The Diplomat no 7 by The Diplomat-Bucharest

Vol. 8, No. 7, September 2012

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Beaming market Investors and developers bask in the opportunities of the solar power market

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Photovoltaic investment Forum 2012 october 4 , 2012 Bucharest, crowne Plaza hotel together with

As the PV energy sector in Romania has one of the strongest growth potential in Europe, with many traditional PV markets cutting financial incentives to levels that will make investments in solar hardly profitable. Romania is now seen by many analysts as the next target for starting PV projects, with the approved amendments to the Emergency Ordinance no. 88/2011 that modified Law no. 220/2008. Join top executives from solar companies, analysts and investors, looking into entering the solar business. in a one day event in which the leading companies in the sector will meet with energy market regulating authorities. event agenda

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9.00 - 9.30 - Participants registration and welcome coffee

iulian iancu, President of the Energy comission in the Romanian Parliament marius ion mateescu, General manager CN Transelectrica rodin traicu, State secretary Ministry of Economy, TBC silvia vlasceanu, General Director, Energy Utilities Association Zoltan nagy, general director ANRE aleXandru sandulescu, General Director, Ministry of Economy, TBC niculae havrilet, President of the Romanian Energy Regulator ANRE ciPrian glodeanu, Partner Wolf Theiss

9.30 - 11.00 - First session - grid connection and legislation issues Evaluating Romaniaâ&#x20AC;&#x2122;s grid capacity, requirements and constraints Transelectricaâ&#x20AC;&#x2122;s plans for grid expansion and interconnection Plans for balancing power Energy trading in the light of the new energy law 11:00 - 11:15 - coffee Break 11.15 - 12.30 - second session - Financing Pv in romania How to make your solar project bankable. Criteria to get access to financing. What is the expected return of investment for a solar park in Romania? Grants provided in Romania for the RES-E Sector Financing conditions imposed by a bank. 12:30 - 13.30 - networking lunch 13.30 - 15.00 - third session - technology providers for the Pv sector What is the technology and equipment cost for developing a solar project New technologies and solutions to increase the efficiency of a PV farm 15.00 - 16.30 - Fourth session - case studies of sucessfuly implemented Pv projects in romania Challenges and specificities of developing a PV project - case scenarios Comparative study - construction of a PV project in Romania vs. Europe

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Vol. 8, no. 7, September 2012

President Traian Basescu returned to the Cotroceni Palace after 52 days of suspension from office. The Parliament recognized on August 27 the decision of the Constitutional Court to invalidate the referendum as the minimum 50 percent turnout threshold had not been reached

Rising sun PV projects are the new engine for the energy sector

Healthy market Private medical system thrives despite economic crisis

Hot pursuit Chinese investment in Europe doubles

5. International anxiety

10. Free falling

6. Closer to home

11. Breaking new ground

7. HIGH AND DRY

34. Field day

8. Red card

50. Future plans

Ambassadors express concern over recent Romanian political issues Retailers look into proximity shopping for expansion Small governmental aid for farmers affected by the drought Football sponsorships draw trouble to the National Company of Lignite Oltenia

Lowest value of the last six years for real estate investments in Romania Cernavoda - Medgidia highway segment opened

Debating agricultural issues at The Diplomatâ&#x20AC;&#x2122;s Agribusiness event Greg Konieczny, fund manager, reveals the Property Fundâ&#x20AC;&#x2122;s ambitions

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politics Ambassadors voice worries for Romania’s democracy

Fears expressed by the international community regarding the recent political developments in Romania have been echoed by ambassadors appointed to Bucharest. The US Ambassador to Romania, Mark Gitenstein, issued a statement expressing concern that the referendum on removing President Basescu from office be consistent with the Constitution, otherwise it would “knowingly provoke a very dangerous constitutional crisis”. “If it becomes apparent that Parliament is unwilling or unable to convene and act immediately, then the Government should take executive action to ensure that the organization and conduct of the referendum are fully consistent with the most recent Constitutional Court ruling on the referendum,” he added. The UK Ambassador to Romania, Martin Harris, also stated, “Parliament needs to put its own house in order. It is extraordinary that convicted felons can still sit as MPs. The Commission is right to highlight the performance of Romania’s Anti-Corruption Prosecutors, the DNA, as ‘one of the most significant advances made in Romania since accession’.”

Center-right alliance takes shape

A f t e r long negot iat ion s, Romania’s new center-right alliance has been created with the Democratic Liberal Party, Christian-Democratic National Peasants’ Party, the New Republic Party, the Right of Center Civic Initiative and t he Ch r ist ia n-De moc r at ic Foundation as members. The center-right alliance will later announce its formal name, program and the team of political leaders who will try to lead it to victory at the next elections.

The Diplomat September 2012

EC calls on Government to respect judicial independence The European Commission has made a list of requests from the Romanian Government in order to ensure its compliance with the independence of justice. The concerns expressed by the EC were drafted in a letter of demands to respect the rule of law, judicial independence and European trust. Among the EC’s requests were that no new head be named at the National Anti-Corruption Department and no new prosecutor-general be named during the interim presidency of Crin Antonescu, no pardon be issued during the interim presidency, appointed ministers must not have criminal records, the People’s Lawyer has to have the support of all

political parties and the powers of the Constitutional Court must all be restored and a recent ordinance limiting these powers must be withdrawn. ■

Viviane Reding, vice‑president of the EC

President returns after second impeachment bid fails The second suspension of President Traian Basescu ended formally on August 27, when the Romanian Parliament accepted the Constitutional Court’s decision to invalidate the July 29 referendum to dismiss the head of state. Tension between Prime Minister Victor Ponta and his USL coalition and President Basescu escalated in June, when Parliament chose Ponta to represent Romania at the EU summit. The dispute had been sent to the Constitutional Court, which ruled that the head of state should attend the European Council. In defiance of the Court’s opinion, Ponta left for Brussels, to criticism from international institutions. One month later, the ruling coalition formed by the PSD, PNL and PC dismissed the heads of the two chambers of Parliament and the People’s Lawyer, while adopting an

emergency ordinance curtailing the powers of the Constitutional Court. On July 6, Parliament voted for the suspension of the President and Crin Antonescu was named interim President. The referendum to dismiss Basescu took place on July 29, but the Constitutional Court declared it invalid as the necessary turnout threshold had not been met. Pressure on the Constitutional Court continued after the decision, with the USL calling for a recount to demonstrate that the minimum level of voters, 50 percent, had in fact been met, rendering the referendum valid. But by a margin of six judges to three, the Constitutional Court finally ruled the referendum invalid as the turnout had fallen below the requirement. The first attempt to impeach Basescu was in 2007. ■

UDMR will not sign pre-election alliances The vice-president of the Democratic Alliance of Hungarians in Romania (UDMR), Laszlo Borbely, has told a press conference that his party will not sign any pre-election alliances, but will have dialog with every party. The UDMR is an organization that represents a minority, not only a political party, and it is important to have the support of its electors, in the context of very difficult elections to come, added Borbely. ■

economics FDI down 28.9 % in Q1, investments up 20 %

Foreign direct investment (FDI) fell 28.9 percent in the first quarter, to EUR 621 million, according to data provided by the National Bank of Romania. Investments in the economy rose 20 percent in Q1 compared to the same period of last year, to RON 28.89 billion. Sectors which saw a higher volume of investments include industry and commerce, and services.

Tax laggards TVR, CFR Marfa and CFR to get seven years for repayments

The Government has approved a Ministry of Finance proposal that taxpayers who owe more than RON 300 million in back tax be allowed to pay it off over seven years. According to data provided by the Romanian Fiscal Authority (ANAF), three contributors fall into this category: the Romanian Television Service TVR, the national railway company CFR Marfa and National Railway Company CFR SA.

Electricity and gas prices rise

Electricity prices increased by 2.3 percent from September 1 for nonresidential consumers, following the deregulation of 15 percent of the electricity market. Meanwhile gas prices rose 5 percent for households and 10 percent for industrial consumers on September 15, said the president of the National Energy Regulatory Authority, Niculae Havrilet. At the end of the last mission of the International Monetary Fund in Romania, the head of delegation, Erik de Vrijer, said that the Romanian Government had agreed gas prices had to rise by 5 percent for households and 10 percent for industrial consumers by mid-September.

The Diplomat September 2012

Public deficit reduced to 1.15 percent of GDP in first seven months Romania’s budget deficit stood at RON 6.97 billion, or 1.15 percent of GDP, after the first seven months of 2012, down from 1.96 percent of GDP in the same period of 2011. Compared with the first seven months of

2011, the budget deficit fell USD 4.3 billion. In its agreement with the IMF, the Romanian Government committed to reduce the budget deficit this year to 2.2 percent of GDP from 4.3 percent in 2011. ■

Letter to IMF sets out privatization schedule A draft letter of intent sent to the IMF sets out the calendar of privatizations for the coming period. The Government’s efforts to accelerate reforms in state-owned companies, especially by selling significant packages in Transgaz, Romgaz, Hidroelectrica and Nuclearelectrica, have not yet borne results. Exceptions are the measures taken at Hidroelectrica, reads the document obtained by HotNews. The timing of the secondary public offering for the sale of a 15 percent package in Transgaz has already been delayed due to technical problems, and the offer will now be launched in October. The sale of stakes in Romgaz and Hidroelectrica will also be postponed. The transaction advisor for Romgaz recommended an assessment of company-owned resources before launching the IPO. For Hidroelectrica a public offer for the sale of a 10 percent stake will be launched, but this process will take place after the company comes out of insolvency. The sale of shares in Nuclearelectrica has also been postponed for at least three months from the initial deadline of yearend. Oltchim will be privatized in September, while the sale of a 20 percent stake in

Tarom and of the majority stake in CFR Marfa will remain a priority for the Ministry of Transport for this year. Early next year, the Government will prepare the sale of the majority share package in the three distribution companies of Electrica and will launch public offerings by mid-2013. ■

Mega Image bets on proximity shop expansion Belgian retailer Mega Image is looking to hire another 700 people this year and open around 40 more shops under the brands Mega Image and Shop&Go. The firm, which is part of Delhaize Group and has an existing network of 150 shops, currently has the most aggressive expansion strategy in Romania, indicative of its belief that the local market still has room for retail development. The company entered Romania in

2008, with the acquisition of the La Fourmi supermarkets. Mega Image went onto acquire the G’Market, Prodas and Primavera supermarket networks, and had a turnover of around EUR 288 million in 2011. Other retailers seeking to cover the proximity shop niche include Carrefour, with the Carrefour Market brand, and Metro with the “La doi Pasi” franchise, which has an existing network of 200 shops. ■

economics

Government compensates farmers for drought damage with just RON 100 per hectare The Government will compensate small farmers for the losses they suffered due to this summer’s drought at a rate of just RON 100 per hectare. The “minimis aid scheme” is aimed at farmers who cultivate between 1 and 10 hectares of land. The Ministry

of Agriculture and Rural Development estimates that about 600,000 farmers will receive the financial assistance for a total of about 1.9 million hectares. According to the minister, Daniel Constantin, total support is estimated at EUR 42.8 million. ■

Economic crisis destroys over 400,000 jobs and 100,000 firms Over 400,000 local jobs and 100,000 companies have fallen victim to the financial crisis, taking the Romanian unemployment rate to 7.4 percent, the highest proportion over the

last eight years. Youth unemployment reached a historic high of 23.7 percent. The data was made public through a study conducted by the National Union Bloc (BNS). ■

Mandatory private pension fund profits increase 2.5 fold in H1

The net profit of the mandatory private pension funds (Pillar II) totaled RON 335.81 million for the first half of the year, almost 2.5 times higher than the level recorded in the same period of 2011, according to data released by administrators. The mandatory private pension fund of ING Pensii posted the highest net profit of RON 111.45 million, up 130.6 percent compared to June 2011. Next came the Allianz-Tiriac Pensions Fund on RON 83.6 million, from RON 34.01 million 12 months ago. At the end of July, the nine funds present on Pillar II managed net assets of RON 8.21 billion, up 3.66 percent compared to June 30. The mandatory private pension funds had 5.67 million contributors, compared to 5.52 million in December 2011.

energy Romania gets EC approval for greenhouse gas allowances

Hidroelectrica wants 74 percent increase in regulated energy prices

The European Commission (EC) has approved Romania’s request for the further allocation of allowances for greenhouse gases, free of charge for electricity producers over 2013-2019, according to the Ministry of Economy, Trade and Business Environment (MECMA). The free CO2 emissions certificates were given to power plants in Romania, Bulgaria and the Czech Republic after the CE approved the requests of Cyprus, Estonia and Lithuania in May. In total, some 71.4 million allowances will be allocated.

SNLO management blasted for losses

The National Company of Lignite Oltenia (SNLO) made “improper” payments, spending RON 8.8 million on the sponsorship of football teams over 2009-2011, causing “significant” losses to the state budget and the mining company’s own coffers, say governmental sources. The auditing irregularities consisted of sponsoring football teams Pandurii Targu Jiu and Minerul Motru with RON 8.8 million in 2011, despite the SNLO not having authorized the expenditure. Meanwhile, the mining company’s operating expenses grew by about RON 700,000, money which went on the repairs and modernization of the buildings owned by the subunits.

Petrom sells subsidiary Petrom LPG Gas to Crimbo Gas International

Petrom, the largest oil and gas producer in South-East Europe, has sold its 99.99 percent stake in subsidiary Petrom LPG to Crimbo Gas International. The decision by Petrom’s supervisory board is in line with Petrom and OMV Group’s strategy to optimize the refining and marketing (R&M) portfolio to improve efficiency, thus contributing to the sustainable performance necessary for the increase. The parties have agreed to keep the transaction value confidential. The completion of the transaction is subject to the approval of the Competition Council. Currently, Petrom LPG has about 260 employees.

