles swoop into aviation
Law firm Bostina & Asociatii has delivered legal services for two large modernization projects at airports in Bacau and Oradea, and its lawyers detailed for The Diplomat – Bucharest some key aspects. For the airport at Bacau, “the minimum investment assumed by BlueAero (e.n: part of Infra Group) following the concession contract was EUR 45.5 million,” but the lawyers estimate that the investment might exceed this amount. Regarding the airport at Oradea, the county council at Bihor and the airport management targeted the extension and revamping of airport infrastructure, as well as the construction of a new terminal meant to process 300 passengers per hour. According to the two feasibility studies which have been approved by the county council, the value for these investments is EUR 69 million. BlueAero was set up at the beginning of 2009, following the conclusion of the first public-private partnership formed in Romania in this domain, targeting the modernization,
management and operation of the international airport in Bacau. The contract was concluded between the BlueAero air transport company and the George Enescu International Airport public corporation in Bacau, as the initial contract stipulated the setting up of a company in charge of carrying out the project. As a consequence, BlueAero and Blue Air are part of the same group of companies, Infra Group, which will modernize and operate the George Enescu International Airport in Bacau for the next 34 years, with a total investment amounting to EUR 45 million, according to official group data. According to these data, the modernization process of the George Enescu International Airport in Bacau will be carried out in three steps over the next 30 months, maintaining the airport’s full operability. The project consists of the construction of a new terminal of 7,000 sqm and a minimum capacity of 450 passengers/hour; the modernization of the runway and the taxiing course, with a bearing capacity of 65 PCN; implementing a CAT II lighting system, meant to facilitate the future development of air traffic and secure optimum safety operation conditions; and the extension of the overall platform so as to enhance the parking conditions and the ground operation of 10 class C aircraft. Currently, the airport is the home base for three aircraft with 400passenger capacity, which make inland and
“It will be key to enhance the airport’s profitability by finding new ways to generate non-ticket fee revenues and excellence in ground operations,” Michael Weiss, partner at AT Kearney 21
airports international flights to Timisoara, Bologna, Milan, Turin, Rome, Paris, London, Dublin, Larnaca, Brussels and Barcelona. With two other airport projects announced, Alexeni Airport and the public-private partnership project for Gura Humorului Airport, the lawyers from Bostina & Asociatii say that they are waiting for the results of the feasibility studies. “If we are asked to provide services for these projects, our expertise and background in similar projects represents a good business card, and not only for these projects, but any other developed in this infrastructure segment,” Cristian Costea, partner at Bostina & Asociatii, told The Diplomat – Bucharest. Lack of financing is the main impediment to developing stronger local airport infrastructure, a statement echoed by most consultants, authorities and private companies. In Romania, most of the airports are developed under the authority of county councils that have yearly strategic investments to make for certain objectives to be sustained. “Because the airport infrastructure in Romania has constantly deteriorated, the revamping process needs significant sums,” said Costea. An alternative to the lack of or limited
access to financing through the European program POS-Transportation is private investors and public-private partnerships. But Bostina & Asociatii lawyers say Romanian legislation concerning leases for public works (according to GO 34/2006) is tricky and hard to put into practice for such projects. “Preparation for a lease contract and meeting the formalities and legal procedures to make a project attractive are time-consuming. PPP legislation has been adopted recently, and has been amended in different stages. Add to that the lack of practice in applying this legislation in Romania and we can understand the reluctance coming from authorities, and not only them, in running and participating in such projects,” said Costea. According to public data, the two airports in Alexeni and Gura Humorului feature among plans for private-public partnerships. The airport at Alexeni is being handled by the Ministry of Regional Development and Tourism (MDRT), it was announced by the former minister in 2011. According to data released by the MDRT at the end of last year, the airport at Alexeni will be developed as a privatepublic partnership, starting with an initial
Airport
Project
Value of project/ financing*
Completion time
Henri Coanda
modernization and development
EUR 17.5 million
2012
Henri Coanda
long-term strategic development
EUR 500 million
2007-2022
Mihail Kogalniceanu
Constanta revamping of platforms for aircraft
EUR 39.6 million
2013
Suceava
modernization works on ILS navigation system
EUR 39 million 2015
Delta Dunarii Tulcea
modernization works on running platforms
POS-T
ongoing evaluation at MT
Baia Mare
modernization works on running platforms
POS-T
financing ongoing evaluation at MT
Oradea
expansion and modernization of airway platforms
POS-T
financing ongoing evaluation at MT
Arad
development and modernization airport POS-T financing
ongoing evaluation at MT
Craiova
rehabilitation of running infrastructure POS-T financing
ongoing evaluation at MT
*Values are calculated at a RON/EUR exchange rate of 4.3 22 The Diplomat June 2012
stage involving a EUR 300 million investment from a total estimated EUR 1 billion.
Undercutting Otopeni
The airport project to be developed by the group of companies controlled by Romanian businessman Nelu Iordache, comprising Blue Air, Romstrade and Infra Group, will be similar to airports in Budapest, Bratislava, Marseille and Brussels South Charleroi Airport. Gheorghe Racaru, group strategy and corporate planning manager at Infra Group, told The Diplomat – Bucharest that the project is currently awaiting the issuing of a feasibility study. In the meantime, the company has been looking for investors for the estimated EUR 220 million funding. The manager says they may be foreign financial institutions and even hedge funds, “some of them with no local office or operations in Romania”. According to Racaru, the feasibility study is estimated to cost several hundred thousand Euros, having been developed by Lufthansa Consulting. A call for offers was launched by the Romanian company in July-August last year, when it received 15 consultancy offers in the first stage. After the second selection stage, which involved seven companies, the firm chose to work with Lufthansa Consulting on the Bucharest South International Airport project. “In northern Bucharest, there is no space to develop an extension of Otopeni airport and even less a new airport. For lowcost airlines, most of the traffic, 70 percent, comes from Southern and Eastern Bucharest,” said Racaru. According to him, Brasov doesn’t need a new airport, and expectations of higher numbers of tourists are not reasonable. “There are five airports in western Romania and aside from one or two, they are registering very low traffic, especially those that are not backed up by military operations,” said Racaru. For the new airport south of Bucharest, Racaru said that, besides Blue Air, the company is in talks with other airlines and the airport fees will be lower than at Otopeni. The project at Adunatii Copaceni will comprise up to 45,000 sqm of flight attendance space, a projected capacity of 2 million passengers yearly and a flight track of 3,200 meters, similar to the one at Baneasa Airport. It will have 10 boarding gates, parking spaces and a commercial area. The investment in this project is estimated at EUR 220 million. So far the investors have not identified a definite financing source but feasibility studies are currently being carried out. EBRD representatives told The Diplomat – Bucharest that talks have been held between Infra Group and EBRD but, so far, no agreement has been reached. The construction works at the new airport are estimated to
airports last 30 months from the issuing of the zonal urban planning (PUZ) permit. The airport will predominantly serve Europe, North Africa and the Middle East.
Ghimbav project takes flight
Another much-discussed project on the aviation infrastructure development agenda is the airport project at Ghimbav, 7 km from Brasov. The area was in the news last year after Premium Aerotec, a division of the French-German group EADS, opened a new production facility in Ghimbav, a EUR 40 million investment creating some 500 jobs. Since 2006, when the company International Airport Brasov Ghimbav (SC Aeroportul International Brasov – Ghimbav) was established, with the county council in Brasov as majority shareholder, the project has suffered ups and downs, with canceled auctions, postponements and even a shareholders call to dissolve the company in 2011. SC Aeroportul International Brasov – Ghimbav was founded to negotiate and sign the contract with the Canadian company Intelcan, but in 2011 negotiations between Intelcan and Brasov county council broke down. According to
16
is the total number of airports in Romania, of which 12 are international Erste group officials, the Romanian Commercial Bank granted EUR 14 million of financing to Brasov county council four years ago, and the contract continues accordingly. In fact, BCR has built a strong local portfolio of financing granted for the development of infrastructure, including airports. Most recently, the bank financed the extension of Henri Coanda International Airport at Otopeni; the total project volume amounted to EUR 150 million, of which BCR financed EUR 50 million. Werner Weihs-Raabl, head of infrastructure finance at Erste Group, said, “Successful airport projects can only be driven by public regional or central authorities which can look beyond the economics of the project company
and consider the multiple benefits which are connected with airport development. Envisaged private investments in airport projects are in different stages of development, but none of these projects has managed so far to ensure finance.” In May, the county council in Brasov announced a call for offers within an auction for building the runway track at the airport at Ghimbav, an investment estimated at EUR 20 million. According to the Electronic System for Public Procurement (SEAP), the deadline for submitting offers is June 14, and the contract covers the planning and construction execution for the runway at Ghimbav Airport. The contract is due to run for 48 months from the final procurement decision. The runaway is 2,820 meters long and 45 meters wide, with 7.5 meter-wide footways on each side. This is the second auction to be announced by the county council in Brasov, after the last one, announced in April, was canceled. According to the previous auction details, the price constitutes 80 percent of the awarding criteria, and duration of works the other 20 percent. The yearly traffic at Ghimbav is estimated at 800,000 passengers. But since last year, estimations regarding the airport have fluctuated.
23
airports Initially, the total airport investment was put at EUR 100 million, which then dropped to EUR 60 million. The draft project developed by companies including Mott Macdonald, then reviewed by Dornier Consulting, put the number of yearly passengers at 1 million passengers, then 500,000. Either way, the capitalization of the airport at Ghimbav is confirmed, according to public statements by the local authorities from Brasov county council. They compared the numbers with similar airports, such as Cluj for instance, which has a yearly passenger volume of almost 1 million. Still, skeptical voices from Bucharest, such as Gheorghe Racaru of Infra Group, claim that not all airports in western Romania are profitable, and some of them have got lucky because of their connected function as military airports, such as at Timisoara, and Constanta, in southern Romania.
able business dynamics. This is an economic move that goes beyond the recently renovated duty-free retailers and fast-food places that have recently opened. “On the excellence in operations front we are talking about the need for a significant enhancement of the current end-to-end process quality, further investment in information technology, and an improvement in the operational business model between airlines, airport and other service providers,” said Weiss. The airport infrastructure, as included in Romania’s long-term intermodal strategy, is a common denominator of development needs in Romania whenever the economic attractiveness for existing and future investors is discussed. “While we have seen progress in selected areas of infrastructure enhancement and modernization, intermodal infrastructure remains for Romania a long-term vision that is not yet implemented on a sufficient level,” he argued.