The Diplomat September 2012

Hidroelectrica has asked the energy industry regulator ANRE to approve an increase of 74 percent in the sale prices of energy through regulated contracts from RON 72 to at least RON 125 per MWh, equivalent to the cost of production. The company sells power both on the regulated market and competitively, through bilateral contracts. Prices on the regulated market (households and small corporate consumers) are estab-

lished by the ANRE. In comparison, the company sells energy to the “smart guys” at an average price of RON 130 per MWh, slightly above the cost of production. Electricity prices for all consumers increased on 1 July, by an average of 5 percent, to reflect the increased costs of production, transport and distribution along with the inflation rate and to respect the country’s commitments to the IMF.■

Financing remains big challenge in local PV projects, say players Players in the photovoltaic industry say that getting projects financed remains one of the biggest hurdles in their field. “Romania has an enormous potential in photovoltaic energy, and the investors were the first to understand this. We’ve noticed that an increasing number of investors with projects already launched preferred to finance their investments from their own sources.” This was one of the statements made by Ciprian Glodeanu, president of the Romanian Photovoltaic Industry Association (RPIA) during the conference Financing PV in Romania, organized by the association. During the event the limited access to financing was extensively debated. Investors present were able to feel the pulse of financing in the photovoltaic field directly from the top representatives of the most active banking and leasing institutions in Romania. Gabriel Mihai, head of corporate for UniCredit Leasing, said financing institutions examine the bankability of a project starting from the three important stages of any PV

project, namely development, construction and operation stage. These are all important for the financial institution and the result of the examination must indicate the project’s ability to generate cash flow. He added that during the development stage, “the situation of the approvals, and the manner in which these are obtained, of the ready-to-build stage of the project, as well as the realistic value of the investment value” are important. Romulus Andrei, head of the structured finance department at Volksbank Romania, added that the approvals, “must be similar for projects which resemble each other from the point of view of the execution conditions.” Bankers also say that special attention is given to the investor’s relevant experience on similar projects. Such experience comforts the financer because the investor will know how to turn the energy produced and the green certificates obtained into cash flow. A project with an efficient operational solution has a better chance of receiving financing. ■

law

A Hot Summer for the Photovoltaic Industry T

his summer brought some long awaited clarifications about the timeframe of the first overcompensation analysis to be performed by the National Regulatory Authority in the Energy Field (ANRE). For the solar industry, this is expected to reduce the number of green certificates from 6 to (expectedly) 4 according to some authorities’ representatives, starting January 1, 2014. For power generated from other renewable energy sources the first overcompensation analysis will be applied one year later (January 1, 2015). These timeframes were set by the Law 134 as of July 18, 2012, which entered into force on July 26, 2012 and approved the Government Emergency Ordinance No. 88/2011 which, in turn, modified and supplemented the Law 220/2008 on the subsidy system for electricity produced from renewable energy sources (E-RES) and gave the investors (especially those in the photovoltaic industry) a breath of fresh air. At the same time, the Law no. 123 as of July 10, 2012 for electric energy and natural gas (the New Energy Act) that came into force on July 19, 2012 and transposed in the national legislation the relevant EU directives in this field, seems to have banned the conclusion of power purchase agreements (PPAs) as the E-RES industry has known them under the old regulation. ANRE has to approve the power supply regulation within 60 days as of the New Energy Act’s entry into force. Furthermore, within 6 months as of the entry into force of the New Energy Act, ANRE must adjust the entire regulatory framework in the electricity sector. For the natural gas sector the respective deadline is 9 months. From now on, according to Art. 23 in connection with Art. 28 lett. c) and Art. 3 of Title I of the New Energy Act, all electricity transactions are to take place exclusively on the competitive market (Rom. piaţa concurenţială) managed by the Romanian Power Market Operator (OPCOM), in a transparent, public, centralized and non discriminating manner. The sale prices will be based on supply

and demand, according to competitive market mechanisms and ANRE’s regulations. The reading of the New Energy Act implies that the generated electricity can still be traded based on bilateral agreements, yet only on the so-called centralized market of bilateral agreements, also transparently and auction-based. ANRE together with the OPCOM must draft and approve the secondary legislation needed to this end within the aforementioned timeframe of 6 months as of the entry into force of the New Energy Act. All power producers – including the producers of E-RES, as the New Energy Act does not differentiate – must offer the entire electricity available on the competitive market in a public and nondiscriminating manner. It is thus clear that with the entering into force of the New Energy Act, PPAs can no longer be concluded outside the OPCOM-operated centralized market. Even if the said obligation is incumbent upon all electricity producers as of July 19, 2012 (since the legal provisions of the New Energy Act are imperative and immediately enforceable), because there is no trading platform for such bilateral agreements (especially for the electricity producers not yet holding an electricity production licence and thus unable

to register on the OPCOM-operated centralized market), their implementation will have to await for the secondary legislation to come in place. The New Energy Act does not take into consideration the impact of the new regulations upon the private sector and especially on the producers of E-RES, who are thus left without a crucial pillar for the bankability assessment of their projects: the PPAs. In order to compensate this, the competent authorities envisage the creation of a special trading platform on which even future producers – those not yet holding a production licence – might be able to conclude bilateral agreements with respect to the power to be generated in their E-RES facilities. Thus, on the one hand, the Romanian legislator gave new hope to the investors in this field by encouraging them to invest in the photovoltaic sector – investments in solar parks that start injecting power into the grid until December 2013 will still benefit for the entire duration of the subsidy scheme (maximum 15 years) of 6 green certificates per each MWh of electricity produced. But on the other hand, this made it difficult for the investors to get their projects financed, since PPAs can no longer be concluded in an early project stage – that is to say, prior to holding the electricity production license. Roxana Dudau, Head of Real Estate & Energy Department Noerr Str. General Constantin Budisteanu nr. 28 C, sector 1 010775 Bucuresti / Romania T +40 21 3125888 F +40 21 3125889 roxana.dudau@noerr.com

real estate Coldwell Banker reaches 46 offices in Romania

Real estate consultancy company Coldwell Banker Affiliates of Romania has opened 11 more branches in the large and medium-sized cities of Romania and reached a total countrywide coverage of 46 offices, the company has announced. Its managers say that the national coverage will help the company to manage transactions at a national level, for properties held by large owners from the telecom, financial and energy sectors. The company currently manages a portfolio of 900 buildings and a cumulated area of 800,000 sqm. Recently, it developed a new division, Coldwell Banker REO Management, specialized in the management of distressed real estate assets.

Armonia Shopping Center Arad reshaped as logistic park

Immofinanz has decided to change the profile of the commercial center Armonia Shopping Center Arad and transform it into a logistic park, which the investor believes can better address the needs of the area. Armonia delivers a GLA of 43,500 sqm and the transition to a logistic park process is estimated to be completed in 2013, with no major investments required. The commercial center was opened in May 2008 and includes as anchors a Carrefour hypermarket, Bricostore DIY unit and a commercial gallery of 80 shops.

Brasov retail stock take-up estimated at some 53,000 sqm

Real estate consultancy agency DTZ reports that Brasov currently has some 53,000 sqm of modern retail space, from seven operational retail projects developed so far. Most of the commercial centers were launched between 2004 and 2008 and most deliver a gross rentable area (GLA) of no more than 10,000 sqm. Since 2004, the second generation of malls includes Eliana mall, Macromall and Unirea Shopping Center. Others are the strip mall, Brasov Retail Park and Carrefour Gallery. The largest GLA is delivered by Unirea Shopping Center, owned by the Adamescu family, at 18,000 sqm.

10 The Diplomat September 2012

Real estate investments plunge to six-year low Real estate investments in Romania in the first semester of this year recorded the lowest value of the last six years, with only two transactions signed in this period and some EUR 55 million transacted, according to a study by the real estate consultancy CBRE. The two transactions were the sale of the Nokia plant in Cluj, to household producer De’Longhi, and that of Timisoara-based City Business Centre compound, which was acquired by the South Africanregistered investment fund NEPI. According to data from CB Richard Ellis (CBRE), Romania remains an attractive market in terms of real estate transactions but the lack of financing and the Euro zone turmoil have raised the investment risk and quelled investment appetite.

In the CEE region, Russia and Poland registered the highest investment volume. Regarding prime yields in Romania, office segment yields stabilized to 8 percent, while retail notched up 8.75 percent for commercial centers and 10.25 percent for storehouses. By comparison, in Warsaw, prime yields in office are at 6.25 percent, while on the industrial segment the figure is 7 percent. Retail in the Polish capital has an estimated prime yield of 6 percent. Similar values are registered in Prague and Budapest. In the first half of 2012, Russia posted over EUR 900 million of transactions and Poland over EUR 800 million. The Czech Republic, in comparison, saw a transaction volume of EUR 180 million at six months. ■

Litexco office building in Bucharest sold for EUR 4 million

Spanish real estate investment company Litexco Investments has sold the office building Litexco Stirbey Center in Bucharest for EUR 4 million, to Lisaos Ventures Limited. The Spanish company took over the building, which was built in 1883, and modernized it to transform it into an office center. It was opened in 2005. The office complex is made up of a fully renovated small palace constructed in 1883, which houses Litexco’s current office in Bucharest, as well as two adjoining modern office buildings, according to the company. In the sale transaction, Litexco was assisted by lawyers from Schoenherr. “The sale procedure required the fulfillment of some preliminary conditions,

typical to an M&A transaction for a real estate asset,” said Simona Chirica, one of the three lawyers assisting on the deal. The negotiations between the seller and the buyer lasted around 18 weeks, according to a statement by Litexco. The buyers were represented by a team of lawyers from law firm Chirvase, Rilla and Asociatii. Investment company Litexco was founded in 1989. Its aim was to find investment opportunities mainly in the emerging economies of Eastern Europe and, to a lesser extent, in the more mature economies of the Mediterranean countries of Europe. So far, the company is present in Argentina, Bulgaria, Hungary, Italy, Slovakia, Spain and Romania. ■

infrastructure CernavodaMedgidia highway segment ready for traffic The A2 highway section linking Cernavoda and Medgidia has been opened, with the status of national road and an 80 km per hour speed limit for vehicles, the Romanian National Company of Motorways and National Roads (CNADNR) has announced. According to the road authority and statements by officials from the Ministry of Transport and Infrastructure (MTI), the delivery of the highway segment was within deadline. In 2011, the ministry canceled its contract with Colas, the contractor appointed to build the Cernavoda-Medgidia road section, and a new auction was organized, which was won by the Astaldi-Max Boegl consortium.

PPP to be used to build highway in southwestern Romania

The two companies are also constructing the Medgidia-Constanta segment. The contracts were signed in September 2011 and the firms started works in October. Ovidiu Silaghi, minister of transport and infrastructure, said that the CNADNRâ&#x20AC;&#x2122;s debt to the constructor is currently RON 270 million, including VAT, and the ministry will make efforts to pay the constructor, from a total contract for the highway estimated at RON 498 million. The Medgidia-Constanta section consists of 20.5 km and is scheduled to be completed in January 2013. By the end of July 2011, some 21 km of highway had been completed, linking Murfatlar to Constanta. â&#x2013;

The southwester n region of Romania, a significant logistics cluster for the automotive industry, can be linked to the national highway infrastructure th rough the f irst highway built through a public-private partnership, according to officials of the Ministry of Transport and Infrastructure. The southwestern region hosts the two automotive plants of Dacia and Ford as well as suppliers of car parts and accessories, such as Pirelli and IAC Dragasani. In November this year, the Romanian authorities said that modernization works on the 80 km road between the cities Calafat and Craiova were ongoing and that the bridge over the Danube would be completed.

appointments FLORIN PETOLEA has been appointed GM of Alcatel-Lucent Romania, starting August 1. He will replace Raoul Ros, who had served as GM since 2009 and will assume other responsibilities at the company’s HQ. Petolea has over 20 years of experience in telecommunications, most of which was gained at Alcatel-Lucent. STELIOS TSIFETAKIS has been named director of F&B at JW Marriott Bucharest Grand Hotel. He has 17 years of experience in the food and beverage segment and operations. Previously, Tsifetakis spent six years at Hyatt Regency Casino Thessaloniki. Prior to this assignment, he worked at Melia White House as F&B manager and served four years at Renaissance London Heathrow Hotel, as director of catering operations and of restaurants.

ALBERTO BRAVO is the new managing director of Sonae Sierra Romania, responsible for property management in Romania, on top of his present position as managing director responsible for property management in Spain. He will be responsible for the leasing, marketing, legal and operational management in Romania and Spain. CRISTINA REICHMANN has joined the banking and international finance department of international law firm CMS Cameron McKenna as head of capital markets, FIS and structured finance. Reichmann is a member of the Bucharest Bar Association and of the Arbitration Chamber of Bucharest Stock Exchange. Prior to joining CMS Cameron McKenna, she was managing associate and head of the capital markets practice at NNDKP.

AMIT KUMAR is the new GM of ArcelorMittal Hunedoara. Amit has 11 years’ experience in the industry and has worked for companies such as Bhilai Steel Plant in India. In 2008, he joined ArcelorMittal Long Carbon Europe as performance enhancement manager. In 2011, he was named investment director at the company’s long carbon division in Luxembourg. TONI TEAU is the new general manager of Lasselsberger Romania, and has been named as member of the board of Lasselsberger in Bucharest and Sanex in Cluj-Napoca, the two companies managed by Lasselsberger Romania. Between 2000 and 2004, Teau was financial vice-president at Sanex. His professional background includes expertise in financial management and accounting.

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12 The Diplomat September 2012

investments Germany

Serbia

China

Insolvency firm Casa de Insolventa Transilvania which is the judicial administrator of Astra Vagoane and Meva has announced that the companies of the IRS group – Astra Vagoane Arad, Meva and Romvag Caracal – have been taken over by a German investor, who paid over EUR 30 mln for them. The transaction is part of the reorganization and redressing process of the insolvent firms. The three firms together employ over 1,500 people.