New flight paths
Others are also calling for improvements. For instance, the management of Baia
in a EUR 2 million investment. According to the airport’s representatives, the funds for this investment come from the state budget and county council. In Suceava, Stefan cel Mare Airport started a modernization project in 2011 involving the entire airport infrastructure, through the POS-T program, an investment to be completed in 2015, with a total value of approximately RON 168 million (some EUR 39 million). Of this sum, the EC’s contribution, through the European Fund for Regional Development, is 69.25 percent, while the state budget will put up 28.75 percent. The airport is covering 2 percent of the total amount.
West brings traffic to Timisoara and Sibiu
Cornel Samartinean, general manager of Traian Vuia Timisoara International Airport, told The Diplomat – Bucharest that the management is currently in talks with two airlines that are interested in coming to the western Romanian airport, and, overall, the Traian Vuia figures look good. Passenger traffic has increased each year since
“A EUR 150 million project for modernization works at Henri Coanda Airport has been completed, of which BCR financed EUR 50 million,” Werner Weihs-Raabl, head of infrastructure finance at Erste Group
Far from fares
According to the findings of AT Kearney, communicated to The Diplomat – Bucharest by Michael Weiss, partner within the company, Romania has to speed up its progress in terms of airport infrastructure, in order to bridge the gap with other countries in the region. “In the next phase it will be key to enhance the business model of the airport in two main directions: exploring new opportunities to generate non-ticket fee related revenues and excellence in ground operations,” said Weiss. He added, “On the non-ticket fee related revenues side, other European airports have been able to transform the airport into a strong economic cluster with retail and service activities beyond the traditional check-in, wait and arrival process.” Weiss offers the example of the so-called “airport cities”, which have been able to generate their own very profit24 The Diplomat June 2012
Mare Airport believes that the Romanian authorities should find solutions, especially in terms of financing resources, to expand the remit of local airports which currently focus only on commercial flights over medium-large distance and capacities. “Currently, the other flight activities present in all European countries, such as light and ultra-light flights, private charters, utility and entertainment fights for proximity tourism activities, are being neglected,” said Baia Mare representatives, quoted by the Airports Association in Romania. Legislation should be updated to this end, they added. The airport at Baia Mare has submitted a financing request for expansion and modernization works on the airport platforms, likely to cost RON 45.3 million (around EUR 10.6 million). Of this financing, the county council in Maramures will contribute some RON 730,000, while European funds will supply over RON 25 million. The remainder should come from the state budget. Meanwhile, the airport in Iasi is currently seeing the construction of a new passenger terminal, to be finished at the end of this month,
2009, from 974,000 to over 1.2 million at the end of 2011, a 6 percent rise since 2010. Timisoara’s airport is the second largest national hub in Romania, Samartinean said. Otopeni and Timisoara are linked through six daily return flights. In 2010, the airport achieved a turnover of almost RON 42.6 million, a similar value to 2011, while for this year the GM expects some RON 44.65 million. According to data provided by the commercial division of the airport in Sibiu, over 60 percent of travelers in the region purchase a ticket more than twice a year, the top destinations being London, Paris and Barcelona. The airport capacity is 300 passengers per hour on each flux, domestic and international, and it can handle a flight every five minutes. Airlines with regular flights to Sibiu include Lufthansa, Austrian Airlines, Carpatair, Blue Air, and charters Air Bucharest and Corendon Airlines. Traffic in 2009 reached 221,000 passengers, three times the figure from 2008, and rose again to over 226,000 passengers in 2010. “In 2011, we registered a slight decrease in traffic due to the current economic conditions,” said Mirela Ciucur, chief of commercial
airports
“Because the airport infrastructure in Romania has constantly deteriorated, the revamping process needs significant sums,” Cristian Costea, partner at Bostina & Asociatii law firm service at the airport. Currently, the airport at Sibiu has some RON 30.7 million for different updates and modernization works within the airport infrastructure. The airport posted a turnover of RON 10.2 million in 2011, slightly down on 2010, and has an estimated budget of around RON 10 million for this year, due to relatively steady business indicators such as traffic, fares and flight frequency.
Privatization still up in the air
There are currently four major names from Romanian air infrastructure on the privatization schedule and, under the law published in January 2012, their listing should start before the end of 2012. The Property Fund holds stakes in three of them. “The National Company of Airports is ready to be listed,” said Greg Konieczny, Property Fund manager and executive VP of Franklin Templeton Investments, the company administrating the fund. Plans for privatizations and listing of the main state-owned companies in Romania also include the Bucharest Airports National Company (CN. Aeroporturi Bucuresti). According to Konieczny, that listing could happen this year only if there is a strong will on the part of the government, as there is currently no plan in this respect, while the latest political uncertainty and IMF visit to Romania could delay it.
Konieczny told The Diplomat – Bucharest that the company is profitable and ready to be listed and efforts are being made to urge the Ministry of Transportation to speed up the process. According to current data, the value of CN Aeroporturi Bucuresti is EUR 73.6 million, with the Property Fund owning 20 percent, while the Romanian state holds the rest. As of March 31 this year, the portfolio of the fund was heavily weighted towards companies operating in electricity and oil and gas, representing almost 87 percent of the fund’s net assets value (NAV). In the same period, the fund reported a portfolio of 73 companies, 27 listed and 46 unlisted. According to company data, CN Aeroporturi Bucuresti registered a turnover of EUR 94.2 million, and a profit of EUR 10.1 million in the same year, from a cumulated traffic for the two airports at Otopeni and Baneasa of over 7 million passengers and over 100,000 aircraft arrivals and departures. According to data provided by the Property Fund, the dividend payout in 2011 was 90 percent. Also on the fund’s listing schedule is Traian Vuia Airport in Timisoara, of which the fund owns 20 percent, with a NAV of EUR 2 million and Mihail Kogalniceanu Airport in Constanta, where it holds the same amount of shares, estimated at EUR 1 million.
Tarom listing preparing for take-off
The listing of the national airline Tarom on the Bucharest Stock Exchange will most likely take place in late June, two months later than scheduled under the commitments made to the International Monetary Fund (IMF). According to the letter agreed by the government and the IMF after the latter’s last mission in Bucharest, the prospectus setting out the sale of 20 percent of the state’s shares in Tarom was scheduled to be published by the end of May, and the
procedure was estimated to be completed by the end of June. The IMF has agreed to the extension, but urged the government to return a Boeing 737-800 aircraft the company hired four years ago, or to renegotiate the rent. The initial understanding between the government and the IMF was for the stake to be sold by the end of 2011. After the National Securities Commission (CNVM) approved the preliminary prospectus for the sale of 20 percent of Tarom shares, the listing of the airline was said to have entered the home straight. According to Marius Trif, general manager of Carpatica Invest, the broker involved in the listing, beside Swiss Capital, the preliminary prospectus from the CNVM has been sent to Ministry of Transport, but the manager couldn’t estimate when the final version will be published. According to Bucharest Stock Exchange data, the IPO for Tarom was scheduled for June this year. Still, according to market sources, the listing of Tarom could prove a major failure, due to the large losses registered by the company for the fourth consecutive year. However, in 2011, according to its financial reports, the airline reduced its losses by 24.2 percent compared with 2010, from EUR 79 million to EUR 14 million, and expected revenues of EUR 7.5 million. Through the IPO scheduled for this month, the Ministry of Transport aims to sell 163 million shares, worth EUR 93 million, for RON 2.5 per share. ■
“The National Company of Airports is ready to be listed, but no plan for its listing has been issued by the Ministry of Transport,” Greg Konieczny, Property Fund manager 25
telecom
A
Are telecom operators ready for 4G? Suffering in the current economic climate, telecom players present on the local market say this year’s biggest challenge by far is the upcoming auction for 4G licenses. They told The Diplomat – Bucharest that one of the most important business drivers is mobile internet, and characterized the Romanian market as challenging, innovative and competitive, especially given the latest trend: Mobile Virtual Network Operators. By Roxana Cristea 26 The Diplomat June 2012
s in many countries across the world, Romania is entering the new era of mobile broadband with super fast speeds and high-quality services – downloads, browsing and video streaming, enjoyed by users on the move. But this means a real storm for everybody. All the players, users, regulators, operators and telecom vendors, are ‘navigating’ in 2012 on a market that is very competitive, demanding and unpredictable,” says Angela Haraga, CEO of Nokia Siemens Networks, of the telecom market in Romania. Most players in this field agree with Haraga and say that, at present, the Romanian telecom market is dynamic, competitive and challenging. “Telecom today is an environment of radical adaptation to new realities, demands and business models. Today there is a tremendous appetite for very high-speed connections, a boom in data traffic, demand for TV and video services, shifting from voice to video and multimedia networks. This trend is also valid for Romania,” adds Raoul Ros, country senior officer at Alcatel-Lucent Romania. And yet many Romanians still don’t have access to high-speed connections. While Romania is now in challenging times and the market has been visibly impacted, telecom service providers’ revenues are stagnating overall and major public projects are still to happen, in the midterm the country still offers growth opportunities. In many parts of Eastern Europe and Romania as well, there are many emerging opportunities in network and business modernization and new infrastructures not only in telecommunication but also in defense, transportation and energy, say players. “Romania can be proud of its telecom market. Prices are low, network coverage is excellent both for voice and internet, and the range for handsets and smartphones is extensive. It is the most competitive and advanced market in Eastern Europe. Furthermore, I would say that Romania is very open towards Western trends. Romanians are a technologically-driven people, and although users are very attentive to the price/quality ratio, they want to benefit from the latest technologies,” says Jean Francois Fallacher, CEO of Orange Romania. In addition, the market now has a tendency to strengthen, meaning that some companies are taken over by other companies in the field. Consolidation also came in mobile telephony, when Cosmote acquired Zapp. This may pose a problem: while consolidation can be a quick introduction to innovation, too small a number of operators may lead to concerns about competition in the market. “Competitiveness is also based on market regulations. This is a market that favors end users who register on the retail market, one
telecom
“The telecom market will change in the coming years. It will stimulate further economic development and facilitate communication,” Catalin Marinescu, president of ANCOM while, Panos Makris, chief commercial officer at Cosmote Romania, tells The Diplomat – Bucharest that the biggest challenge is the GSM tender to take place by mid-year. That aside, the other challenges are long established: tight competition, price pressure, the economic context and so on.