Serbian oil and gas company NIS, controlled by Russian group Gazprom Neft, wants to run 40 gas stations in Romania by the end of 2012, and aims to expand the network to 120 units by 2014, according to the company. NIS will invest EUR 500 million per year over the next three years, with 40 percent of funds being allocated to modernizing the network of 250 stations that it owns in Serbia and expanding operations in Bulgaria, Bosnia-Herzegovina and Romania.

State-owned Chinese company Huadian is in talks with the Romanian authorities over a thermo central project at Rovinari energy complex, where some EUR 900 mln could be invested with the delivery of almost 500 MW of installed power. The government of China, though the Bank of China and other Chinese financial institutions, is assigning USD 10 bln to developing projects in CEE, targeting countries such as Poland or Romania.

Astra Vagoane, Meva and Romvag Caracal taken over by German investor

Italy

Walter Tosto to invest EUR 30 mln in Romania

Italian firm Walter Tosto will invest EUR 30 mln in the FECNE nuclear components plant it acquired earlier this year for EUR 7 mln. The company will spend EUR 11 mln on new installations and equipment and EUR 5 mln on energy efficiency. Another EUR 5 mln will go on servicing the current equipment, while EUR 6 mln will be put into training employees and EUR 3 mln into R&D investments. Walter Tosto has started to revamp equipment and install a new roof at its FECNE plant, which is based outhern Bucharest, as part of a larger investment.

Gazprom Neft to open another 40 stations in Romania in 2012

India

ArcelorMittal Galati puts EUR 1.2 mln into hot flow unit

ArcelorMittal Galati has invested EUR 1.2 million in two of its sintering machines, which included the building of a quick lime injection unit. The construction works were completed by a Romanian company in six months and the project design was provided by specialists from Galati and sister units of the group. The new injection facility is now operational and will reduce costs by using an increased level of concentrates instead of expensive ores, say officials.

Chinese company to spend USD 900 million on Rovinari energy complex

Chopstix cooks up EUR 160,000 investment in two outlets

Asian food restaurant chain Chopstix has opened its first street location on the ground floor of the Unirea shopping center and another outlet in the shopping center’s fourthfloor food court. The restaurant covers 50 sqm and has 20 indoor seats. The two venues, which have 32 employees, required an investment of about EUR 160,000. Chopstix was set up in 2008 and owns five other restaurants which are located in Baneasa Shopping City, AFI Palace Cotroceni, Plaza Romania, Bucuresti Mall and Maritimo Mall Constanta shopping centers.

solar

Solar power projects give market a ray of hope Are PV projects the hot new attraction on the power market? Lawmakers, lawyers, investors, suppliers and bankers talked to The Diplomat – Bucharest to help shine a light on the main challenges facing solar projects on the local market. By Dana Verdes

he saga of the legislative uncertainties regarding photovoltaic (PV) projects is drawing closer to an end as the new provisions of the law approving the Emergency Ordinance no. 88/2011 regarding electricity production from renewable source were approve. Market specialists say the amendments bring clarity and stability to legislative aspects regarding electricity production from renewable sources, especially for those who want to invest in PV projects, the latest attraction in terms of investments. According to the Social Democrat deputy Mugurel Surupaceanu, there are several specifications which will clarify the current regulatory framework on this topic. For instance, energy suppliers and produc14 The Diplomat September 2012

ers will have to meet their GC quota each quarter, as established by the Romanian Energy Regulatory Authority (ANRE). “If the GC quota isn’t met each quarter, then these companies are obliged to pay to the warranty fund within 45 days the maximum value of the GCs they failed to acquire. GCs paid to the warranty fund will be factored into the GC quota of the supplier,” said Surupaceanu. According to him, the source of the warranty fund is the state budget. “The warranty fund for green certificates is at the discussion stage. It is not yet certain that we could support such a fund. Also, the issue of overlapping sanctions – as the same aspect will be penalized by both the warranty fund and the Environment Fund

– has not yet been settled by these norms,” added Surupaceanu. One of the most interesting points this law clarifies is the validity of the current support scheme, which stipulates six green certificates (GC), a clarification meant to throw a ray of light on the long debated overcompensation issue. According to the new amendments, the current number of GCs allocated to each type of technology cannot be decreased before January 1, 2014, for solar and before January 1, 2015, for other technologies. “Next year the total costs a PV projects involves will be monitored, and an evaluation conducted of all units made operational by the end of the year. If overcompensation is identified, the number of GCs will be

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Photo from the 1.7 MW PV project situated in Lechinta, Romania, finished and connected on August 17, 2012

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“We noticed that an increasing number of investors with projects already launched preferred to finance their investments from their own sources,” Ciprian Glodeanu, president of RPIA

reduced from January 1, 2014. The European Commission hasn’t expressed a view on this matter yet. There is no need to make waves. Overcompensation has existed tacitly in other countries as well and we will approve it tacitly in Romania too,” commented Surupaceanu. Market specialists say that the law will

16 The Diplomat September 2012

boost investments in this sector. “We still have just 2 MW in operation for PV projects, because Romania had an unstable regulatory framework. The legislation was not clarified. These changes will bring predictability,” said Ciprian Glodeanu, president of the RPIA ( Romanian Photovoltaic Industry Association). “Romania has an enormous potential for photovoltaic energy, and investors were the first to understand this.” Speaking at the RPIA event, dedicated to PV Financing in Romania Glodeanu went on, “We noticed that an increasing number of investors with projects already launched preferred to finance their investments from their own sources.” In his view, this was partly due to the limited access to financing combined with the recent legal provisions which left open

the possibility to reduce the support scheme for the photovoltaic industry from January 2013. However, given the new provisions of the law approving the Emergency Ordinance no. 88/2011, it is expected that the situation will change. “We are convinced that the suspension of the reduction in the support scheme until January 2014 at the earliest, for the photovoltaic industry, will create the environment for a new beginning, especially due to the predictability it brings onto the market,” added Glodeanu.

Regulatory issues

The current legislative framework raises several obstacles for those eager to invest in PV projects. According to Andreea Iancu, energy partner at Hategan, a law firm pro-

solar

“This match-making between developers and investors hasn’t worked so far because of the legislative instability for instance,” Dan Cirstoc, sales manager for photovoltaic at Siemens viding legal counseling for PV projects with a total capacity of 87 MW, which has German, Austrian and Italian clients, multinational companies investing in the PV field, mostly in western Romania, have faced difficulties in implementing their PV projects, especially “due to the insufficient regulatory framework, inconsistent application by the authorities or arbitrary interpretation, regarding mainly the following aspects: re-designation of the agricultural land, requirement of a zoning plan, validity period of the site approval (3+3 or 6 months) through to the signing of a connection agreement and support scheme overcompensation.” Another challenge, says Iancu, is the reluctance of banks to grant loans, as well as to take into consideration the green cer-

tificates in their analysis of the business plans at their minimum level. “Other challenges are the legal deficiencies that affect the obtaining of authorizations and licenses, in the case of many projects for which a purchasing intention in the ready-to-build phase exists, such deficiencies being discovered only upon drafting the energy part of a due diligence report, along with the fact that the number of green certificates is not determined in the event of overcompensation,” said Iancu. “Another is the fact that the capacity of the transport and distribution grid is frequently exceeded and so strengthening the grid appears necessary – which means high costs for the investors.” Monica Cojocaru, attorney at law at Schoenherr, believes that there are other

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aspects which should be clarified by the regulator in the secondary legislation regarding electricity production from renewable sources. In her opinion, the authorities must come to agreement on whether investors have to own or to lease the plot of land on which the project will be developed. Another interesting aspect for investors,

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“The most important points in the development and implementation of PV projects, is proved to be financing and strong PPA agreements,” Thomas Melitsis, general manager of Egnatia Rom

says Cojocaru, is the fact that they will be able to sign bilateral contracts but only once the project is operational.

Investor’s view

“As a contractor and service provider, Martifer Solar is focused on the construction (turnkey) and operation of photovoltaic

hotovoltaic projects in Romania are receiving more and more attention from project developers, international investors and European utilities. Big projects with five or more MWp all over the country have been developed and will be realized in the next 12 to 18 months. Local developers, authorities and financing banks have relatively little experience with PV projects and many steps until the grid connection are challenging for everybody involved. But PV projects of this size are nothing new. More than 30 GWp have been built in the last few years in Europe, mainly in Germany, Spain and Italy. Many issues and conflicts can be avoided when each party profits from the different experiences of others. Investments of up to 10 Mio Lei per MW must be secured by a professional approach and Know-How. CUBE Engineering is one of the pioneers supporting project developers and investors to find the right approach. The company is at home in many European solar markets and the clients benefit from this experience. There are some important steps which are mandatory during the project development: • Solar Energy Assessment Services are one of the most important tasks in project development. A reliable forecast of the energy production of a solar project is mandatory for investment and financing decisions. The steps are: • Research of existing solar radiation data sources • Solar data filtering and quality control • Site visit, to review site characteristics • Solar data analysis and processing

18 The Diplomat September 2012

plants. In Romania the firm has recently completed its first large-scale PV plant which is now being connected to the grid,” Oscar Fonseca Marques, general manager at Martifer Solar Romania, told The Diplomat – Bucharest. “From the construction point of view, the project has been finished, and confirmation of connection to the grid is expected to take place shortly.” In his view, the main challenge posed to a PV project in Romania is definitely related to its financing, and the ability of the investors/sponsors to develop a bankable project. “In this regard I would highlight the importance of having a ‘clean’ project from the legal point of view and correctly designed from a technical perspective, for which we deem it crucial to have the right partners,” said Marques.

• Calculation of likely solar project losses • Energy yield and performance ratio calculation • Uncertainty analysis • Detailed reporting The results from those studies deliver information on the solar potential at a site. This is a requirement for the optimal design of the site and evaluating different system designs. Site Feasibility Studies Choosing the right site for a solar project is critical to its financial success, but the different parameters involved make it a very complex task. It is very important to combine all the required disciplines and develop a site (pre-)feasibility study that enables the developer to make smart investment decisions. A typical feasibility study includes a first solar energy assessment study, list of site constraints, preliminary layouts using different technologies and arrangement combinations. Environmental Impact Study and Permitting Services Romania´s landscape is worth protecting; many endangered species have found a last refuge in special habitats in Romania. To make green energy production as sustainable and environmentally-friendly as possible and to cover all the needs of the permitting process, a detailed environmental impact assessment study must be done. Is the right partner is involved at an early stage of the project the interest of the environment can be protected while avoiding unnecessary project delays.

Similarly, Monsson Group officials added, “To date, the company has several hydro projects, which are in early stages, and a small solar pilot project. Monsson Group has already installed 1 KW of solar power in a Dobrogea production facility that has been operating for over a year.” The group can develop projects from scratch so is interested in wind, solar and micro-hydro and can bring them to the “ready for construction” stage. “We believe that Romania has a great potential in the renewable energy sector and, even if access to finance is still difficult, investors are keen to start projects in the field,” said group officials. Investors expect the legal amendments to bring much more stability and predictability on this market. “The stability brought

Grid Connection Last but not least, the grid connection must be secured. The following topics must be clarified: • Network connection feasibility studies • Grid connection application • Negotiations with network operator • Technical requirements for grid connection • Device-grid compatibility assessment • Calculation of electrical losses within the PV plant For all these steps, CUBE Engineering offers to share its experience of many other PV projects from many other PV projects worldwide and support clients in Romania to make their developments successful. The German CUBE Engineering has devoted itself completely to renewable energies. Since the beginning of the 1990s, the company has developed a one-stop service for projects in this industry. Based on its interdisciplinary network of experts, CUBE Engineering has established itself as one of the leading national and international consultancies for renewable energies. Find more information on www.cube-engineering.com

Electrifying ideas. by the confirmation of the six green certificates to be awarded to PV projects until the end of 2013 will naturally trigger a faster growth of the PV market, as it has clearly increased investorsâ&#x20AC;&#x2122; appetite for PV in Romania,â&#x20AC;? said the Martifer Solar Romania GM. In his opinion, having a longer period to study the market and implement their business plans under a stable supporting mechanism, investors (including those that are not yet acquainted with the Romanian market), will be more comfortable and confident about making successful investments in Romanian PV projects. â&#x20AC;&#x153;On the other hand, itÂ´s important to note that this increased appetite from investors will always be limited by the financing available, as well as impacted by an overheated market, namely on the development side, with higher prices being asked for the available licenses in the market,â&#x20AC;? added Marques. Thomas Melitsis of Egnatia Rom, whoâ&#x20AC;&#x2122;s company has undergoing five projects totaling 28MW, in the areas of Giurgiu, Braila and Calarasi expected to start in the next 6 months states that â&#x20AC;&#x153;the most important points in the development and implementation of PV projects, is proved to be financing and strong PPA agreements. There are serious projects to be realized, but its really difficult these days to support financially the project realization till it will reach commissioning phase. Also having a strong power and green certificates purchase agreement is quite a challenge, since this is strictly connected to financing most of the timesâ&#x20AC;?, said the Egnatia Rom general manager for Romania.