Mobile gets moving which specifically favors access to a wider range of services. For example, mobile internet in Romania is much cheaper than in other countries, as purchasing power is lower,” says Catalin Marinescu, president of ANCOM. Romanians adopt new technologies very quickly and operators have adapted because they realized this. The quality of services in Romania is of very good quality compared to other countries, even large countries in Europe, adds Marinescu. In general, operators and solution providers must find new ways to exploit investment and generate profits. ”The mobile market has felt, as have other segments of the economy, the impact of the economic crisis. Its main reaction was to fight at price level, which saw offers becoming more and more generous. This type of competition has deepened the problem and is obviously not a sustainable long-term model. There is a need for different business models,” says Nicusor Tanase, business development manager for Romania and the Republic of Moldova at Computaris, who adds that the solution is for operators to compete on infrastructure or the business models and value-added services they practice. Beyond direct competition between local operators, pressure is exerted by global players such as Apple, Google and Samsung, which by intelligent handsets, applications and Web services erode the income and value of operators as it is perceived by the end user. Mean-
In 2011 the industry witnessed avid competition for the engine of growth: broadband internet both mobile and fixed. “Fixed telecommunications providers, which still have the best service for the segment, focused on attracting clients with attractive bundled offers alongside digital/analog TV and fixed telephony. Meanwhile mobile operators focused on gaining rapid market penetration for mobile internet traffic,” says Ros. Speed is still the main consumption driver of the internet in Romania. Out of the 25 million mobile telephony users in the country, 3.5 million use mobile internet services. In 2010, for the first time, mobile broadband users surpassed fixed broadband ones. This trend will consolidate in the years to come, predict players. Worldwide broadband subscriptions are expected to reach 3.4 billion by 2014 and about 80 percent of these consumers will use mobile broadband. The driver lays in the simple but fundamental value it offers to consumers’ lives: mobility, being always connected while on the go. “Long Term Evolution is the technology developed especially for the internet era,” adds Ros. Meanwhile, the CEO of Orange Romania believes that besides the high level of competitiveness on the telecommunications market, a remaining challenge is to increase the percentage of the population that uses the internet. “As you know, according to a study released by Eurostat, only 50 percent of Romanians aged from 16-74 have used a computer, compared to 96 percent in Sweden, 94 percent in Den-
“Romania can be proud of its telecom market. Prices are low, network coverage is excellent, and the range for smartphones is extensive,” Jean Francois Fallacher, CEO Orange Romania 28 The Diplomat June 2012
mark and the Netherlands, 93 percent in Finland and 91 percent in the UK. Usage is more widespread among young people, because they understand and adapt more easily to new technologies. The rate among those aged 1624 who have used the internet is higher, at 81 percent, but it is still the lowest percentage in the EU. So, in practice, one of our missions is to increase internet access, and for that we have extended our 3G network in rural areas,” adds Fallacher.
Looking forward to 4G
“The biggest challenge for this year is reconfiguring the mobile market for the next 15 years by the auction to be held in the middle of the year,” says the president of ANCOM. According to him, if the auction ends successfully Romania will have 4G services in 2014. 4G or LTE (Long Term Evolution) is the first mobile wireless technology designed to primarily transport data traffic efficiently, whereas 2G and 3G technologies were developed and optimized for voice traffic. Using internet-based protocols (IP), LTE can enable web-based applications like Facebook, YouTube, Flickr, InternetTV, etc. “With social, business and information networks rapidly expanding, I foresee that all mobile handsets will be connected to the internet by 2015,” says Ros. 3G technology is still an adequate technology in areas where
telecom it can answer market needs and to consumer demands. According to Nokia Siemens Networks estimates, there were about 10 million 3G subscriptions in Romania at the end of 2011. And 3G usage will continue to be the dominant technology over the coming years, reaching more than 20 million subscriptions by 2020. This is similar to the overall global trend, where the number of 3G subscriptions is expected to grow 3.5 times by 2020. This is all related to spectrum usage as well as cost of services. Meanwhile 3G speeds are growing quickly to impressive levels, too. LTE will be implemented to answer consumers’ insatiable appetite for very high-speed connections as the demand for TV and video services is shifting from voice to video and multimedia networks. In addition, some rural areas with a low population density cannot be covered by wire line networks at a reasonable cost, and LTE remains an excellent solution to reach such citizens, say players. “4G is mainly about high-quality mobile broadband services and applications, services that generate high traffic and very high speeds. It also means simplified network infrastructure that allows these higher speeds. We’re
Mobile users by subscription type
The flexibility of payment and promotions from the existing operators on the market have persuaded the majority of end-users to choose pre- paid SIM cards.
date
Pre-Paid SIM (percent)
30.06.2009 31.12.2009 30.06.2010
Monthly subscription (percent) 39 38.2 39.3
31.12.2010 30.06.2011
38.7 39.5
61.3 60.5
61 62.2 60.7
SOURCE: ANCOM
talking about 13 times more traffic generated per user by 2020 and smart phone traffic alone growing 30 times in same timeframe. All of this because users have better quality at hand and more applications to use,” adds Haraga. According to her, there are several factors behind the taking off of these services: handset availability, service quality, coverage and, last but by no means least, price. If the users are able to access these types of services at the quality they expect, and they can afford it, they will use them. Bell Labs research on European consumers in late 2010 found that more than half the consumers surveyed were likely to sign up for
LTE, and 40 percent would switch network providers to gain access to the technology. The main perceived benefit for consumers was faster speeds. Live messaging, next-generation music and enhanced mobile video with enhanced end-user experience in a next-generation network environment were the top three consumer applications tested. As far as businesses are concerned, the survey revealed that interest in signing up for LTE services was high across all enterprise segments, and especially so among mediumsized and large businesses. The survey indicated that more than half of small businesses and more than three-quarters of medium-sized
29
telecom
“The market has matured in the last two years and was marked by intense competition and prolonged uncertainty over the state of the economy,” Panos Makris, chief commercial officer of Cosmote Romania
and large enterprises are interested in signing up for next-generation wireless network access for their employees. The findings suggest that interest in accessing LTE service also impacts customer loyalty. Again, a higher response rate was reported for the medium-sized and large enterprise respondents. More than half of small businesses, over 70 percent of medium-sized companies, and more than 80 percent of large enterprises reported they would change service providers in order to get LTE. Improved speed and quicker response time (improved interactivity) were ranked as the top two attributes for enhancing quality of experience, across all enterprise segments. However, speed ranked highest for the small enterprises, while improved interactivity was most important for medium-sized and large enterprises.
Need for speed
Players say the implementation of 4G services in Romania is a big opportunity for the whole telecom market: for consumers as they will have new services, for regulators as they will sell licenses, for operators as they will get new revenue streams from the new services, and for vendors such as Nokia Siemens Networks and Alcatel-Lucent as they will implement new technology. “But the success depends on how the licensing is done. The more difficult it is for the operator to launch 4G services, the longer it
will take for the market to progress,” explains Haraga, adding that she believes that first implementations could come as soon as next year, once the licensing is finalized. The implementation of 4G depends on the service coverage, as some operators launch when they have coverage in one city, others when they reach several locations. “From our experience in other projects, it takes from a few months to one year if we are talking about covering for example 10-15 main cities in Romania. It all also depends on what spectrum frequency different operators will have. The lower band one has, the faster and cheaper it deploys,” adds Haraga. Similarly, Ros says that deploying commercial LTE networks in the region is just a matter of time. ANCOM confirmed that 4G licenses and associated spectrum tender, and thus LTE, will come to Romania soon after the licenses are granted. LTE services are already available in 37 countries. And the number of operators launching new services is rapidly growing. Currently it is the United States which leads the 4G market, with nearly 8 million subscribers. But this year, according to estimates by ABI Research, 61 million LTE handsets will be sold across the world in an indication that 4G subscriptions are really going to take off globally in 2012. This is partly related to the fact that hundreds of new LTE devices, including smart phones, have now become available. “Finally, LTE and mobile broadband expansion will bring significant economic and social benefits – stimulate economic growth, create new jobs, etc,” predicts Haraga, adding that LTE will be developed in Romania within five-seven years. The uptake of 4G in Romania depends on the licensing process and the policies of the operators. So it will take this amount of time until 4G becomes really popular. According to NSN forecasts, there will be some 2.7 million 4G subscriptions in Roma-
“Telecom today is an environment of radical adaptation to new realities, demands and business models,” Raoul Ros, country senior officer for Alcatel- Lucent Romania 30 The Diplomat June 2012
nia by 2020, meaning that more than about 12-13 percent of the population will use 4G services. “Orange has already tested 4G in Romania and we are ready to launch this technology, which allows data transfer speeds of up to 100 Mbps, shortly after the licenses are available. In rural areas too our network is Long Term Evolution (LTE) ready and the transition to this technology will be simple. In urban areas this service may be available shortly. Also, Orange is a promoter of this technology in the EU, because the network has committed to introduce 4G/LTE in all EU markets where it is operating by 2015,” says Fallacher, adding that the speed of deployment of 4G will of course greatly depend on the conditions under which the authorities grant licenses to the operators. Discussions are currently ongoing with ANCOM and the Ministry of Telecommunications. Panos Makris says that Romanians are very eager to try new technologies, so interest will exist for 4G. “Cosmote Romania is considering the opportunities offered by this technology and we will announce our future developments in due time,” he says. On the same theme, the president of ANCOM adds that some Romanians are ready to adopt 4G: those who love innovation, who need applications and faster data transfer. “Certainly in the implementation of 4G operators will adopt the same tactics as in
telecom the case of 3G, covering areas where there really is demand, such as major cities, and subsequently expanding into other areas of the country. Network operators do not develop any new technology if there is no demand. Any network development requires investment and this investment should be recovered. If there is an economically favorable case then they will develop it,” says Marinescu.
Next step
“The MVNO (Mobile Virtual Network Operator) can be a solution to help revitalize the telecom market,” Nicusor Tanase, business development manager for Romania and Moldova at Computaris, tells The Diplomat – Bucharest about one of the newest challenges in the telecom market. The full MVNO model is a mobile operator that has all the network and operational support necessary to provide mobile services under its own brand, less radio access network. The light MVNO model is a reseller of mobile operator services host. It is noteworthy that these models come from the 2G/3G mobile market, with charges depending the call duration. The business model is buying wholesale and the retail sale of minutes or, more recently, of Megabit transfer.
“Developing technologies in 4G mobile networks may have a significant impact on the listed models, because providing services and applications can be done over the internet. Thus it is anticipated that an MVNO model will consist of three ingredients: brand, operational services and attractive content, including applications for voice, messaging, etc,” says Cristian Nitu, general manager at Radiocom. According to him, the first MVNOs will occur either later this year or probably next year. From here important steps still need to be taken until the market is developed. Objectively speaking, the time horizon necessary in Romania for the emergence of MVNO operators is based on several factors, say pundits. The first step is the tender for the licensing of mobile operators, the auction to be held by ANCOM. After the auction, the holders of licenses granted through the selection procedure for telephone operators will provide access to mobile virtual network operators under the rules of the game, set by ANCOM. Each license holder (MNO, mobile operator) will be required to publish an MVNO access offer on its network after the radio coverage has reached 30 percent of the population, a threshold that has been reached by almost
Penetration rates
With penetration rates below the EU average, players say the Romanian market has significant opportunity to generate highways for growth in all the major service areas, especially for mobile broadband where 90 percent growth is expected across Europe over the next five years.
Service
Romania
EU average
Mobile telephony
127%
124%
Fixed telephony
26%
40%
Mobile 12% broadband
35%
Fixed 16% broadband
27% SOURCE: ANCOM
all MNO in Romania. Thus, the maximum period of negotiation to conclude an MVNO access agreement will be six months from the date of receipt by the holder of a request to that effect. Also, the owner will ensure the
31
telecom implementation of the MVNO access agreement so that the provision of electronic communications can begin within four months from the date of the agreement. Calculations show that in the final auction spectrum for MNO, the development of MVNO would take 10 months. “These terms do not really embrace the potential of the MVNO operator, but by the operator that will host it. Until then, Radiocom, like other competitors who have agreed that they will be MVNO operators on the Romanian market, is working to provide the necessary technology, conducting feasibility studies for business opportunities and the necessary technology. Some companies interested in becoming MVNOs have already initiated talks with mobile phone operators. For now it is difficult to assess the state of relations between them, but hopefully things will develop well, supported by the regulatory framework,” adds Nitu. Players say that MVNO is an advantageous business because of short time required to launch in the first place, and launch products and services as well as campaigns and promotions for MNO-MVNO partnership integration. ”The main activity of Radiocom is radio and TV broadcasting. But the market leads you to find innovative solutions to grow,” says Nitu, adding that the introduction of MVNO as a service entails a strong entry on the competitive market of major league players on the mobile segment, the growth of the portfolio of services and the company’s value, income diversification, increased experience and the training of Radiocom employees, plus commercial offers with increased flexibility. So far in Romania there have been two initiatives to implement an MVNO, from Click and MyAvon, but they are not active at this time. The MVNE platform that Computaris offers is a technological solution that facilitates the market entry of virtual operators, not a virtual operator itself. The Romanian economy in general lags slightly behind those in Western Europe, the USA and Asia. Telecommunications in particular is, technologically speaking, very advanced and Romania has one of the best internet access rates worldwide. But in terms of business models, industry initiatives and entrepreneurship, Romania is playing catch-up to those regions. Computaris, as an MVNO solutions provider, wants sustainable development and the progression of this business as more companies enter this market. Interest in this business model is growing, both in terms of public messages and other channels. The MVNE solution which the company provides through Primetelecom is a virtual platform technology that allows operators to launch with minimal investment and existing mobile operators to manage any virtual operator without requiring major changes 32 The Diplomat June 2012
“The more difficult it is for the operator to launch 4G services, the longer it will take for the market to progress,” Angela Haraga, CEO at Nokia Siemens Networks in the systems they operate. “In the MVNO business there are many factors to consider, such as brand strength, distribution, packaging offers and user retention strategy. We must take into account that many virtual operators from other industries, such as mobile services, are only one component of business strategy and marketing,” outlines Tanase. An example is Carrefour, which has launched virtual operators in six countries, and uses mobile services for loyal customers, but in the end these are a secondary business or marketing tool for the main business of retail.
Green shoots?
In addition to 4G, MVNO and mobile internet, which are considered to be the latest challenges in the telecom market, players say that in recent years, although Romania has been engulfed in the crisis, things have not gone too badly and they are optimistic regarding the future. “The telecom market has matured in these last two years and has been marked by intense competition and prolonged uncertainty over the state of the economy. Romania has
the smallest tariffs in the whole of Europe, not only Eastern Europe, and there’s still fierce competition. Customers are price oriented,” says Panos Makris, chief commercial officer at Cosmote Romania. Speaking before the most recent data was released, he added that Romania’s recession had technically ended with GDP posting economic growth in recent quarters. However, consumers remained cautious and this was the major change: despite encouraging macroeconomic figures, consumers have not resumed their former spendthrift ways. The mobile operator’s number of subscribers (the total customer database) has grown by 4 percent in the last two years, from 19 percent in December 2009 to 23.1 percent in December 2011. As of the end of March 2012, the postpaid ratio increased to 23.4 percent from 22.4 percent in Q1 2011, as a result of the business segment growth and appealing offers for the residential segment. The company significantly increased its 3G customer base, by 74 percent compared to Q1 2011. Also, in Q1 2012, Cosmote Romania managed to further grow its business customer base by 30 percent against the same quarter of last year. Meanwhile, the operator’s national sales distribution channel included, at the end of March 2012, approximately 580 points of sale across the country. “We are always reshaping our strategy for our stores and reshuffling our retail network, because telecom retail is a very fast moving market. Any telecom retailer closes stores and opens others based on the permanent monitoring of customer traffic, sales per square meter, changes in consumers’ purchase habits, and so on,” says Makris. The chief commercial officer adds that he hopes the current situation will improve, the organic growth of the whole economy will resume and, accordingly, the telecom market will regain shape. “For telecom, I expect mobile internet consumption to continue increasing,” concludes Makris. However, Catalin Marinescu, president of ANCOM, believes that as mobile penetration is over 100 percent this means that the Romanian mobile market has matured and players can no longer expect rapid increases. The only significant growth expected this year is access to the internet via broadband. In terms of the number of users the telecom market has decreased, but increased for calls, MMS and SMS. “The telecom market will change in the coming years. It will stimulate further economic development and will facilitate communication so that it can stimulate the development of various activities. It is already changing; various gadgets like tablets have appeared with which you can do a lot of things,” notes Marinescu. ■
italy
Latin links Despite the economic pressures that sometimes lead countries to ‘shut up shop’, Italy and Romania have maintained close diplomatic ties in recent years, with a strong focus on economic aspects. 2011 was an excellent year for bilateral relations, H.E. Mario Cospito, the Ambassador of Italy to Romania, told The Diplomat – Bucharest. By Magda Purice
“I
have now spent more than three years in Romania and I can say without any hesitation that I have found here a fertile ground for many economic fields. With the signing of the New Strategic Partnership Declaration, adopted in Bucharest in January 2008, our countries agreed to strengthen our bilateral economic cooperation. Italy can now count almost 16,000 active enterprises in Romania which have met a very attractive investing environment,” says Cospito. Italy is Romania’s second biggest trade partner, after Germany. The Latin country has also taken concrete steps in Romania’s favor at a less visible level, for example the decision to lift remaining labor market restrictions for Romanian workers in Italy starting from January this year, says the Ambassador. “Italy is the biggest investor country in Romania by number of registered companies, amounting to almost 31,000 and employing 800,000 people,” he adds. Out of this number, according to both the Ambassador and Mario Iaccarino, director of the Italian Institute for Foreign Trade (ICE Bucharest), almost 16,000 are active. But the envoy sees no reason to rest on his laurels. “My daily diplomatic activity in Romania is very satisfying and I think that in future our work will have to focus on making the existing links even stronger.”
Counting the Italian numbers
Over the past three years, the overall foreign direct investment value (FDI) in Romania has dropped, due to the economic crisis and the lack of liquidity. In 2011, FDI amounted to EUR 1.9 billion, down 13.6 percent on 2010, according to ICE. With regard to Italian investment in Romania, according to the official data of the BNR, Italian FDI in 2010 amounted to EUR 2.8 billion, and the first estimations for 2011 suggest it has increased by EUR 300 million to EUR 3.1 billion. The value of bilateral trade reached EUR 12 billion in 2011, an historic peak and an increase of 13.3 percent compared with 2010. According to the data provided by ICE’s
12bln
€
represents the value of bilateral trade between Romania and Italy in 2011 33
italy
“If I have to identify a real challenge for the future, I hope that there will be a real upgrading in the fields of education and research,” H.E. Mario Cospito, Ambassador of Italy to Romania director, Romania’s exports to Italy were equal to EUR 5.78 billion, up about 12 percent on the year before, while imports from Italy amounted to EUR 6.23 billion, a 14.6 percent increase over the previous year. The trade balance shows a surplus for Italy of about EUR 444 million. “It is an excellent result that far exceeds the EUR 11 billion recorded in 2008, a result that rewards the efforts of the entire ‘Country System’, formed by the Embassy, the Italian Institute for Foreign Trade, the Italian Chamber of Commerce for Romania and Confindustria Romania,” says Iaccarino. In the first month of 2012, Italian-Romanian bilateral trade amounted to EUR 869.6 million, an increase of 4 percent compared to January 2011. In the same period, adds the director, Romania’s exports to Italy were worth EUR 465 million, an increase of 1.2 percent, while the value of imports from Italy amounted to EUR 404.6 million, an increase of 7.5 percent compared to January 2011.