Suppliers spot opportunities

The photovoltaic sector has very good perspectives, but few projects actually get developed, Dan Cirstoc, sales manager for photovoltaic at Siemens, tells The Diplomat â&#x20AC;&#x201C; Bucharest. In his opinion, Romania is currently at the stage where there are dozens of projects ready to be built with construction authorizations which are looking for investors. â&#x20AC;&#x153;This match-making between developers and investors hasnâ&#x20AC;&#x2122;t worked so far because of the legislative instability and the fact that the income isnâ&#x20AC;&#x2122;t guaranteed in any way,â&#x20AC;?

said Cirstoc. According to him, one argument in favor of such investments is the consistent decrease in technology prices. While in 2008 the price of solar panels was EUR 3.5 million currently it accounts for 40 percent of the total investment at EUR 1.5 million. â&#x20AC;&#x153;In terms of project costs, the biggest expenses for a PV projects are â&#x20AC;&#x201C; in order â&#x20AC;&#x201C; the panels, investors and the necessary equipment to connect the project to the grid,â&#x20AC;? said Cirstoc. The Germans from Refusol have also identified opportunities for business growth on the local market. â&#x20AC;&#x153;We are focusing on large-scale solar projects and we are trying to sell our products directly to EPC contractors and investors, but it all depends on the financing availability as right now I believe this is the key issue. On the local market I see many projects in development but it all depends on financing. However, I believe hundreds of MW will be installed by the end of next year,â&#x20AC;? Michal Kalousek, sales manager for Eastern Europe at Refusol, told The Diplomat â&#x20AC;&#x201C; Bucharest. Refusol has 47 yearsâ&#x20AC;&#x2122; experience with invertors and produces the most efficient invertors on the market, which reach some 98 percent efficiency, say company officials. â&#x20AC;&#x153;We launched a new product quite recently, 23 KW invertors made especially for large-scale installations. I started in this business in 2008 and I have seen a constant decrease in technology prices, which I think will continue. Currently, our company is sold out until the end of September but we believe that by then we will have a normal delivery time like a few weeks. The costs for invertors represent some 10 percent of the total PV project costs,â&#x20AC;? said Kalousek. Paul Voicu, managing partner at IBCO Energ, attributes the scarcity of projects actually being made operational to a current â&#x20AC;&#x153;gap on the market between banksâ&#x20AC;&#x2122; and investorsâ&#x20AC;&#x2122; expectations.â&#x20AC;? â&#x20AC;&#x153;We are in discussions with several entities and this autumn we will start work on several projects totaling 30 MW. We anticipated this boom in PV projects and we started to develop a project portfolio two years ago. We have 100 MW in development and 50 percent of that is ready to build. Our intention is to be involved in this field on the long run,â&#x20AC;? Voicu told The Diplomat â&#x20AC;&#x201C; Bucharest. In his opinion, PV projects have the greatest growth

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solar

“In the last few years, the cost of technology for solar panels has decreased by approximately two-three times,” Daniela Scripcariu, CEO of Tractebel Engineering

potential on the local market, which is expected to be a fragmented one. For Etem Systems the market has brought many interesting projects, especially for roof PV projects. According to Andreas Laspadakis, general manager at Etem Systems, the company is in discussions with developers and investors for roof solar projects totaling some 40 MW. “In less than three weeks we will start a roof solar project for a factory in Timisoara of 1 MW. For projects totaling 25 MW of the total 40 MW, discussions are advanced. These projects are in Urziceni and Giurgiu,” Laspadakis told The Diplomat – Bucharest. Regarding large PV projects, Laspadakis says that the unclear legal framework and the difficult access to financing are causing delays. “We had talks for a 6 MW PV project in Giurgiu. Because of the difficulties in securing financing, now the owner has altered the project and will go ahead with a 2 MW PV plant,” said Laspadakis. In his opinion, the main challenges for large PV projects locally are the bureaucracy, as it takes several months to obtain the necessary licenses, land procurement, access to the grid and financing. “If we’re talking about renewables, we have very good opportunities in Romania and we expect many more investments in the next three years. We provide equipment

and solutions to connect wind and solar farms to the power grid. And following the clarification of the renewables legislation in Romania regarding the green certificates for solar and wind, the country will continue to attract more investment for which Schneider Electric can provide very good solutions,” Saulo Spaolanse, president of Schneider Electric Romania, told The Diplomat – Bucharest. According to his data, the annual solar energy potential of the country is 1.2 TWh. “Romania is a country with 210 sunny days per year, which means a huge solar potential. The country’s wind energy potential is about 23 TWh, the highest in South Eastern Europe, with the south-east Dobrogea area being in second place in the entire continent,” said Spaolanse. For Tractebel Engineering, the engineering and consultancy services assigned for different renewable projects developed in Romania represent approximately 50 percent of its business. “As we address services especially for large energy infrastructure projects, we deliver engineering and consultancy services for power plants, transmission and distribution installations and projects for end-users,” said Daniela Scripcariu, CEO of Tractebel Engineering. The manager tips solar projects to be next in terms of development, as developers and investors are hurrying to implement them, in order to benefit from the current support scheme rate of six green certificates. Scripcariu noted that the investment in these projects is decreasing, as the technologies for solar panels have improved significantly and thus involve lower costs. “In the last few years, the cost of technology for solar panels has decreased by approximately two-three times,” she said. According to the manager, solar projects, ranging from 100 kW to several MW, will be easier to roll out, both

“If we’re talking about renewables, we have very good opportunities in Romania and we expect many more investments in the next three years,” Saulo Spaolanse, president of Schneider Electric Romania 20 The Diplomat September 2012

in terms of execution and project permits, compared to wind projects. Carlos Pinto, country manager at Megajoule, told The Diplomat – Bucharest that due to the legal framework (six GC until 2014) there is a lot of interest in solar projects, but he thinks this incentive will decrease afterwards, assuming that solar project development costs will continue to decrease and also because there could be an oversupply of GC in the trading market. “In the market there are many solar projects for sale in a similar way to wind projects. The development quality of the projects remains an issue. The energy production of the projects in the majority of cases is poorly assessed or is estimated based on solar radiation data from existing databases, which have a different quality, instead of on-site measurements. In such cases there is more uncertainty associated with the energy calculations,” said Pinto. In his opinion, in the near future the trend will be to perform on-site measurements of solar radiation and correlate them with long-term datasets, in order to characterize the expected longterm conditions in which a given project will operate. “This should decrease the uncertainty in the energy calculations and provide a more accurate scenario of expected energy production for making the financial analysis. Most of the projects are presented by the

solar

“The grid transport capacity is frequently exceeded and strengthening the grid appears necessary – with high costs for the investors,” Andreea Iancu, energy partner at Hategan

seller without a detailed assessment of the energy production and assuming the highest price for GC or even don’t consider the risk of GC reduction, which is an optimistic scenario,” said Pinto. He added that given the crisis and the difficulty of accessing credit, a better assessment and improvement of methodologies will be demanded

22 The Diplomat September 2012

by the banking institutions and any other investors. “Similar to what I expect for wind projects, taking into consideration the high number of solar projects with a connection contract, the legislation for solar and wind projects regarding the connection to the grid will probably change in the near future, as the electrical grid cannot accommodate a big penetration of renewable energy due to the variability of these sources of energy,” commented Pinto. He added, “Similar to what happened in other countries, in order to distinguish the serious investor from non-investors, probably a high fee will have to be paid in advance in order to keep the connection contracts valid. Such a fee could be applied in all Romania or in specific regions in order

to avoid congestion of projects in the same area, which would represent a slowdown in the project development in the mid-term.”

Financing fears

Market specialists say that currently one of the most important challenges facing PV projects is obtaining financing. Banks, leasing companies and other types of financiers have specific requests for those interested in investing in PV projects. Ioana Anca Gheorghiade, executive director of the project finance department at BCR, said that the bank was one of the first to decide to finance renewable energy projects. “Currently our attention is turned towards some projects which have met the main bankability requests and in which we

Three sensitive issues to carefully address upon investing in a ready-to-build photovoltaic project

s the reader might already be aware of, taking-over of a photovoltaic project (hereinafter in short “PVP”) by means of a share deal involves the process of an extensive due-diligence exercise, which often unveils some risks which are either difficult to assess or which, if familiar before starting the due-diligence exercise, would have led to time savings. This article is aimed to provide you with an indication of those aspects which should be confirmed with the developers of the project during the preliminary negotiations with respect to the purchase of a PVP.

1. Zoning Urban Plan („PUZ“)

Despite that building works of some PVP’s have commenced, based on a building permit issued without for a PUZ to have been issued in the first stage of the project works, the law on urbanism requires mandatorily that a PUZ is necessary to be approved by the City Council (Rom. “Consiliul Local”) every time the construction of a production place is planned. Often, investors are inconsistently advised to rely on the requirements set forth in the certificate of urbanism issued by the City Hall and should such certificate of urbanism fail to ask for the preparation of a PUZ then no PUZ would be required. However, since the legislation requires on a mandatory level that a PUZ is required, it cannot be considered that a PUZ is not required simply because such has not been formally required for by the local authority through the certificate of urbanism. It is further a trite point and less practical to think of putting this failure to ask for the delivery of the PUZ on the shoulders of the local authority having issued the respective certificate of urbanism. A more practical approach is to apply for the issue of the PUZ, in order to remedy this legal flaw.

2. Technical Due‑Diligence

Every assessment of the viability of a PVP should start with a technical duediligence, in order to avoid that the already issued licenses and permits need to be either amended or re-issued.

It is often the case when an investor is interested to acquire a PVP, but the investor seeks to bring certain modifications to the initial technical project. In such a scenario, as a rule the beneficiary or project manager is obliged not to start the construction works or, if these have been initiated – to suspend them and to apply for the issuance of a new building permit, corresponding to the modifications brought to the technical documentation. However, as practical solution, an exemption to this rule is available: based on a so-called construction site order, issued by the designer of the project (Rom “proiectantul lucrarilor”) and verified by a project auditor (Rom. “verificator de proiecte”), as well as with the written consent of the beneficiary, amendments may be brought to the authorized technical documentation, whereby issuance of a new building permit may be waived, if certain conditions are met: • purpose/ function of the construction works, as such has been approved by way of the initial building permit is not changed; • compliance with the provisions of the permits/ consents/ opinions of the environmental protection authority annexed to the initial building permit is ensured; • provisions of the Romanian Civil Code are complied with; • conditions of placement (height, POT, CUT, alignment, minimum distances towards other properties or the aspect of the construction is not changed); • resistance or stability of the neighboring constructions is not endangered; • technical fire safety provisions are complied with; and • energy economy is ensured. Nevertheless, the verification of whether such modifications (envisaged) comply with the limits of the afore-mentioned permits and/ or consents is made by the same authorities issuing the relevant documents, by duly endorsement of such construction site order. Further, the renewal of the Technical Connection Permit, or the replacement or modification of the connection installation is required by law, in any of the following cases:

law

Ovidiu Valeanu, managing partner a. Any developments requiring the excess of the approved output power, as mentioned in the Technical Connection Permit (Rom. “avizul tehnic de racordare”); b. Modification of elements of technical or administrative nature of a production place, compared to the situation for which the Technical Connection Permit has been issued, without for the approved output power to be exceeded; c. Modification of the connection installation realized for a production place, without the increase of the approved output power, for the purpose of solving certain requests of the user. If the changes brought fall under any of the above-mentioned criteria, it seems that a renewal of the Technical Connection Permit must be obtained. Close contact with the regulator is always advisable and moreover, should the fulfillment of these criteria be of a purely technical impact, it is always advisable to first confront the issuer of the Technical Connection Permit with the required modifications to the PVP.

3. Title over Real Estate

According to the law no. 50/1991 on authorizing the construction works, the beneficiary must hold a real right over the real estate on which a PVP is developed. Despite having been the case that PVP’s were often developed over real estate on the basis of a lease agreement or commodatum agreement (which stands as a personal right rather than a real right), this right is a personal right and therefore not enough in order to allow building works, wherefore a change of this right into a real right is required.

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solar Main amendments to the RES-E law 220/2008 Priority access to the grid for RES-E Rules and conditions, both technical and commercial, based upon which some producers of RES-E are given the possibility to intervene at any moment and to sell the entire electricity produced at a given time, in accordance with the grid connection and availability of units/eligible resources. This is allowed if the security of the national energy system is not affected.

Quarterly fulfillment of the GC quota Energy suppliers and producers will have to meet their GC quota each quarter, as established by the Romanian Energy Regulatory Authority (ANRE). If the quota isn’t met each quarter, then these companies are obliged to pay to the warranty fund (which is not yet created) within 45 days the maximum value of the GC they failed to acquire. GCs paid to the warranty fund will be factored into the GC quota of the supplier.

Reduction of GCs The current number of GCs allocated for each type of technology cannot be decreased before January 1, 2014, for solar and before January 1, 2015, for other technologies.

Quantity of RES-E for which the GC purchase is imposed The RES-E quantity which is taken into consideration to determine the mandatory GC number is based on (i) electricity purchased by electricity suppliers, for their final consumption or for selling to end consumers, (ii) electricity used for own final consumption, except an electricity producer’s own technological consumption, (iii) electricity used by a producer for supplying electricity consumers connected directly to its power plants.