Tough measures for tough times
In recent years, especially since the economic turmoil started in 2008, the bilateral relationship between the two countries was in line with the shared European response to the crisis. This was also mirrored at the political level. “Many of the political
choices made by our governments followed the European pattern which asked for sacrifices, in order to reach a comprehensive program of structural reforms towards fiscal consolidation and economic competitiveness,” says Cospito. The Ambassador sees mutual membership of the EU as an opportunity: it can provide a common space of understanding in order to find concrete solutions for citizens. According to the Ambassador, the current challenge for Romania is two-fold. “Domestically, I believe that Romania’s main priority will be to carry on with the reform agenda agreed with the international financial institutions. But Romania will have to implement this program with an eye on the future, engaging in a new set of EU measures that give priority to economic growth and job creation,” the Ambassador urges. “In this context, Italy is currently engaged in dialog with Brussels in order to enhance the focus of the ongoing negotiations for the next budgetary outlook on growth. We hope that Romania will give support to these priorities.” To foster investment within the current European context, the Ambassador’s advice for both Romanian and Italian investors, in this time of crisis and lack of liquidity, would be “to deepen their knowledge of local and EU regulations, especially with regard to those projects co-financed by the EU, so that a better absorption of the structural funds can be achieved.”
Energy, construction and tax incentives in fashion
Traditionally, Italians see great opportunities in the local business landscape in the food, furniture and textiles sectors. In the fashion industry, brands such as Calzedonia, La Perla, Valentino and Gucci are familiar to Romanian consumers. Further-
more, with the local energy sector growing and attracting large companies with ambitious projects and vision in this field, Italians are also part of the renewable energies story, which relies on a favorable legislative framework and incentives such as green certificates. “In this framework, I’d like to mention the stable presence in this country of Enel Green Power, which is currently running five projects and which invested EUR 330 million last year. It’s now planning to increase its total installed capacity to 450 MW in the coming months,” adds the diplomat. The Ambassador notes that other areas of interest for his country’s investors are agriculture, which has huge development potential in this country, as well as the food industry. “Last but not least, let me mention infrastructure in general, in particular the construction of highways and railways, where many companies are active, such as Astaldi, Impregilo and Pizzarotti,” adds Cospito. The director of ICE underlines that FDI in Romania has been encouraged by a policy of liberalization which dates back to the early 90s. Moreover, tax incentives, like the 16 percent flat tax on corporate income, and the possibility to take over shares of other companies without restrictions, except in sensitive fields like defense and banking, act as significant encouragement not only for Italians but for all foreign investors active locally. ■
“I hope that the excellent performance of 2011 will be repeated. We will continue to identify opportunities in the food, furniture and textiles sectors,” Mario Iaccarino, director of the Italian Institute for Foreign Trade 34 The Diplomat June 2012
italy
Italian battalion stays the course Bilateral trade between Romania and Italy registered a peak in 2011, but this year, with the ongoing economic woes all over Europe, the story may be different. To find out how Italian investors with operations on the local market are coping with the changes, The Diplomat – Bucharest talked to decision makers and managers of Italian companies and brands in Romania. By Magda Purice and Roxana Cristea
I
talian investors’ stock value of investments was worth almost EUR 1.4 billion at the end of 2011, through more than 31,000 companies registered in Romania, half of which were active in 2011. For Italians, traditional segments such as infrastructure, construction, fashion, finance and medical services remain the key areas for the market opportunities they find here.
AutoItalia Group aims to reverse market trend
With a network of 28 dealers countrywide, the local importer of Fiat and Fiat Professional cars has several other well-known brands in its current portfolio: Alfa Romeo, Lancia, Maserati, Infiniti, Abarth and Jeep. And AutoItalia Group aims to compensate for the stalling automotive market by capitalizing on the b2b channels. According to Umberto Miceli, role group sales director, the corporate segment accounts for up to 60 percent of overall sales, and Fiat Professional vehicles are the leading brand on this segment. Within the dealers’ network, the official stated that dealers in Bucharest, Cluj and Constanta are currently registering the best performances, in line with the
country’s best economically performing regions. In the company’s sales to consumers, Fiat tops the ranking. “Our priorities for this year are the consolidation of the Jeep and Lancia brands, an increase in market share and investments in the new car lines group wide,” said Miceli. Company officials told The Diplomat – Bucharest that the Italian firm is planning four new model launches this year, with the first comer the Abarth 500 Cabryo. According to Gabriela Diaconita, brand manager for Infiniti, Maserati and Abarth, there are already pre-orders for the car in Romania. The operational leasing segment is paramount for the company’s operations, and AutoItalia is working with several different operational leasing companies. One of the company’s largest fleet deals was signed in 2008, when Arval, the operational leasing company, delivered around 1,000 vehicles to Enel Romania, following an auction organized by the power distributor. The previous government’s regulations reducing the number of vouchers for cars included in the Rabla (cash for clunkers) program is also expected to impact car sellers’ overall operations. According to
Umberto Miceli, with just three vouchers per car only around 30,000 vehicles can be sold across the market, a value which cannot boost the industry, with only 10,000 to 15,000 cars sold. One year ago, AutoItalia was sold to Mediterranean Car Agency-Levi Group, and the new owners, controlled by Israeli investor Michael Levy, acquired the car importer from Herbert Stein. The Israeli company has, however, a long track record with Italian car brands, as it has been the exclusive importer of Fiat Group brands in Israel since 1950. Within one year, the company started to reconfigure the business, and “invest smart”, as the company’s official puts it. The new owners stated at the time they took over the company that the sales plans target 10,000 sold cars in 2015, a similar level to the one in 2006, while in 2010 the company sold only 4,000 cars. 2008 was the peak year for the firm, which had 276 employees and achieved a turnover estimated at around EUR 214 million in Romania, after which a downtrend began, and 2009 and 2010 brought the company its first losses. In 2008, it managed to double the performance achieved in 2006, when it attained a EUR 80.5 million turnover. 35
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“Now we are moving into a new phase, the focus is to improve the service to our clients, which I have to say is currently very far from our targets,” Luca D’Agnese, CEO and country manager of Enel Romania
SIAD banks on health of hospital market
“We have the advantage that we address 360 degree customers. If a sector has a problem we are not affected because we deliver industrial gas from the food to metallurgical industry and small consumers are the backbone. Large customers come with a disadvantage as if their business fails it affects our whole business estimations badly,” said Cristinel Mihailescu, general manager at SIAD Romania, adding that like SIAD Italy, 80 percent of the customers of the local branch are SMEs. This year the company wants to sell gas on the hospital market, after obtaining all permits. According to Mihailescu, the benefit of the business is that the industrial gas industry is assimilated to the energy industry, and if tomorrow there were no argon, nitrogen or oxygen people could not weld, breathe etc. “I think the likeness of the gas industry with electricity and fuels is very good. The industrial gases segment is going very well. The crisis has not affected us very much, we need now just to recoup investments,” the manager told The Diplomat – Bucharest. SIAD’s business grew last year by 15 percent and had a turnover of EUR 9 million. “Business in Romania is difficult because we have no financial discipline,
the time to obtain payment has increased by 50 percent; many companies can pay but use this excuse. In Bulgaria, the period of recouping money is 25-30 days while in Romania it is six months. The problem is not only money but also cylinders, as many companies don’t return them,” added Mihailescu. But the manager is optimistic and says that since it has the factory in Calarasi there is great potential because the facilities are now running at a quarter of capacity. “What we have built in Romania are the largest and most modern factories in this area. Usually these plants are near a big customer; we built it near Tenaris,” said Mihailescu, adding that the investment in the factory was EUR 30 million. In addition, every year SIAD makes investments in gas tank park development. In 2011 the company invested EUR 1.5 million in cylinder installations and in 2012 it will invest EUR 4 million. In terms of future plans, the company director hopes to operate factories at full capacity. Also, the market in Romania is in development, and infrastructure, construction and highway programs will use O2 and acetylene. Any activity in a country consumes industrial gas. “In the future new technology will develop. A few years ago in the food packaging industry ham and salami were kept in bags; now all packaging is done in inert medium with nitrogen and can last on the shelf up to three weeks. SIAD’s businesses are for the long term and will grow continuously,” concluded Mihailescu.
UniCredit Group halts expansion in Romania
Italian UniCredit Group will focus its investment in the region on subsidiaries in Russia, Poland, Turkey and Czech Repub-
“We cannot compare the business performances of clinics in Rome or Venice, nor can we compare the expectations for the clinics abroad,” Gian Antonio Favero, founder of Favero clinics 36 The Diplomat June 2012
lic – markets it considers drivers of growth – while the previous plans for expansion in Hungary and Romania remain suspended, says Federico Ghizzoni, CEO of UniCredit Group. It reaffirms the strategic decision of last year to freeze Romanian retail expansion which had an ambitious target of up to 300 new units. With the Romanian economy failing to return to a solid growth trajectory and retail loan demand still very low, the Italians have decided to suspend the extension. On the local market UniCredit controls UniCredit Tiriac Bank in partnership with businessman Ion Tiriac. Last year, the lender increased its network by 10 branches, reaching a total of 245. At the end of the first quarter of 2012 the bank had a balance of EUR 5.1 billion, a level which does not put it among the priorities of the regional group. It needs further major investments to increase retail business to a level comparable with the corporate division, which continues to play a key role for local businesses. The Italians have just installed a new chairman, Giuseppe Vita, 76, replacing German Dieter Rampl, who resigned after seven years. Vita believes that Unicredit is the only Italian bank that can grow on the external market, indicating Germany, Poland and Turkey as prime targets.
italy REAG relies on renewable energy
“A few years ago, many foreigners coming to Romania bought houses and land at low prices and made a huge profit on the sale, without taking into account on topics like land registry issues. Currently, the ones that want to buy a house or a piece of land use the services of a specialized consultant before finalizing the acquisition,” Fabrizio Trevisan, deputy general manager at Real Estate Advisory Group, told The Diplomat –Bucharest. In addition to property management and technical diligence, REAG also offers assessment services, and is approved assessor to various lenders, notably Raiffeisen, Citi, Marfin, Leumi and UniCredit Tiriac. ”But I think right now the most important service we offer is renewable energy services. We make topographical, cadastral and geological analyses, project analysis, business plan and connection analysis,” added Trevisan. He believes this area is promising, as many major players have entered the market. The company has a
“We have particularly concentrated on Muntenia because of the later acquisition. Now we are moving into a new phase, as we are trying to implement new ways of carrying out processes; the focus is to improve the service to our clients, which I have to say is currently very far from our targets. The most important measure of services is to what extent the average customer suffers interruptions,” Luca D’Agnese, CEO and country manager of Enel Romania, told The Diplomat – Bucharest. “Actually last year we had a significant improvement versus 2010 due to a combination of investments and new ways of organizing our activity. We had a 20 percent reduction, which is a significant effort, but from the point of view of the customer it is still too long,” said D’Agnese. According to him, the high-voltage network was the focal point in 2009 and 2010, investments wise. Last year, Enel continued investments in high-voltage lines, but the biggest share was in the medium-voltage network. “The investments in the medium-volt-
performances of clinics in Rome or Venice, nor can we compare the expectations for the clinics abroad in different countries. We offer standard services, positioned to the premium level,” Gian Antonio Favero told The Diplomat – Bucharest. According to the clinics’ representatives locally, who include Radu Colteanu, manager of the Favero clinic in Romania, the unit is expected to bring up to EUR 1 million of turnover in the first operational year. From June this year, it will be operated by seven medical doctors, specialized and trained in Italy at the Favero clinic, as well as four nurses and other administrative personnel. The decision to expand in Romania was made two years ago and came as the result of the two countries’ similarities, as they share, according to the clinics’ founder, “the same modus vivendi”.
“Business in Romania is difficult because we have no financial discipline, the time to obtain payment has increased by 50 percent,” Cristinel Mihailescu, general manager at SIAD Romania total of four employees, but is working with several consultants and had a turnover of around EUR 1 million in 2011. “REAG has always been growing, even during the crisis. The engine for growth within our company is service differentiation – evaluation services for banks and services for renewable energy,” outlines the deputy general manager. He believes that the company is more likely to develop in Romania than in other countries because there are many things to do, the workforce is highly trained, young people want to grow professionally, there is cheap labor and Romania is an EU member. “It’s the right place for development and investment activities,” said Trevisan.
Enel Romania rolls out massive investment plan
Enel acquired the Banat and Dobrogea distribution companies in 2004-2005 and later Muntenia in 2008-2009. According to the company’s CEO and country manager, the firm has made substantial investments in the network in recent years.
age network will decline in the next three years and low voltage’s share will increase, particularly as we are to implement the smart meters projects, meaning an electronic meter for any business customer, which will allow us to carry out some small repairs in the network close to the customer’s house. We will shift towards low voltage with this end-metering system in one or two years,” said D’Agnese. Enel Romania’s total investment volume is intended to reach EUR 750 million over the next five years.
Taking a bite out of the dental market
Favero clinics, the Italian-based dental services chain, launched its first clinic in Romania, in Bucharest’s City Gate building, following an investment of EUR 500,000. The launch comes after the dental services company extended in the UK, opening a new clinic. According to the chain’s founder, Favero clinics have 20 representatives in Italy. “There is no comparison to be made between the business
The investment in the clinic came from private equity and 70 percent from a loan taken out from Italo-Romena Bank. According to representatives, the company is currently discussing with the bank setting the credit maturity for seven or ten years. The Favero Clinic, specialized in implantology, was founded in 1987 by Professor Gian Antonio Favero and is currently present in three countries, with 15 clinics in Italy, one in London and one in Bucharest. Said the professor, “Implantology saved the dental services practices, as it is, among others, one of the most in demand services currently. For instance, at the Bucharest clinic, an implant, which can cost EUR 700- EUR 1,100, can be made and tailored to all medical specialties within one day, after which the patient can go on as normal.” 37
italy Adjusting to supply and demand
On the left side of the road towards Otopeni is a large courtyard with outdoor design items, Cris Garden Plaza. The building was built by Italnove, part of Italian group Edimo, which is represented locally by several industrial, warehousing and office building projects in Bucharest, Arad, Brasov, Oradea and close to the capital. According to Carlo Taddei, the owner of Edimo Group, the company has changed its business strategy in the last decade. “We started work in 1997 and until 2008 we invested in the private sector, building industrial warehouses to order. It often happened that our real estate business started from zero, with the purchase of land, and continued with the building of the warehouse and selling the finished product,” the businessman stated. “Then, four years ago something changed. Since the beginning of the economic crisis, this kind of market has stopped and we started to respond to public procurement. Now there is the EUR 10 million tender, but there are also other public tenders we intend to participate in.” According to the investor, in times of crisis like this, options are limited: he believes that the only possibility is EU funding for public procurement. To this end, the company established a branch of Taddei Spa in Bucharest, a group company specialized in the procurement and implementation of public works. The head office in Alba Iulia Square is run by business manager Paolo Pezzopane and the company focuses on the group’s ability to carry out projects where the technological component is predominant, with the assistance and expertise of the synergies of the Edimo group. Last year, the company’s largest investment was in the Republic of Moldova, with the realization of a high-tech stone grinding plant with a laboratory of over EUR 2 million. “For 2012, the most important strategic move will surely be the realization of our office building in Italy, an investment of over EUR 11 million which began this year and will end by 2013,” Taddei said. The business in Romania will resume its course again, with a EUR 10 million contract to build bridges and roads in the city of Constanta between late 2012 and H1 2013. “The crisis has hit hard and it is only now that we have resumed our business with contracts in Romania. Roads are a first step, but hopefully in the next few years a revival of the private sector may be also possible,” Taddei commented. But for further growth, the company is taking its operations beyond the EU, with investments and works in nearby non-EU nations 38 The Diplomat June 2012
neur. In 1974 he founded the first private firm in the field of industrial covering, then extended the activity to the field of large precast concrete and steel structure erection. In 1983, Taddei transformed the company which took his name, Edimo Snc (Modern Construction), which in time became a group with over 600 employees and companies that deal with all aspects of large industrial and civil projects.
The wow factor
“The crisis has hit hard and it is only now that we have resumed our business with contracts in Romania,” Carlo Taddei, Group
owner of Edimo
such as Serbia and Moldova. “Today we are starting to work in alternative markets, apparently very distant like those of Asia and Africa, with the potential to be discovered and new challenges to be faced and overcome,” Taddei said. Last year, the group achieved a turnover of EUR 150 million, and, as the group owner states, the net income was put at risk. “We fight and we are well defended. We have not recovered business-wise, but nor can we say that we could have big profits. As for our employment policies, our workforce has grown slightly to over 600 employees. In the next four to five years, however, we expect to increase staff by 50-60 percent to reach and exceed 1,000, in contrast to the Italian production system that is cutting jobs at all levels,” said Taddei. The owner of Edimo Group began his activity in 1969 working for an industrial covering company, made up of three associates at the time. After having been an employee for just 45 days, the associates invited him to join the body of shareholders. At just 16, Taddei became an entrepre-
Once the shopping compound Palas Iasi is opened at the end of this month, the location will include the first location established in Romania for the Italian brand The C House Lounge Cafe, brought to Iasi by Marian Mantu, a local businessman with several fashion and services businesses in eastern Romania. The Milan-based brand is present in 20 cities in Italy, France, Spain, Canada, the UAE, Qatar, Morocco and Cyprus. In Romania the master franchisor is Mantu’s company in Iasi, Authentic Design. Mantu told The Diplomat – Bucharest that discussions with the Italians from C House started back in December and the latest design finishings and equipment were expected to reach Palas Iasi’s coffee shop location in May. Everything in the coffee shop is manufactured in or imported from Italy. The espresso machines are produced by a company which delivers customized espresso machines, and, according to the franchise owner, “only three such espresso machines can be found in Romania at this time”. The architect and interior design specialist, Andrea Langhi, oversaw the works on the interior, which is designed to evoke Armani. The wall decorations are made from special glass and bronze, supplied by producers that work for the designer Gucci. Mantu said that he is looking for “the wow factor” for this project, which he plans to expand countrywide. “We have already two new contracts on the table and we are looking for new locations for C House in Bucharest, within a mall to be completed next year, as well as in cities such as Constanta, Sibiu and Brasov,” he said. The C House Lounge Cafè will have 70 seats and another 40 on the terrace plus a staff of 16. Palas Mall, a shopping and leisure compound, has a rentable area of 47,500 sqm and 132 shops, a 1,300-seater food court, plus cinema complex Village Cinemas with 10 halls including a Vmax. The complex also comprises the 6,600sqm Palas Shopping Street, which hosts high-awareness national and international brands. The retail anchor of the complex is Auchan. The Palas complex was inaugurated one week ago. ■
energy event
Access to the grid comes under specialists’ spotlight Connection to the energy grid, plans for the further development of the distribution network and changes to the E-RES support scheme were the main topics discussed by top managers from the largest energy and energy-related companies at the power breakfast event Access to the Grid, organized by The Diplomat – Bucharest and Transelectrica in partnership with Noerr and CEZ. By Magda Purice
P
redictability and timely access for investors to the authorities’ regulation plans for this sector, the combining of prompt responses and adjustments in the segment in a coherent national strategy, along with the significant impact of a potential reduction in green certificates on photovoltaic investments are of paramount importance to the main energy operators, investors, distributors and regulators. And these topics were duly raised and debated at the event. Also under discussion was the predictability that can reduce the risk assumed by investors in all markets, especially in the energy sector where any wrong calcu-
lation triggers high costs and could even cost business.
Petru Lificiu, vice-president, ANRE
“Within any market, the risk of a business is assumed by the entrepreneur, since there is no guaranteed business, and things function according to the market mechanisms. This simple principle applies also to the energy sector, including renewable energy.” “Regarding the predictability needed in this segment, the issue is directly linked to the market mechanism. We should address the question of whether there is enough market to support the estimated production
volume and this question should take into account the efficiency factor. For instance, other European countries, Germany especially, try to avoid over-supply in this segment, by addressing the production to the consumption and, also, to business indicators, such as efficient investments.” “Currently, we are working on regulating the status of smaller energy projects, those equal to and under 500 kW/h. I believe that there is a need to develop large energy sites but the market is also calling for smaller and more dispersed projects, which could result in useful revenue sources for consumers and regions of remote and widespread small towns.” 39
energy event
Petru Lificiu, vice-president, ANRE : The investments per MWh in photovoltaic centrals formerly reached EUR 3.5 million. Nowadays, the investment barely reaches EUR 1.5 million, in which case six certificates would result in unfair competition.
Hinrich Fischer, executive director and head of energy & environment group infrastructure finance, Erste Group: As there is no concrete date so far regarding the issuing of the new regulations reducing the number of GC, the impact on the decision to invest should be considered.