Electricity produced in facilities with installed power under 1 MW The electricity produced in facilities with installed power under 1 MW can be sold to electricity suppliers which are licensed in the area of the production facility at regulated prices. The electricity sold at regulated prices is not eligible for GCs. Individuals and companies with installations of less than 100 KW may request regularization service for the electricity produced or consumed from the grid. SOURCE: Romanian Photovoltaic Industry Association (RPIA)

24 The Diplomat September 2012

are in advanced talks,” Gheorghiade told The Diplomat – Bucharest. She added that the bank currently has some PV projects in different stages of analysis. “The main challenge for these projects is that their success depends heavily on the support scheme. In consequence, it depends on any potential changes in the legal framework for renewable energy. Due to the consistent number of GCs allocated, any modification of this number or any possibility that a photovoltaic manufacturer will remain with a number of unsold green certificates is an important risk factor for the project,” said Gheorghiade. According to the BNR director, one of the main requirements of the banks is previous experience in PV production from the investor. “Another is the investor’s own contribution, to ensure the sale of electricity and green certificates at a minimum price through the so-called power purchase agreement (PPA), and the existence of an agreed provider of photovoltaic panels. In general, we have a quite selective approach,” said Gheorghiade. Romulus Andrei, head of the structured finance department at Volksbank Romania, told The Diplomat – Bucharest that the bank considers several stress scenarios when analyzing the opportunity of investing in PV projects. “One of the variables is the number of GCs. We can take into account a scenario with six GCs but with a lower GC value. Another scenario analyzes what happens if the production estimated isn’t reached,” said Andrei. In his opinion, the time when the bank assumed all the risks and financed a large percentage of the total investment has passed. “Now we want to see the commitment of the investor and this isn’t negotiable. Currently, if the investor’s equity were to be reduced we would have to see clear reasons for this. The investor’s contribution cannot be less than 30 percent of the total investment,” said Andrei. According to him, Volksbank Romania finances the construction costs and the bank requires PPA, despite the fact that there is currently an 8-10 percent discount for PPAs on the market. Gabriel Mihai, head of corporate at UniCredit Leasing, said that the financing institution takes into account all the aspects of the projects when analyzing the financing structure of a PV project. “In the development phase the authorization stage is very important. If we look at the law there are 18 months to implement a project. If we take out the winter period and the time needed to get financing there

are just a couple of months to finalize the documentation,” said Mihai. According to him, another important aspect is the technical selection. “From this point of view, the investment value is important. No financier would approve funding above the market value,” commented Mihai. He added that UniCredit Leasing does not finance construction costs. “For the operating stage what is very important is the investor’s experience in this field. As the financing relies upon the PV park production, this should be predictable,” said Mihai. Thomas Melitsis of Egnatia Rom considers that in order to get financing an investor has to prepare “a very well prepared and documented project, a very serious beneficiary totally committed, motivated and financially healthy and an EPC that can make all this happen. The financing institutes before any approval, are performing very detailed and careful due diligence processes on the project documentation and prospects as well as the involved team background.” Oscar Fonseca Marques, general manager at Martifer Solar Romania, outlined to The Diplomat – Bucharest the mandatory conditions to access bank financing. The PV project must be okay from the legal and technical perspective, a strong collateral package is required from the sponsor (parent company guarantee, share pledge of SPV, general pledge over the assets of the project) and the sponsor must commit 30 to 40 percent of the equity. “The credibility of the sponsor and its creditworthiness will be of major importance for the credit approval, along with the experience and credibility of the EPC contractor and future provider, and the availability of an off-take agreement for power and green certificates,” said Marques. He added that as engineering, procurement, construction (EPC) contractor, Martifer Solar Romania is able to provide an alternative to traditional bank financing, by way of vendor finance to clients, which in essence corresponds to bridge financing to support the construction phase of the PV plant. Full repayment is expected upon the connection of the PV plant to the grid. “Our approach is quite similar to that of banks, though lighter and faster. Mandatory conditions are the same as per the banks (with commitment of the sponsor limited to the payment of 20 to 30 percent of the total values of the EPC contract upon its signature). In order to have a final okay, we will also need to be comfortable with the credibility of the sponsor and with its financial standing,” said the GM. ■

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Quick facts: Smart Solar is a Turkish company on its way to become the leading EPC and O&M company in Southeast Europe. The company was established as a part of Smart Energy Group with the goal of being the leading Engineering, Procurement and Construction (“EPC”) and Operations & Maintenance (“O&M”) company in the renewable energy market in Southeast Europe. After finishing the turn-key construction of more than 15 PV parks with more than 30 MWp capacity in Bulgaria, Smart Solar started operation in Greece and Romania. Its founders and management have extensive working experience in the energy, construction and various industrial sectors. After obtaining ISO 9001:2008 certification from Bureau Veritas Smart Solar successfully obtained its EPC certificate from TUV SUD certifying for the design, engineering, purchase of materials, construction and operation and management of PV Parks in international standards.

• Smart Solar has a very coordinated, high quality and fast-track approach to its EPC services. • Its manual seasonal change methodology in metal frames (winter 33 degrees/ summer 10 degrees incline) increases the electricity production by up to 8 % annually • Smart Solar has design and construction certified by TUV, and all the designs are customer-project tailored • The cables are designed for minimum loss, not for minimum expense • The rows and the strings are designed for minimum loss from shadings • The strings are designed to minimize the snow and ice effect • Smart Solar uses central invertors up to 1200V which guarantees much lower loss and much more efficient strings. • Smart Solar uses additional isolated shelters (kiosk) for a better production in very hot summer days. • Low loss transformers Smart Solar uses in its PV parks provide 2% better efficiency • Smart Solar uses selected cells without craks and with perfect smooth surface (mono-like poly- new generation), which have 5-10% better emissions, in its PV parks • Smart Solar uses the most efficient Balance of Systems to optimize its PV park systems • Smart Solar, in total, produces 15-20% more electricity than expectations in the radiation area

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healthcare

Cash injections revive Romanian private health system Unlike other segments of the economy, the Romanian private medical system has not been too badly sickened by the crisis. Proof is the large number of hospitals and clinics opening and the massive investment, with the new trend being the construction of specialized hospitals. The Diplomat – Bucharest spoke to the biggest players on the market and found out their market prognosis and future plans. By Roxana Cristea

e can all see that in recent years the private clinic market has developed. New clinics and hospitals were opened and I think this will continue. We also want to open a private hospital, but not this year,” Andrei Gagea, executive director at Academica Medical Center, tells The Diplomat – Bucharest. Gagea’s statements about private clinics on the market in Romania are reinforced by the large number of hospitals that have been either opened or announced in recent times. Whether niche or general hospitals, private operators believe that this is a market with big potential. For example, earlier this year, Medicover, one of the biggest private healthcare operators, inaugurated a hospital in Bucharest following an investment of over EUR 20 million. The hospital covers an area of 7,000 sqm, has seven fully functional and integrated operational floors and a capacity of 122 beds. This is the first private hospital opened in 2012 after 2011 brought a record of eight hospitals opened with investments of EUR 131 million. Meanwhile, Gral Medical Romania, Hilmi 26 The Diplomat September 2012

Medical Center, Romgermed and Medical Minovici Development have all announced investments in new hospitals. Although most operators have favored the opening of hospitals with more specializations, some see a real opportunity in niche institutions. MedLife has opened the first hospital in the country dedicated to osteoarticular system diseases – the MedLife Hospital for Orthopedics and Traumatology. The investment in the new facility was EUR 8.5 million. The hospital has a surface area of 2,000 sqm and three operating rooms, outpatient facilities, a radiology department and medical imaging, physiotherapy and rehabilitation department, an emergency laboratory for analysis and rooms with one and two beds. Meanwhile, Medas, another medical services operator, will this autumn complete an investment in a urology hospital with 40 beds and 100 employees. “After this first phase of opening hospitals, I think players will begin to consolidate their positions, and then we can talk about a mature market for private clinics,” added Gagea. Until then, operators

have to face the current economic situation and consumers’ reluctance to spend money on their health, and wait for new regulations in health reform.

Treating the crisis

“Unfortunately, whether we are in a crisis period or not, people get sick, so unlike other industries and unlike other businesses, healthcare has not really been affected,” said Razvan Stefanescu, general director of medical group Romgermed, adding that consumers have however begun to be more careful about how they spend their money. According to him, people tend to go to the doctor only when they have a health problem, a custom that has increased since the crisis. While before some people still went to the doctor to take preventive measures, now, with less money available to spend, they go only when something is troubling them. Stefanescu’s opinion is shared by Andrei Gagea, who says that medical services are unfortunately not people’s top priority. “Our fees reflect the best the quality report: the

healthcare

“More and more people looking for orthodontic treatment are beginning to see it in terms of functionality, and not as a fad,” Emilia Gheorghiu Milicin, general manager, Ortodent market price versus the services provided (the type of investigation / procedure, the reputation and competencies of the doctor or the equipment used). Because of the crisis our prices might represent a barrier for a market segment however the prices have not been reduced because they have to ensure coherence between development and functioning. I am of the view that quality costs,” said Gagea, adding that the problems he has now are the general problems of the business environment. The whole economy is going through a crisis period in which money circulates with more difficulty and people consume less, and this is being felt by the operators of private clinics. Patients are focusing more on price to the detriment of quality. Another problem is the settlement of payments by insurers, along with bureaucracy. However, many openings of new hospi-

tals have been announced lately, while many clinics have been closed. “The reasons are diverse. Many have invested money in luxury clinics and packages aimed at rich customers and multinational companies. Once the crisis came these revenues began to decline. There are examples of clinics that were closed due to lack of patients,” said the Romgermed director. The clinic he manages, thanks to its focus on clinical laboratories and not highend hospitals, has not been greatly affected by the crisis. In the last two-three years the firm has continued its expansion policy and the diversification of services nationwide, and posted a growth of 30-35 percent per year. “We face the same problems as other private healthcare operators in the market, namely the lower income of consumers of medical services in general and companies’ budgets for medical benefits packages for employees. The

market has registered a small decrease since last year and the first months of 2012 were as we expected, because people’s purchasing power has not changed, while demand for private medical services remains very high,” said Vassilis Chaniotis, general director at Medsana Medical Center.

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healthcare

“The lack of legislation in this area is the main obstacle to the establishment of structures to meet the current needs of the population,” Catalina Balan, general manager at Medicover

Money and education are the remedy

“The lack of legislation in this area is the main obstacle to the establishment of structures to support a system able to meet the current needs of the population. Insufficient funding and lack of facilities lead Romanians to seek private health services. But many of them are not used to the idea of subscriptions or private health insurance, that would ensure easy access to Europeanstandard services anytime,” said Catalina Balan, general manager of Medicover. Currently, private medicine in Romania cannot compete in terms of ability to solve complicated cases, human resources and facilities with that in the region and Europe. “I think the main differences from Central and Western Europe are caused by medi-

28 The Diplomat September 2012

cal services consumers (patients) and their awareness of health and tendency to take preventive measures. The private medical services market is still growing here, both for multidisciplinary clinics and for highlyspecialized ones,” said Chaniotis. The average Romanian spends an average of EUR 200 per year on his or her health, while in Western countries the amount is 10 times higher. This is the main difference, say market players. “Another difference is the way in which health systems are organized. In each country they work using different models,” added Gagea. The director of Romgermed says there is little use in comparing Romania with what is happening in Hungary or Poland. “But if you want I can compare the health systems in Romania and other countries. I recently

returned from a vacation in the Caribbean where I found that plastic surgery in Cuba is free. We know that in the United States 25 percent of the population has no medical insurance. I know people who live in Spain and told me that for non-essential surgery there is a waiting list of more than a year.

healthcare In Canada the waiting list for a cataract operation is generally four months, while in Germany some friends of mine fought for weeks with insurance companies over a minor problem,” said Stefanescu, adding that the conclusion is that there is no perfect system and it is obvious that Romania will see no major improvements next year. Dr. Emilia Gheorghiu Milicin, specialist in orthodontics and dental facial orthopedics at Ortodent clinic, believes that the main differences within her profession between Romania and other European countries, are education, respect for the medical discipline and doctors. “In Romania, orthodontic treatment is approximately 20 to 30 percent cheaper than in other EU countries, however, this is not sufficient to determine the existence of medical tourism, due to the fact that an Orthodontic treatment involves a long-term process, requiring regular consultation. This would make it in fact more expensive for the patient, due to the addition of the flights and accommodation. Nevertheless, our clinic has had patients from Poland, Switzerland, England, Germany and Spain, however, the percentage is rather small and we believe it will remain so,” said Signal Iduna 180x131 Corp.pdf 1 the Ortodent specialist.

Medical tourism on the move?

Lately, medical tourism has started to grow in Romania, but it continues to represent only a very small part of the market. “We can talk about medical tourism in Romania but not as a mass phenomenon. I have thought many times whether I, purely because the surgery or tests would be very cheap, would go to Kazakhstan or Belarus. There are a lot of collateral costs. But I see many people who come to Romania for dental services and cosmetic surgery. For serious interventions, though, things get complicated,” said Stefanescu, adding that there is a flip side to the coin, which is that many Romanians go abroad for operations, generally rich people who want some security after surgery. “I do not think that tourism will increase significantly,” predicted the Romgermed director. Similarly, the executive director of Academica Medical Center says medical tourism in Romania is not yet extensive. While Simona Ateia, general director at Medas, commented, “Some Romanians go abroad to resolve their health problems, for high-quality treatment and the advantages of the Western medical system. Meanwhile, some foreigners come to 21.11.2011 17:01 Romania to be treated for certain issues. This

is due to the lower prices compared with those in other countries and the high quality of service. They are often, but not always, Romanian citizens working abroad. We believe however that this is rare.”

New health reform, new hopes

“There are no dramatic developments because lately we have been passing through a stationary period. It’s hard to do something. We are waiting to see what will happen with these regulations that are called health reform. A new draft code has appeared, but many comments and ideas on it are needed. I think the code will regulate and reduce leakage and losses. The problem is that we are a society with limited resources to meet the requirements,” said Tiberiu Roth, administrator at private medical network Hiperdia. Healthcare reform will improve the quality of services on the private healthcare market to the benefit of policyholders and will stimulate the further development of medical services, including private ones, adds the director of Medsana. “The pressure put on private operators to provide the highest quality services, to have a complete range, to have highly skilled medical teams and complex

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healthcare

“Unfortunately, whether we are in a crisis period or not, people get sick, so unlike other industries, health has not really been affected,” Razvan Stefanescu, general director at Romgermed

equipment, to provide the best solutions both in terms of improving health, and in financial terms, has increased. What it means is investing in people, technology and competitive service packages. In addition, the introduction of private health insurance will reposition the private sector against the public, and private medical centers will be complementary to public health centers,” said the Medsana chief. On the medium and long term new regulations are expected to follow trends in other European countries and to gradually move the focus to prevention, as a health policy, thus creating a beneficial shift in the Romanian medical system, which is currently more focused on treatment. All these are advantageous to the patient or the consumer of medical services. “We believe that reform will have a positive impact on our operations because we have business relations with insurance companies. In addition, in the last two years we have launched several packages focusing on the prevention of major diseases such as cervical cancer, breast cancer, cardiovascular diseases, diabetes and obesity,” said Chaniotis. The Medicover director adds that market evolution depends on the legislative regulations and the socio-economic changes against a background of instability and uncertainty.