Ciprian Diaconu, manager of technical division, Transelectrica: The aspects of costs involved in the grid should be addressed. Transelectrica needs EUR 500 mln to strengthen the network and this amount doesn’t include the necessary financing for regular maintenance works.
Hinrich Fischer, executive director and head of energy & environment group infrastructure finance, Erste Group
it is fair they be backed with a support scheme. Also, we should take into account the unfair competition on pricing, compared with conventionally-produced energy. At this moment, I believe that six certificates for 1MWh produced in photovoltaic centrals is rather exaggerated, and we suggest four. I must underline that, following ANRE’s analysis of the over-compensation issue, there will not be fewer than four certificates for photovoltaic projects.”
“The investments per MWh in photovoltaic centrals were formerly estimated at EUR 3.5 million, for which sum six certificates would have been the correct support scheme. Nowadays, the investment barely reaches EUR 1.5 million, in some cases even less, EUR 1.3 million, in which case six certificates would result in unfair competition. Anyhow, the rethinking of the support scheme, even if the change comes in 2013 or 2014, will not affect the current investment in such projects.”
“As we are in talks with several investors in renewable energy, especially wind energy, interested in getting financed and developing projects in Romania, we agree with the urgent need for a steady regulatory framework regarding the green energy segment in Romania. As there is no concrete date so far regarding the issuing of the new regulations reducing the number of certificates, the impact on the decision to invest should be considered.”
Ciprian Diaconu, manager of technical division, Transelectrica
The over‑compensation issue
Issues surrounding the reduction of green certificates are being reconsidered, from the point of view of fair competition practices of conventional energy and renewable projects. However, the Romanian Energy Regulatory Authority (ANRE) backs the four-green certificate support scheme for photovoltaic projects, especially as the investment per MWh in this segment has decreased lately from a formerly estimated EUR 3.5 million per MWh to at most EUR 1.5 million, specialists say.
Petru Lificiu, vice-president, ANRE
“It is obvious that, due to expensive technologies, renewable projects, including photovoltaic, involve high costs, and 40 The Diplomat June 2012
Gherghina Vladescu, head of the certificate trading office, OPCOM: In the latest trading sessions, green certificates are no longer being traded at their maximum price. This trend started in March this year, when a large supply of green certificates was issued.
“In energy, any mistake can cost a business. If we are looking at the numbers, we are currently far from the consumption peak registered in 2009. Today, 1,541 MWh is the total installed capacity of wind energy locally, while photovoltaic projects make up a little more than 1 MWh.” “The difference between the two amounts speaks for itself. Transelectrica and the distribution operators have signed contracts for connection to the transport network equal to 20,000 MWh. Besides this, there are also connection notifications and demands for another 15,000 MWh.” “The national energy transportation network can sustain these capacities but the amounts and the projects should address the market principle of supply and demand. Who is going to consume this energy?”
energy event
Laura Neacsu, senior associate energy specialist, Noerr: Regarding over-compensation, the most impacted by the decision to reduce the number of green certificates will be investors in photovoltaic projects, as they will be the unlucky winners of fewer certificates.
Adrian Borotea, corporate affairs manager, CEZ: There is the issue of individual notification of the EC for projects larger than 125MWh, as there is a practice of “hiding” the amount by splitting it into smaller projects. A definition of a wind farm seems to be a necessity.
Carmen Neagu, region executive, GE Energy for South East Europe: Unfortunately, the idea of a national strategy has been replaced by tactics. It is vital to develop and adhere to a national strategy drafted for the long term in order to establish the predictability that everybody relates to.
“Within the current market conditions in Romania, we are comparable to a European country with a 10 million population in terms of production, while the consumption potential is equal to a country with only 5 million inhabitants.” “Within this context, the aspects regarding the costs involved in the power distribution network should be addressed. For instance, Transelectrica needs EUR 500 million in order to strengthen the distribution network and this amount doesn’t include the necessary financing for regular maintenance works. So far, we have invested EUR 100 million in reinforcement works on the distribution lines.”
certificates.” “In my opinion, most investors would welcome a buffer period and, most of all, they would appreciate knowing in advance about the regulations and future likely plans for their sector.”
ate effect. There is also the issue of individual notification of the EC for projects exceeding 125MWh, as there is a practice of “hiding” the amount by splitting it into several smaller projects. Therefore, a regulated definition of a wind farm seems to be a necessity.”
Laura Neacsu, senior associate energy specialist, Noerr
“The logical pattern of any functional system, as the energy system is, starts with investments, legislative framework and financing, before further talks on grid connection or technical details. That is why, based on the feedback of our clients, we consider the predictability of regulations and market updates in this segment, directly linked to financing, to be of utmost importance for keeping investors in the market and triggering new investments.” “Regarding over-compensation, a subject on the ANRE’s agenda, the most impacted by the decision to reduce the number of green certificates will be investors in photovoltaic projects, as they will be the unlucky winners of fewer 42 The Diplomat June 2012
Producing too much electricity?
The over-compensation situation would be avoided if the monitoring reports regarding renewable energy investors and their green certificates target could be done by trimester, and not yearly as now. Currently, Romania has a very generous support scheme for green energies but issues regarding over-supply in the segment should be considered.
Adrian Borotea, corporate affairs manager, CEZ
“The key word in the energy system is balance. We have a very good support scheme in Romania, while, in other European countries, the trend is to diminish this support scheme.” “I consider the estimated power production included in the national energy strategy, of 23,000 GWh per year, utopia; 10,000 is a more realistic amount. Even in the event of over-supply, the authorities should develop a mechanism regarding transfer pricing policies if local production is exported. The EC advises that, in the event of over-compensation, the support scheme be changed with immedi-
Carmen Neagu, region executive, GE Energy for South East Europe
“We are in a system that functions in difficult conditions. Unfortunately, the idea of a national strategy has been replaced by tactics. It is vital to develop and adhere to a national strategy drafted for the medium and long term in order to establish the predictability that everybody relates to. We also need complex studies to determine to what extent the complementarity of renewable energy can be effected within one system, and how these resources can be integrated.”
Gherghina Vladescu, head of the certificate trading office, OPCOM
“In the latest trading sessions, green certificates are no longer being traded at their maximum price. This trend started in March this year, when a large supply of green certificates was issued. Hence, the price of a green certificate decreased from RON 248.3 to 247.5 then 246.3, at the latest trading session. Currently, 90 renewable energy producers have registered on the centralized trading market for green certificates.” ■
energy event
44 The Diplomat June 2012
business leader
Anghel urges investors to look to capital markets during lean times On a market where FDI, remittances and the absorption of EU funds seem to have hit the buffers, Romania needs to find alternatives to international loans to finance the economy. Lucian Anghel, chief economist and head of strategy and macro & market research at BCR, who is also chairman of the Bucharest Stock Exchange (BSE) board, told The Diplomat – Bucharest why the stock exchange is one of the solutions and what are the key elements for successful listings. By Dana Verdes
I
n a period when the European Union is like a game of dominoes – waiting for the last piece to drop – Romania is walking over hot coals to access alternative financing. Aside from the multi-billion euro loan from international financial institutions, the country is still struggling to identify and put into action some alternatives. For many years there has been talk of privatizing some of the biggest energy companies on the market. Many politicians came into office and as many strategies were proposed but none stuck. Starting last year, some concrete steps were made and the Romanian authorities have even set a calendar for the initial and secondary public offerings on the Bucharest Stock Exchange (BSE) for the main stateowned energy companies on the market. The plan is to privatize the companies by selling minority stakes.
Who is Lucian Anghel? He received a PhD from the Academy of Economic Studies in Bucharest in 2002. Having spent over 15 years at Banca Comerciala Romana, Anghel is currently chief economist, head of strategy and the research division, coordinating the strategic programs of BCR Group. For almost two years before this appointment, he held the position of deputy executive manager of the bank’s treasury division. He was a member of the supervisory board of Erste Asset Management and BCR Asset Management for more than five years. In January this year, Anghel was elected chairman of the BSE board.
46 The Diplomat June 2012
Lucian Anghel, chief economist and head of strategy and macro & market research at BCR, also chairman of the BSE board, tells The Diplomat – Bucharest that Romania urgently needs to find alternatives to finance the economy.
Why the BSE?
“Generally, economic growth needs solid investments and in this new phase through which Romania will be passing – for the next 10 years – we need to find those financing sources which will allow us to grow,” urged Anghel. According to him, the importance of the stock exchange must be put into context in order to understand the need to make the BSE a financing source to support the local economy. “Let’s not forget that loans aren’t what they used to be during 2007 or 2008, the boom phase. Also, it should be taken into account that the European banking authority has imposed several restrictions which require a more consistent solvability rate and stricter selection criteria from European banks when approving loans. This is of great importance as more than 80 percent of the bank’s capital is controlled by foreign banks, mostly European,” said Anghel. In addition, added the BSE chairman, in the coming period Romania will start reimbursing the loans it took from the International Monetary Fund, World Bank and European Commission, while foreign direct investments have fallen to EUR 2 billion, down from EUR 9.5 billion in 2008. “The
business leader remittances of Romanians working abroad have also fallen from EUR 7.8 billion in 2008 to EUR 3.8 billion this year,” Anghel estimates. “And European funds – the cheapest financing solution – aren’t easy to get. The top performer in terms of EU funds is a Baltic country with an absorption rate of some 40 percent. Romania has grown from EUR 1.1 billion net in 2010 to EUR 1.3 billion net last year, while its payments to the EU reached EUR 1.3 billion net last year. It is good that we can talk about an increase, but we are still at a low absorption level,” said Anghel. This is why he considers the stock exchange a solution as Romania deals with its constrained economy.