Development is key

Most market players say that the private medical services market will continue to grow, especially in the context of health reform that creates market opportunities for both multidisciplinary medical centers, as well as specialized clinics. This diversification is good primarily for patients. “I think the market of private clinics will develop. New private hospitals will appear, private healthcare will become more accessible and consumers will 30 The Diplomat September 2012

perceive these services better and start to use them more. I think we will have a growing market offering customers high quality services,” predicted Gagea. However, the Hiperdia administrator believes that until the market really takes shape, the most important thing is to try to create synergy between private investors and the public sector. “That is what we foresee for the future. I think that Romania will be able to effectively develop a lot of private hospitals, but they will be niche. Complete hospital services will be in the public sector,” concluded Roth. Though one thing is certain, he says: most private health operators will continue to expand and invest on the Romanian market.

Medsana Medical Center to focus on medical team and development

“When we opened the first private clinic in Romania, we made this investment based on the idea of establishing a network of clinics that provide European quality standard services, to be a stable business and profitable in the long run,” Vassilis Chaniotis, general director at Medsana Medical Center, told The Diplomat – Bucharest. So far, the investments made by the firm in its three clinics exceed EUR 10 million. The first Medsana clinic was opened in 1996, when there were no private clinics on the market and the private medical system was an absolute novelty for most customers. “Private medical services were not trusted; public institutions were considered the only ones able to provide answers. Soon we introduced for the first time on the Romanian market the concept of corporate health subscription as a tool to motivate employees, with multiple benefits for client companies,” said Chaniotis. In the early years the private operator had approximately 50,000 patients per year. After the first 10 years, corporate customers represented 65 percent of the portfolio and individual users the other 35 percent, but by the middle of last year the ratio had reversed and individual customers accounted for 65 percent. In 2011 the clinic had an estimated 175,000 patients, a slight increase compared to 2010, but the average sums they spent in clinics were 7 percent lower than the previous year. “Given the changing share of individual customers, we launched individual subscrip-

tions, in addition to preventive care packages,” said the director. The main investments made by the operator this year have been in the development of the medical team by attracting doctors from all disciplines. The company also developed its range of services in several medical specialties, especially in genetics and laboratory medicine, and invested in the latest technology in imaging and laboratory. “Evaluating market needs, we plan to extend the range of medical services provided to medical imaging and opening a super-specialized medical center, but this depends on market developments. Otherwise, we continue to invest in technologies in laboratory medicine and the development of existing clinics and health services team,” added Chaniotis. In the past few years the EBITDA profit was around 15-20 percent, in line with the profit margins registered in the private healthcare system. For 2012, Medsana is trying to maintain the same level of profitability. The staff numbers 175 people, administrators, nurses and physicians. The medical team is complemented by approximately 100 specialist collaborators.

Romgermed: expansion, development, evolution

“First, Romgermed, in terms of market positioning, cannot be compared with any other actor in my opinion. The focus is on laboratory work and we have the largest network of laboratories. We have three clinics in Bucharest and one in Constanta. In these clinics, besides the specialties that any player on the market has, the primary focus is on medical and occupational health services, which is why our clinics are not as luxurious. We do this because we try to address to the middle and working classes, and so our prices are aimed at lower income patients,” said Stefanescu. This year the company has opened a new clinic in which it invested over EUR 1.1 million, and by the end of the year it will open a hospital. Romgermed expects to achieve a turnover of EUR 1 million in the first year of operation for the hospital in Calea Plevnei. It will have about 200 beds, and the investment amounts to EUR 10-15 million.”The greatest achievement we have had is two-fold: sustainable development and the opening of hospital and laboratories. We have 19 laboratories of which 10 are in Bucharest. Certainly by the

healthcare end of the year we will exceed 20-21 laboratories. Mainly we are opening new laboratories and we want to expand our activity geographically to the west of the country, and diversify the packages of services we offer,” said Stefanescu.

High-end hospital

“This year we celebrate 15 years since the Medicover group has been present on the private medical services market, having been the first foreign investor to see in Romania a long-term growth opportunity. We reached a total of 11 clinics in Bucharest and in the country, an advanced diagnostic center, a pediatrics department in Bucharest, a medical and rehabilitation center and the Medicover hospital in Bucharest,” said Catalina Balan, general manager of the private operator. Medicover’s advanced diagnostic center was opened in July, the total value of investment being over EUR 500,000, of which EUR 350,000 went on last generation equipment. In late 2011 the firm relocated Medicover Pediatric Clinic to Victoria Square, to allow patients quicker access to pediatric services, while 2012 began with the relocation of the firm’s Iasi clinic to a more accessible, central location. In February 2012 it opened a new

work point in Ticleni (equipped with the first ambulance jeep, for the oil fields). The company’s most important investment is the Medicover hospital. It was inaugurated in January 2012 with an investment of over EUR 20 million and is a multidisciplinary hospital located on seven levels, with a capacity of 122 beds. “Now we are focusing our attention on developing facilities in the Medicover hospital and promoting in parallel both medical subscriptions and private health insurance,” said Balan, adding that currently the operator has over 100,000 individual and corporate patients from more than 1,500 client companies, and about 70 percent of customers are corporate clients. “We want to continue to invest with confidence in the Romanian market. We will see if the economic conditions allow us to expand our network of clinics and hospitals,” said the director.

Academica Medical Center to open hospital down the line

“Our future plans include the opening of a hospital, but It will not definitely be this year,” Andrei Gagea, executive director of the Academica Medical Center, told The Diplomat – Bucharest. This year the operator

has opened a facility for cardiology and neurology activities. “So far we have invested around EUR 4 million. Academica Medical Center was founded in 2007 and the first patient came in February 2008. Initially there were 12 medical specialties, and now we have 23 specialties. We started with the outpatient part. In February 2009 we made the imaging center, in 2010 we expanded and took a clinic in franchise called Anais Medical Center that we integrated under the Academica Medical Center brand,” said Gagea, adding that the business can be divided into four separate units because each has a distinct profile. According to him, the company, which last year had a turnover of EUR 2.5 million, focuses on four strategic areas: quality care, professionalism of the medical team, last generation medical equipment and central locations. Academica Medical Center last year celebrated its 50,000th unique patient. “The corporate side accounts for less than 1 percent of patients, but it is irrelevant to us. We’re not trying to limit ourselves to a particular customer. We have clients from all categories of life. We do not rely on a subscription policy and we have many patients who have subscriptions elsewhere, but then come to us for

healthcare

“We face the same issues, namely the lower income of consumers of medical services and firms’ budgets for medical benefits packages for employees,” Vassilis Chaniotis, general director at Medsana Medical Center turnover of over EUR 8 million (about EUR 1.8 million), according to initial estimates. By the end of this year, we intend to grow by 60 percent in turnover, compared with the level of 2011,” concluded Ateia.

EUR 120,000 investment for Ortodent Clinic interpretation of test results and a second opinion,” said the network manager, adding that currently Academica Medical Center has 60 full-time employees, over 20 collaborations with university professors and over 100 specialists.

Medas goes niche

“As part of our plan to help more people access quality health services, we recently opened the first niche clinic of the network, Medas Feminis, a clinic specialized in maternal-fetal medicine. Next will follow the opening of the first Medas hospital, which will specialize in urogenital surgery,” Simona Ateia, general director of the firm, told The Diplomat – Bucharest, adding that in the future the firm has plans to expand in the country by opening new clinics and laboratories that will develop the entire Medas network. So far, the network has absorbed about EUR 20 million of investments. Its greatest achievement, according to Ateia, was the opening of the Medas Unirea clinic at the end of 2010, the first clinic in the network that integrates clinical and laboratory medical services. By late last year, more than 1 million patients had received medical services provided by the firm. In 2011 the company had a turnover of RON 34.5 million, which represents an increase of 46 percent over the same period of 2010. The figure exceeded estimations made last autumn by 6 percentage points, when the firm predicted an increase of 40 percent in turnover compared with 2010. “The fact that we managed to record this positive trend pleases us and helps us to look forward with optimism this year. For 2012 we want to maintain our good progress that we have managed to keep up in recent years, despite the difficult economic environment. In the first quarter we recorded a 32 The Diplomat September 2012

“It was a long and winding process which got us here. I started working in Mexic as an orthodontist and after more than 7 years I returned to Romania and worked in three different clinics, before launching Ortodent Clinic in year 2005 on London Street, Sector 1, Bucharest. Further to costant growth over the past 7 years, and following an investment of approximately 120,000 Euro, we have relocated our clinic to a new location, where we have more than doubled our space and increased the number of chairs from 4 to 7. This move has ensured that Ortodent has become the largest and only clinic specialized in orthodontics in the country. Since we moved here, we have witnessed growth beyond our expectations,” Emilia Gheorghiu Milicin, told The Diplomat Bucharest. “Since quality and dedicated patient care has always been the focus of our clinic, offering lifetime warranty to our treatments, , with the opening of the new clinic, we have also started to focus on our development in terms of marketing and PR, thus increasing market awareness for the need of Orthodontics in Romania.For this, we have hired a small inhouse team of specialists who are dedicated to increase market awareness” said Milicin, adding that this is a market with great potential, considering that 90 percent of the population needs orthodontic services, and the ability to meet these needs is still very small. Since an orthodontist can treat around 6,000-7,000 patients during his/her entire career, there is plenty of room for other orthodontists in Romania, however quality of service must prevail. “More and more people looking for orthodontic treatment are beginning to see it in terms of functionality, and not just for aesthetic purposes. We have to work very much on people’s attitude,” said the doctor. Last year the firm had a turnover of RON 850,000, posting an increase of 15-20 percent every year over the past 7 years.

Italians smile at Romanian dental services market

“There is no comparison to be made between the business 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. Favero, 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 expanded to the UK, opening a new clinic. According to the chain’s founder, Favero clinics have 20 representatives around Italy. The clinics’ local representatives, who include Radu Colteanu, manager of the Favero clinic in Romania, say 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”. 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.” ■

agribusiness event

Sowing the seeds of profitable agriculture in Romania The trade dynamics of agricultural products in Romania over the last decade, opportunities for the development of local agriculture in the context of the Common Agricultural Policy and the issue of GMOs were the main topics discussed by top managers and representatives of the largest agricultural and agriculture-related companies at the Romanian AgriBusiness Forum 2012, an event organized by The Diplomat – Bucharest in partnership with AgroBiotechRom, Monsanto, Pioneer and BRD-Groupe Societe Generale. By Roxana Cristea, Magda Purice

he development of sustainable and profitable agriculture in Romania, problems with genetically modified organism (GMO) regulations in Europe and controversies over GM crops, the trade dynamics of agricultural products in Romania over the last decade and EU policies and their impact on Romania are among the most significant problems local agriculture is facing, say industry players. And these topics were duly raised and debated at the event. Currently, Romanian agriculture must undergo many changes to reach European 34 The Diplomat September 2012

Union levels. Although the country has no irrigation system, little storage space, a productivity level that is half the EU average, and just a fraction of European funds have been absorbed, market players are trying to see the light at the end of the tunnel.

Achim Irimescu, secretary of state, Ministry of Agriculture and Rural Development

“Sustainable agriculture is a very new concept but highlighted in the last decade. The Common Agricultural Policy (CAP) has

focused on sustainable agriculture. As long as the farms respect EU rules, we can talk about sustainable agriculture at a local level. Large producers should be able to meet high standards. I believe that sustainable agriculture is the basis for future agricultural development.” “The goal is to transform the European farmer into a rural entrepreneur. Romanians can align to European requirements. Also, one solution would be agronomic research to come up with revolutionary solutions to produce more with fewer resources.”

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lives

By improving agriculture, we can improve lives. In the hands of farmers, better seeds can help meet the needs of our rapidly growing population. And they can help farmers do so while protecting the earth’s natural resources. That’s why we’re working with farmers and partners worldwide to make agriculture truly sustainable. To get more from each acre, each raindrop and each seed. And to improve the most valuable resource of all: people’s lives.

Producing More

Conserving More UÊImproving Lives

agribusiness event

Klaus Ammann, Bern University, Switzerland: I think we should change our focus from process to product. Our focus should be on products because the processes change anyway

Doru Pamfil, rector of the Agricultural University in Cluj-Napoca: The present century belongs to biotechnology, as, according to forecasts and scientific studies, 50 percent of the global culture production will be based on biotechnology by 2050.

Gheorghe Sin, president of the Academy of Agricultural and Forestry Sciences: The local potential of this segment, which could feed a population two or three times the size of Romania’s, is not being used and we should analyze several aspects.

Veronica Toncea, general director, the Guarantee Fund for Rural Credit

of such products, and some EU countries have reached their peak of productivity, plus the efficient use of natural resources and social cohesion in rural areas.”

duction on acreage obtained from Pioneer corn hybrids can provide animals with enough food to meet the annual average consumption of beef (2 billion people), pork (1.8 billion people) and chicken (1.4 billion people).”

“Among Romanian agriculture’s advantages are that it is the only sector that has something like the Common Agricultural Policy, which means a common market, common rules and standards and a common budget, European funding sources and substantial national budgets, which are used to support agricultural production and environmental development areas.” “Another advantage is the partnership with the banking system, given that all the sums will be distributed to beneficiaries through bank accounts.” “The objectives of the Guarantee Fund include supporting food security and increasing the export of value-added agricultural products, in the context in which global demand is greater than the supply

36 The Diplomat September 2012

Maria Cirja, marketing manager for Romania & Moldova at Pioneer

“The European and Romanian farmer has to develop into an entrepreneur, and act according to business principles, if we want to develop profitable agriculture.” “Production must grow continuously to cope with population growth, the consumption of fuel and increasing meat market demands. If the production cannot cope, marginal non-agricultural areas will be forced to become agricultural. Production must increase by 70 percent by 2050 to feed over 9 billion people.” “We can develop through research and innovation. Sustainable agriculture is profitable long-term agriculture. Pro-

Klaus Amman, Bern University, Switzerland

“I think we should change our focus from process to product. We should look at products because the processes change anyway. In Romania I love that farmers can talk to scientists. We are making progress and GMOs will develop in the future.”

Financing for farms

Due to its weather conditions and higher than the average European arable area, Romania has excellent primary agricultural resources, but to achieve performance like farms in other European

EU GMO POLICIES, SUSTAINABLE AGRICULTURE AND PUBLIC RESEARCH Executive Summary The farmers and public-sector scientists contributing to this paper support the call of Mr. John Dalli, European Commissioner for Health and Consumer Policy, for a more informed and less polarised debate on genetically modified organisms (GMOs), and offer this briefing paper as a contribution. This briefing paper addresses: •

Global challenges in agriculture - By 2050 Farmers need to produce 70% more food with less impact on the environment and on less land. “Sustainable intensification” requires, among other things, that farmers have crops that provide a higher yield per hectare, make better use of water, are less dependent on pesticides and fertilisers, have enhanced nutritional value, etc.

•

Public sector research - Modern biotechnology can contribute significantly to addressing these challenges, because it can help overcome some limitations of conventional breeding. Much public sector research aims at developing crops that have, for example, increased resistance against diseases and pests, increased tolerance to dry or saline soil, and enhanced nutrition.

•

Experiences with GM crops to date - Worldwide, many GM crop varieties have been grown on over hundreds of millions of hectares by over 16 million farmers, resulting in significant economic, social, health and environmental benefits. In the EU, only two types of GM crops are approved for cultivation, and in several EU countries growing these GM crops is banned. Meanwhile, the EU imports large quantities of GM commodities grown outside the EU.

•

The EU regulatory framework for biotechnology - The EU regulatory system for GMOs is not functioning as it is designed, because decisions are not taken within the time frames and/or are not based on the legal criterion of scientifically sound risk assessment. There are various regulatory proposals made to address the current impasse. Some of these proposals have met with concerns in relation to the Internal Market, WTO rules, the role of the European Food Safety Authority (EFSA), and farming and research in general.

•

Survey amongst farmers and scientists - A pilot survey has been conducted among farmers and scientists in 12 EU countries to assess: 1) the potential role of GM crops in agriculture in the EU, 2) experiences of farmers, and 3) experiences of public-sector scientists. The conclusions from the survey include the following:

•

There are many constraints in cultivating crops and trees in Europe that result in significant losses of yield and/ or substantial use of pesticides, fertilisers and/or water. For many of these constraints conventional breeding has limited potential to provide adequate solutions, whereas biotechnological tools are already available or in an advanced stage of development.

•

Current GMO policies in the EU deprive farmers of potential benefits and of the freedom to choose, and these policies hinder public-sector research for sustainable agriculture.

•

In the 12 countries in which the survey was conducted there are farmers who wish to have the freedom to use the crops they find best suited for their needs, including approved GM crops.

•

Much public-sector research in Europe has been slowed, stopped or moved abroad, because of regulatory hurdles and costs to prevent destruction of field tests.

The briefing paper ends with recommendations, including: Governments and EU institutions are urged to execute the current regulatory system in the way they themselves designed it, while upholding the freedom of choice for farmers. Farmers and public-sector scientists are called upon to better engage with the general public and policy makers and to collaborate in further developing the survey-database Background information will be placed and updated on: www.greenbiotech.eu

AgroBiotechRom

agribusiness event

Maria Cirja, marketing manager for Romania & Moldova at Pioneer: The European and Romanian farmer has to develop into an entrepreneur, and act according to business principles, if we plan to develop profitable agriculture

Toma Dinu, PhD Professor at the University of Agronomic Sciences and Veterinary Medicine, Bucharest: Romania is dependent on agricultural imports. The good thing is that exports also increased

Achim Irimescu, state secretary at the Ministry of Agriculture: At European level, we sense that there is no interest in cultivating GMOs. Romania is among the few countries in Europe that are open to this segment

countries it needs major investments in upgrading and modernization, argue players. Compared with other EU members, Romania’s agricultural system is poorly financed, has major differences in unit production, a weak organization of capitalization and must fight farmers’ reluctance to join a cooperative. The Romanian agricultural sector has a high capacity to absorb new funds and to develop further and longer than any other field. The support of the European Union through grants is an advantage for those who wish to invest, without having a significant financial contribution of their own to make. The majority of financing in agriculture is done through banks, whether it takes the form of a grant, EU funds or a loan. In 2011, considered one of the best agricultural years since the revolution, agriculture contributed 11.3 percent to GDP growth, compared to previous years when the average contribution was 6-7

percent, and both high yields and good prices gave relief to Romanian farmers.

the countries with low direct payments. EUR 8 billion was allocated to Pillar II and EUR 5 billion to Pillar I. As long as the overall amount remains constant, GDP will not be affected. If it changes it will affect Pillar II.”

38 The Diplomat September 2012

Achim Irimescu, state secretary at the Ministry of Agriculture and Rural Development of Romania

“Romania will benefit from EUR 13 billion for agriculture over 2007-2013, of which just EUR 6 billion has been accessed so far. Time is short and an acceleration of absorption is required. We have a partnership with the Guarantee Fund and the banks.” “In Romania there are two main problems for agriculture: financing and bureaucracy. Clearly, investments in agriculture are very important and direct payments will continue to support farmers’ income.” “It is difficult to achieve a balance between Pillar 1 and Pillar II. Romania needs both and we have supported this. For objective reasons Romania is among

Veronica Toncea, general director, Guarantee Fund for Rural Credit

“There is less interest in financial solutions for farmers than in 2011. Our recommendation for farmers is to take out credit in the national currency as they have revenues in RON. The maximum guarantee ceiling is 80 percent, while the maximum value of a guaranteed fund is EUR 2.5 million. There is open competition between banks to give credit for this sector. It is important to emphasize that individuals cannot obtain financing for agricultural projects unless they are authorized individuals (PFA), family associations, enterprises or other small com-

agribusiness event

Laurentiu Baciu, president of the Romanian Agriculture Producers’ League: We are currently facing the largest disaster in the last 50 years in Romanian agriculture, with production at the same vales as 50 years ago

Veronica Toncea, general director, Guarantee Fund for Rural Credit: Among Romanian agriculture’s advantages are that it is the only sector that has something like the Common Agricultural Policy

Dorel Benu, president of the Romanian Payment and Intervention Agency in Agriculture: Our most urgent need is to find a more coherent and organized system for our dialog partners

panies. In terms of procedure, nothing has changed since 2011.” “Current legislation allows the reduction of agricultural risk by having secured guarantees for both short-term and longterm loans. Financing agriculture and projects using European funds are among the main strategies of commercial banks (with an increase of about 10 percent in 2011). The volume of loans to companies has higher growth rates than to individuals and financing costs have dropped compared to previous years.” “Commercial banks compete in agricultural lending and in creating new loan products adapted to agriculture, given that prices are still in line with the 2011 trend. Commercial banks have set up offices and hired staff dedicated to funding European projects.” “The introduction of a letter of comfort has ensured that the project value takes account of the financial capacity of beneficiaries, which has reduced the risk of projects not being implemented. In terms of guarantees required by commercial banks there have been no significant changes in the percentage of coverage of guarantees of credit exposure, but due to the depreciation value of assets as collateral securities, their value is not the same.”

delivered in recent years, and we continue to deliver, financial products for farmers, to meet their need. I know that the general feeling is that banks are closely competing by launching different products in this segment, but actually their claim is limited to the safest level of financing, that of prefinancing subsidies or European funds.” “Farmers should take note of a product that can be used all along the process and that covers their needs. For instance, we have a financial product with a maturity of 10 years and a grace period of 9 months, in order to cover the seasons of the agriculture cycle.”

tion, lack of proper subsidies, tax evasion, inaction from state authorities and ministries when it comes to finding basic solutions for farmers and the fragmentation of agricultural land.” “Currently 54 percent of Romania’s agricultural surfaces are holdings of up to 1.7 ha. The added value is obtained from the 46 percent which are productive in agriculture. We have the lowest subsidies in Europe and expect others to decide for us.”

Weeding out the biggest problems

“Given the context of several crises – financial, economic, environmental and food – plain solutions are needed from politicians. Even if agriculture has been invoked many times in rhetorical speeches, it seems that, in fact, it hasn’t attracted too much attention from the political sphere.” “The local potential of this segment, which could feed a population two or three times the size of Romania’s, is not being used and we should analyze several aspects: the lack of efficiency of subsidies, the banks which are not acting according to partnership principles and ineffective lobbying by those in favor of GMOs.”

Dan Florian Petre, agriculture market officer, BRD-Groupe Societe Generale

“We represent a bank that signed the first partnership with APIA in 2008, targeting financial products for agriculture. We have 40 The Diplomat September 2012

Technical challenges, lack of proper subsidies, tax evasion, lack of state help and the fragmentation of agricultural land are among the main problems dogging Romanian agriculture. Currently, of the 10 million hectares of Romanian arable land only 600,000 hectares are irrigated and the amount of fertilizer per hectare in Romania is 6-10 times lower than in the EU. In addition, there is a lack of storage space around the country.

Laurentiu Baciu, president of the Romanian Agriculture Producers’ League (LAPAR)

“We are currently facing the largest disaster in the last 50 years in Romanian agriculture, with production equaling the same vales as 50 years ago. Some of the causes that I can indentify are the lack of irriga-

Gheorghe Sin, professor and president of the ASAS (the Academy of Agricultural and Forestry Sciences)

Dorel Benu, president of the Romanian Payment and Intervention Agency in Agriculture (APIA)

“Our most urgent need is to find a more coherent and organized system for our

agribusiness event dialog partners. Currently, we are in discussions, individually, with over 1 million farmers. Another downside of our work process is the lack of the cadastre for agriculture land.” “Also, farmers are complaining that the diesel subsidy is too small.”

Veronica Toncea, general director, Guarantee Fund for Rural Credit:

“Currently agriculture vulnerabilities include the excessive division of land plots, which has caused a high percentage of self-consumption, and the elderly farming population due to young people emigrating. In Romania farmers between 50 and 70 years old own over 2.3 million ha, meaning 24.3 percent of the total agricultural area.” “Low profitability has caused the decapitalization of the sector and was the main factor in the stagnation of agricultural production.” “Other problems are the lack of a land cadastre, the underdeveloped agricultural production marketing chain, lack of irrigation facilities, lack of state support for energy and water and tax evasion caused by the dual tax system (individual farmers, VAT excluded, corporate-VAT included).” “Another problem is the nonexistent marketing structure to integrate farmers, processors and traders in strategic alliances, with effects on produce (the diversity of producers has raised issues in providing the appropriate volume of standardized products to market requirements).”

The future of agriculture: GMO and biotechnology?

One of the most contention topics regarding agricultural development in Romania, and, to a wider degree, in Europe, is the cultivating of genetically modified organisms (GMO) and how this could boost the

growth of this strategic industry. This year’s Romanian Agribusiness Forum, organized by The Diplomat – Bucharest in partnership with some of the most significant and biggest companies, financial institutions, state authorities decision-makers and scientists operating in this field, tried to identify the pros and cons of genetically modified crops and address the most troubling aspects of this sector.

Achim Irimescu, state secretary at the Ministry of Agriculture and Rural Development

“At European level, we sense that there is no interest in cultivating genetically modified crops. Romania is among the few countries in Europe that appears to be open to this segment. I suggest we let the scientists confirm whether or not it is safe to cultivate GMOs, rather than throw ourselves into emotional debates.” “On the other hand, Romania imports 45 million tons of soya beans each year and I find it rather weird to fight against cultivating this locally but, in the meantime, import such an amount.” “I don’t think that the position of the Ministry of Environment will affect the introduction of GMOs.”

Toma Dinu, PhD Professor at the University of Agronomic Sciences and Veterinary Medicine, Bucharest (USAMV Bucuresti)

“Romania is dependent on agricultural imports. The good thing is that exports have also increased. Mostly, we exports grains, seeds and tobacco, and the numbers of imports and exports dramatically changed for instance in 2000, when GM soya started to be cultivated, and again in 2007, when GM soya was forbidden in local farming.” “Between 2002 and 2011 Romania exported agricultural products worth a total of USD 20.2 billion. Meat produc-

tion in Romania is a goal but it is limited to satisfying vegetable protein needs. In 2011 Romania imported feed and soybean cakes worth USD 340 million. Quantities imported exceed 600,000 tons (420,000 tons of soybean cake and 186,000 tons of feed, especially premixed feed). To encourage the production of meat the domestic production of vegetable protein must also be stimulated.” “In the last decade (2002-2011) in Romania agrifood imports far exceeded exports and the accumulated deficit of the period is USD 16.7 billion of which USD 11.8 billion involved EU member states.”

Doru Pamfil, professor and president of the Commission of Biotechnology of ASAS, rector of the Agricultural University in Cluj-Napoca

“The present century belongs to biotechnology, as, according to forecasts and scientific studies, 50 percent of the global culture production will be based on biotechnology by 2050. Worldwide food production is also expected to double by that year, in order to be able to feed the estimated global population of 9 billion.” “Biotechnology, by definition, plans to address the issues of food security and safety issues. Even so, it seems that currently, biotechnologies are better applied in industries, especially in bio fuel, pharmaceuticals and medicine, than the food industry.” “We should ask a question in the future: whether we want cheaper fuel or food. Currently, European regulations are pushing towards a target of 20 percent bio fuel of the total production. By 2015 more than 50 percent of global production, food, feed and feedstock will be biotechnologically processed, not necessarily GM. It is clear that for the future we must bend more to biotechnology, to establish our priorities.” ■

china

Chinese show character for business

Since 2008, China has been looking very closely at Europe in order to find investment opportunities. The pace really picked up in 2020, when Chinese investments in the continent doubled compared to 2009. The Diplomat – Bucharest found out where Romania stands on the map of Chinese investments from Huo Yuzhen, the ambassador of China to Bucharest. By Magda Purice

he Bank of China has allocated around USD 10 billion of financing to be invested in the CEE region, meaning countries such as Romania or Poland could benefit from massive investments if they can put viable and concrete projects on the table for Chinese investors. The targets are telecommunication, IT&C and technologies in general, as well as energy, education and trade. The Diplomat – Bucharest talked to Huo Yuzhen, the Chinese ambassador to Bucharest, to find out how this money can find the right and shortest way to Romania and what steps need to be taken in order to secure Chinese cash.