Confidence is key
In the chairman’s opinion the main focus of the BSE must be to restore investors’ confidence. “The new board was elected in January and we have set a very ambitious goal: to become a regional hub on the long run and a financing engine. For this one needs confidence from investors, which could come from successful listing stories. We have had the Transelectrica SPO – which in my opinion was a success and raised
some EUR 50 million – but we need more examples like this to give entrepreneurs the confidence that they can come to list a part of their business successfully on the BSE. We are running late as, let’s remember, Poland started 20 years ago, and with its first IPO in 1991 it raised EUR 60 million,” said Anghel. One good example of how to use the stock exchange for further development, suggests the economist, is CEZ. At the time of listing the Czech state held 100 percent of the company, while currently its stake is 70 percent, but of a company 10 times more valuable. “This case invites a question: what is better – to hold 100 percent of a small company or 70 percent of a company 10 times more valuable, which can generate dividends and has a high performing management? From this point of view, the state could only benefit by selling these minority stakes on the stock exchange, as it would support the further development of the company,” argued Anghel. “Let’s recall that a while ago Hidroelectrica was selling a small hydro power plant just to support its day-to-day activity. What
do we need to follow the example of Poland or the Czech Republic?” As for the listings calendar, there is no news, says Anghel, as Trangaz was next on the listings list, but action has been likely postponed. For a success story on the BSE there are at least two mandatory ingredients. One, Anghel says, is for the listed company to have a professional management which has set some realistic targets to increase the company’s value. The other is investments. The state has shown over time that it has no capacity to invest and to push a company to its full potential, even to become a world player. The BSE chairman predicts that the action plan established at the beginning of the year will not change, despite the recent change of government and the upcoming elections. “No matter the government we will realize that we need alternative ways to finance the economy and this is why I believe the public offerings will continue, as they are included in the agreement signed with the international financial institutions,” concluded Anghel. ■
47
events
ROYAL DECORATIONS: In the presence of His Majesty and Their Royal Highnesses Crown Princess and Prince Radu, the Kings Hall of Elisabeta Palace hosted a ceremony awarding the King Michael I Medal For Loyalty to Theodor Paleologu, Puiu Hasotti and Catalin Ionescu Arbore. The same occasion saw the Cross of the Royal House of Romania presented to Stefan Caltia, Jiri Sitler and Estanislao de Grandes Pascual and the Royal Decoration Nihil Sine Deo bestowed upon Cristian Hera and Calin Popescu Tariceanu. The ceremony was followed by a reception in the large dining room. GAME MANIA: Electro-IT retail chain Flanco
hosted the launch of the game Diablo 3, which had been eagerly awaited by tens of millions of gamers worldwide. Fans were present on the night of May 15 at the AFI Cotroceni Flanco store, which stayed open until 2 am, to get their hands on the year’s top title as quickly as possible, participate in a raffle with Diablo 3 prizes and test the game.
AMBASSADORIAL ARRIVAL: Traian Basescu received at Cotroceni
Palace the Ambassador of the Netherlands in Romania, Hendrik Johannes Mattheus van Bonzel, for the presentation of his credentials. The head of state congratulated van Bonzel on his appointment as Ambassador to Romania. The Romanian president emphasized the countries’ excellent bilateral economic cooperation, which sees the Netherlands the top investor in companies with foreign capital.
DIPLOMATIC MEETING: Foreign minister Andrei Marga received a visit from HRH Prince Khalid bin Saud bin Khalid Al Saud, deputy foreign minister of Saudi Arabia. Marga underlined the need to strengthen bilateral political and diplomatic contacts between the countries, expressing the desire have as a guest in Bucharest the HRH Prince Saud Al Faisal, the Saudi foreign minister.
GYM WIN: PM Victor Ponta invited the national women’s gymnastics team to
Victoria Palace, in order to congratulate them on their results at the European Championships in Belgium. Ponta announced that the government has doubled the bonuses awarded to the gymnasts. The Romanian women’s team returned from Brussels with four gold medals, from a possible total of five, and two silvers.
48 The Diplomat June 2012
events
LUXURY STORE: Le Manoir opened the sixth Comtesse du Barry store in Romania, in an exclusive location in the Primaverii neighborhood in Bucharest. The shop was opened by Cristi Preotu, associate director of Le Manoir, with the participation of H.E. Philippe Gustin, French ambassador in Bucharest, and Mr. Mario Cospito, Italian Ambassador to Bucharest.
REAL MERIT: The seventh annual Europa Property SEE Real Estate Awards highlighted some of the field’s highest achieving companies, projects and professionals in 2011. The awards gala, held on May 17 at the five-star Athenee Palace Hilton Hotel in Bucharest, brought together the cream of the property industry’s firms and professionals operating in the SEE region.
IT WORKSHOP: Brinel, a Romanian-capitalized company that offers solutions to improve companies’ management, organized the event Business Processes in Sales and Marketing. The two-day workshop was the first devoted to time management and business processes for sales and marketing.
JOBS FOR STUDENTS: PwC Romania, though its integrated
services team for entrepreneurs (Private Company Services) and the training school The Academy at PwC offered as a prize four internal positions for graduates of the departments of Banking and Finance Accounting and Management Information Systems at the Faculty of Economics and Business Administration (FEAA) of the Western University of Timisoara, class of 2010/2011. Candidates were selected in partnership with teachers from among the students with the best academic results.
WEIGHTY ISSUE: On the occasion of European Obesity Day, private
health network Regina Maria organized the event I Want an Easier Life!, during which attendees were provided with accurate and practical advice on: psychological factors in obesity, sleep apnea syndrome, a disease closely linked to obesity, and its treatment, diet, exercise and the role of bariatric surgery, a solution for severe cases of obesity.
GOLF TOURNAMENT: Intesa Sanpaolo Bank organized the third edition of the Intesa Sanpaolo Bank Golf Tournament. The company put up many prizes, the winners of which included Corstian Vasilescu, Laurentiu Jiga, Florin Nistoroiu, Vlad Lazar, Marinela and Ciprian Zavloschi. 49
city life Iconic crooner Julio Iglesias to charm Bucharest crowd
Julio Iglesias is coming to Bucharest on his 2012 World Tour, which could be the veteran performer’s last. Fans will be treated to a grand spectacle at Zone Arena from 8 pm on June 30. In a career of over 40 years, Iglesias has managed to sell over 300 million records worldwide, sung in over 14 languages. According to Sony Music Entertainment data, the Spaniard is among the 15 best-selling artists in history. Some of his many albums have gone platinum and gold, and he has notched up various awards and accolades. In 1988 Iglesias received a Grammy for Best Performance by a Latin Pop Artist for the album A Hombre Solo, while in 1992 he was given the title Universal Spaniard in Florida. The singer was also Jacobeo 93 Cultural Ambassador in January 2008, after the tournament in South Africa, while Sony BMG presented him with a platinum disc for sales of over one million copies of the album Romantic Classics. Iglesias’s local show is expected to include hits such as Baila Morena, Guantanamera and La Carretara. Tickets prices are between RON 100 and RON 900.■
Children prepare for P*ET’s World, the first kids’ festival in Romania P*ET’s World – KidsFest, the first festival for children held in Romania, will take place on the weekend of June 16 and 17, in Unirii Square Park. The event promises participants two days of stories, plus games, contests, live music and lots of other surprises prepared by the host of the event, P*ET, alien friend of children everywhere. P*ET’s World – KidsFest, sponsored by Betty Ice, is being organized by Emagic, in partnership with the troupe Zurli. The event will be preceded by one of the largest recycling programs involving children.
Rockers Iris celebrate 35 years with anniversary concert
The IRIS 35 anniversary concert will take place at the National Arena, on June 22. The anniversary of the iconic local rock band will be marked by a new album, which the group members – Cristi Minculescu (voice), Valter Popa (guitar), Doru Borobeica (bass), Nelu Dumitrescu (drums) and Relu Marin (keyboards) – say will include 14 tracks, half of which will be new compositions. Iris are the most popular Romanian rock
DJs to spin decks at palatial compound On 22 and 23 June, Europe’s top DJs will come together in the noble environs of Domain Stirbey for SonoChrom Festival, a mix of the best ideas and top trends inspired by the hottest festivals: Love Family Park (in the Netherlands), the Monegros festival (Spain) and Tomorrowland (Belgium). For 48 hours, the music will be accompanied by fun activities such as magic, acrobatics, body painting, pillow fights, a fire show, laser robot, soccer corner, Falun Dafa center, de’ll arts stall, Day Dream Area, Wheel Of Fortune, Wishing Tree, Action Area, Create Your Own Mix Music, Crowd Surfing, Picnic Area, games and contests. On the decks will be some of the most creative DJs and performers of the moment, such as Monika Kruse, Tiefscwarz and Tube & Berger. ■ 50 The Diplomat June 2012
Put into practice in partnership with Romprest in different schools in Bucharest, the program aims to encourage the recycling of plastic packaging and inculcate environmentally friendly behavior from the earliest ages. Besides the numerous games and contests that will take place during the festival, P*ET has prepared a ball for princesses and a carnival for costume lovers as well as various theater performances staged by Zurli. The festival will wrap up with live concerts by some of the most famous Romanian artists of the moment.■
group, and have built up a loyal fan base over their three and half decades of performing. Their hits include: Sail, Who Called Me in the Night, Train without Nose, On Water, Your Street, Sleep Bizarre, Baby, Mirage, If You Go, Do not Believe Anything, and Iris Maxima. To date, the group has released 16 albums, 3 maxi-singles and a DVD/VHS. The rockers have performed to over 9 million people in more than 5,500 concerts.■
presents
Romanian Forum 2012 July 17, 2012, Bucharest, Romania
Gold Partners
Investment in agriculture is an emerging asset class for private and institutional investors, and Romania is one of the European countries with the highest potential for development of this field. The Diplomat – Bucharest, the leading English-language magazine in Romania, is organizing in July, 2012 the second annual conference for decision-making agricultural professionals to network, do business and learn about Romania’s agribusiness potential. This will be a major event providing business opportunities in Romanian agriculture, where the key players in this sector will debate the challenges and opportunities of investing in this dynamic sector.
Event Agenda
8:30 - 9:00 Registration and welcome coffee 9:00 - 10:30 First session - Romania’s agricultural policies Topics: EU policies and their effects on Romania Aligning Romanian agricultural state grants with European ones 10:30 - 10:45 Coffee break
10:45 - 12:00 Second session - Sustainable agriculture Topics: Developing sustainable agricuture for a planet of 7 billion How is agriculture seen by the private companies active in the sector? How can they support good practices in the sector? Improving agricultural productivity in Romania: irrigation system, silos etc. 12:00 Networking lunch
To find out more or to participate, contact us at: 004 021 210 1336 or sales@thediplomat.ro www.thediplomat.ro