Chinese extends helping hand to Europe

“Thanks to the traditionally good relations and bilateral exchanges between China and Romania, the investments of Chinese companies in Romania are developing, within the new economic parameters,” Huo Yuzhen, the ambassador of China to Bucharest, told The Diplomat – Bucharest. According to official data, bilateral trade between Romania and China is currently estimated at USD 1.5 billion between January and May 2012, “a slight decrease compared with the same period of 2011 but it is expected to recover in the second half of the year,” according to the ambassador. He attri42 The Diplomat September 2012

butes the decrease to the European and global economic downturn but it is also because the first half of a year usually sees less business than the second half. In April this year, official data indicated that the bilateral exchanges between Romania and China had posted an increase of almost 38 percent for Romanian exports to China and 8.2 percent for Romanian imports, with a total value of commercial trade of USD 4.2 billion. For 2010, representatives of the Romanian-Chinese Chamber of Commerce said that the total bilateral trade registered was estimated at EUR 3.2 billion. Within the balance of exports and imports with China, Romania imported EUR 2.73 billion worth of goods in 2010, and exported EUR 386.4 million.

Park-ing investments in Bucharest

Recently, government leaders from the 16 states in CEE met the Chinese premier in Warsaw to discuss opportunities for financing and partnerships. The group settled on an agenda of 12 measures and target industries, corresponding to projects in key industries in the CEE region, one of them being the investment at Rovinari. The investments include the development of a technological park near Bucharest, as part of an agreement signed by the Agricultural Sciences Academy

10bln

USD

represents the financing from Chinese banks targeting CEE businesses in China and the Agricultural University in Bucharest. “I believe that, once this technological park is developed, more Chinese companies will come to Romania in order to establish investments and businesses locally,” said Yuzhen. The technological park project in Bucharest is supposed to pave the way for the establishment of local offices of Chinese IT&C companies and those from related industries. The park could also feature assembly lines for IT&C and telecommunication devices. According to official data, 2013 will bring over EUR 50 million of EU financing dedicated to the telecommunication and IT&C sector in Romania. According to representatives of telecom companies in Romania, the park and the potential development of two assembly lines for different devices will help local companies in Romania to acquire locally assembled products, within the Euro-

china

“The investments of Chinese companies on the local market are developing, within the new economic parameters,” Huo Yuzhen, ambassador of China to Bucharest pean space, as EU legislation stipulates. The agreement between the Romanian state and the Chinese authorities to start developing the technological park through the two production lines could be signed this year. Meanwhile, the ambassador recently said that state-owned Chinese company Huadian was in talks with the Romanian authorities over a thermo central project at Rovinari energy complex, where some EUR 900 million could be invested with the delivery of almost 500 MW installed power.

Chinese education

One of China’s priorities in the development of bilateral relations is education and professional training for employees. According to the ambassador, in the next five years, China will provide 5,000 scholarships for employees and young people in CEE. The diplomat

says that China and Romania are maintaining their traditional relationship developed over decades but adds that Chinese companies still face challenges when doing business in Romania, usually poor understanding of the local legislation, visa problems and bureaucracy.

Danube region floats onto China’s investment list

Following a recent business forum on Chinese investments in the development of the Danube region, the local authorities present at the event said that the forum formed part of the USD 10 billion of investments allocated by the Chinese government to the CEE region. According to data from the Romanian Chamber of Commerce and Industry, Europe became the largest market for Chinese investments in 2008. In 2010, Chinese investments

in the continent doubled compared with 2009. In 2011, the value of bilateral trade between China and Europe amounted to USD 570 billion. Serbia obtained a EUR 1 billion credit from China during this period, while Hungary signed a financing agreement with China earlier this year. ■

china

China deals with local market challenges Despite their different cultural background, Chinese businesses are no different than any other and talk the same language of profit and performance. The Diplomat – Bucharest found out which fields are delivering the best investment opportunities and why the Romanian business landscape offers the right conditions for Chinese brands and investors in this parlous economic context. By Magda Purice

nvestments by Chinese companies in Romania registered a peak two years ago, having doubled in value on 2009, but the last two years have seen the pain of the local economy extend to their Romanian business. The luckiest just reported smaller turnovers, while some companies, especially those based on imports of Chinese brands, faced insolvency. But there are also success stories in Chinese business, especially in IT&C and telecommunications, and Chinese investors have announced their intention to put a large amount of money into the CEE region. The companies, investors and financial institutions are now waiting for the Romanian parties to put some concrete business plans on the table. The Diplomat – Bucharest talked to the managers of the largest Chinese companies active locally in order to find out the success stories and what the future may bring for them in Romania and Europe.

Facing competition for Chinese financing

In the first quarter of this year, Romanian exports remained at the same value to continental China against the same period of 2011, but reached just 60 percent of the former value to Hong Kong and 70 percent to Taiwan, according to data provided by Gabriel Ghelmegeanu, president of the 44 The Diplomat September 2012

Romanian-Chinese Chamber of Commerce and Industry. Regarding Chinese companies’ investments locally, one single investment has been registered recently, the development of the eco-brick plant at Ovidiu, in Constanta. The Long Wall Brick plant is an ongoing investment, according to the Chamber of Commerce. The investments made so far have come from companies that have a solid track record in Romania, such as the bicycle plant from DH Sport in Deva, the investments by Ricky Impex at Afumati, in Ilfov county and the bicycle plant at Movilita, in Ialomita county, as well as the distribution and dealer networks developed by Alexandros Motors in Romania. The Chamber of Commerce also cites the investments from F&J Grup Romania in the wood industry and imports of household and IT&C products under the brand of Vortex. According to the Chamber of Commerce, Chinese companies are more and more attracted by industries such as energy, for example the modernizing of technologies in thermo centrals and hydro centrals and new plants in this field, as well as investment in green energy, such as wind, photovoltaic and biomass. Besides these large companies, according to data from the National Trade Register Office (ONRC), Chinese companies’ direct investment are estimated at some

USD 400 million from over 10,000 active firms, in en-gross and en-detail trade. “Following meetings and our discussions with different companies and authorities, we have found that the new government is open to strengthening relations with the Chinese investors, especially within the Ministry of Economy, Trade and Business Environment, Ministry of Foreign Affairs, Ministry of Culture and also the Ministry of Transport and Infrastructure,” said Ghelmegeanu. According to the official, the bilateral trade chamber is working on harmonizing the points of view of the authorities with private business representatives, in order to create a common platform for further investments. “It is a difficult year, with the change of the Romanian government and the expected elections in November, both in Romania and China. In think that 2012 should be a serious year for preparing the background so quantifiable results can be extracted from the spring of 2013,” Ghelmegeanu said. The official also underlines that the private investments of Chinese companies as well as the pledged financing (such as the already announced USD 10 billion for CEE from Chinese banks) cannot be taken for granted locally in the absence of national investment planning, the delivery of concrete projects and a minimum strategy from

china

“We affirm our commitment of staying close to Romanian-based projects in terms of developing technology infrastructure locally,” Jin Renuyuan, CEO of ZTE Romania remain strong for the foreseeable future,” he added.

Local challenges

the Romanian government. “Romanians should be aware of the competition with other EU states to attract financing and investments from Chinese companies,” cautioned Ghelmegeanu.

Practicing Chinese in business

The China Desk at KPMG in Romania and in CEE, which was established in 2011, has shown encouraging growth in the last year, with an increasing number of Chinese investors interested in the opportunities on the Romanian and CEE markets. “In the last year we have increased our staff, and we now have four Chinese staff members, out of which three are in our Bucharest office, as well as local staff with a good understanding of China,” said Ori Efraim, audit partner at KPMG Romania. Up to now, the consultancy services provided by KPMG locally have mainly been market entry related, such as market studies, project feasibility studies, legal advice, financial due diligence and tax advice. “However, we are also providing some ongoing and one-off services for Chinese companies which are already established here, such as audit and tax services. I expect this side of the business to grow as more Chinese companies become established on the Romanian market, but I expect our market entry services to also

In terms of the challenges which Chinese investors face, there are unfortunately still some bureaucratic hurdles which can be an impediment to their doing business in Romania, according to the KPMG manager. “For example, visas for Romania are harder to obtain than for Schengen. A recent press report found that in 2011 Hungary granted 114,000 visas to Chinese nationals, while Romania only granted 11,000. The Romanian authorities need to streamline the visa process and cut unnecessary red tape,” urged Efraim. One of the difficulties which all investors, including Chinese, face is the instability of fiscal legislation. The changes that are made frequently, and often at very short notice, disrupt businesses and hence have an impact on the economy, because it makes forward planning more difficult and discourages investment. This can be a particular issue for Chinese investors, who are used to working in a system which is much more stable, with long-term, statedirected central planning. China still has five- and twelve-year plans, and businesses take these into account when they devise their own strategy. So they find the frequent changes to legislation which occur in Romania quite unusual. China is one of the world’s most dynamic economies, and Chinese companies are increasingly looking to expand into foreign markets. The interest of Chinese investors in Romania and the CEE region is growing and is significant. However, to take full advantage of the opportunities presented by this investment, the Romanian authorities need to remember that Chinese investors have advanced business structures

“The more expensive it becomes to borrow money, the more I think of a more efficient leasing contract for Romanian clients of Great Wall cars,” Nawaf Salameh, chairman and CEO of Alexandros Motors 46 The Diplomat September 2012

with fast developing plans. They expect to work in a business and legal environment which is stable, allowing them to have a clear forward strategy, to prioritize projects and to be able to set clear risk and profit allocation structures. “You need to understand and respect their culture and understand the way they conduct business, and show patience,” said Efraim.

Alexandros Motors changes gear

Nawaf Salameh, chairman and CEO of Alexandros Motors, the Romanian importer of Chinese car brand Great Wall, is relaxed and focused on business. Although the firm is active in a troubled industry, severely hit by the downturn in consumers’ appetite for buying new cars, the manager said that he has put on paper a business strategy for the leasing operations of Great Wall cars in Romania and, in the meantime, is waiting for the plant in Bulgaria to complete the testing period and come up with new cars. “There is a serious investor in Bulgaria and there are ongoing negotiations between China and Romania regarding car imports. So far, we are in compliance with the Euro5 standards for Great Wall cars but, soon enough, by 2014, Euro 6 will be mandatory,” Salameh told The Diplomat – Bucharest.

china Great Wall was launched last year in the Bulgarian town of Loveci, four hours’ drive from Bucharest, and the company is expected to produce over 50,000 cars per year, produced by 2,000 workers. The investment in Bulgaria is estimated so far at EUR 30 million and by the completion of the entire project, it will rise to EUR 80 million. At the launch last year, Chinese officials said that the plant would produce the first Great Wall car to be assembled in Europe, a market of over 500 million possible clients for the Chinese brand. About seven different models will be produced at Loveci, from cars to jeeps, but the first stage will see three models roll off the production line, the Voleex C10, Steed 5 and 4x4 Hover H5. “Great Wall doesn’t copy technologies, it buys them and, as part of the company’s worldwide strategy, it will produce by itself,” said Salameh. To boost the sales of Great Wall cars in Romania, the chairman is considering a leasing contract to run for six-seven years, “for easier leasing rates for the consumer”. This strategy could also include a buy-back system for the leasing contracts. With more than 20 dealership partners in Romania, Alexandros Motors has at least 15 aftersales centers countrywide. Salameh said that he is currently in talks with different after-sales networks in order to find the right partner for these services, instead of working with multiple partners. Overall, the manager pays attention to the “costs of money”, especially for the financial-related services provided by the company, such as operational leasing. He plans to sell the operational leasing business, Alexandros Long Term Rental, a division which, according to company data, made up 65 percent of the firm’s overall turnover in Romania. “We are in talks to sell this division. It currently has some 200 ongoing leasing contracts, but last year we signed around 300 contracts,” said Salameh. Among the company’s clients, guard and security service providers ask for Great Wall cars, due to the internal fittings. Since 2007, Alexandros Motors has sold 1,000 cars on the Romanian market. The company’s history in Romania began in 2006, when Chinese car producer Great Wall Motor started to sell on the Romanian market through RoChin Motors, which was soon to change its name to Alexandros Motors, part of Alexandrion Group, best known on the local market for its brandies and wines. With some 160 cars sold in 2007 and similar volumes registered over the following years, Alexandros Motors and Great Wall cars had a battle to con-

front Romanians’ preconceptions over Chinese products, especially cars, which have special significance to the Romanian consumer, said the manager.

ZTE investments await green light from Romania

The Romanian office of worldwide telecommunication equipment producer ZTE Corporation is keeping the regionallytargeted investment plans announced last year, which involve locations including Constanta and recently named cities such as Deva and Hunedoara, according to Lorian Vintila, director of strategy and operations at ZTE Romania. The Bank of China has secured USD 10 billion of funds for developing telecom infrastructure projects in Eastern Europe, targeting countries such as Poland and Romania and, according to the ZTE official, Romania might see a large slice of this money. Locally, ZTE plans to establish two

production lines, one for building mobile handsets such as smart phones and tablets, and another where it plans to produce CPEs (customer premises equipment such as telephones, routers, switches, residential gateways [RGs], set-top boxes, fixed mobile convergence products, and so on). The CEO of ZTE Romania, Jin Renuyuan, said, “Romania has a good technological tradition. We affirm our commitment to developing projects and staying close to Romanian-based projects in terms of developing technology infrastructure locally.” The production lines could employ around 200 workers each. Last month, the telecom supplier started a trial of LTE technology in Romania, which it plans to deliver in partnership with a local telecom operator. In the next few months, the testing will start with another one or two operators on the local market. Still, according to the ZTE official, the launch of LTE (long term evolution) services is not likely to happen this year, even if the

Chinese companies in Romania China Tobacco International Europe Company

Alexandros Motors

Shareholders: 95 percent Chinese company

Romanian importer of Chinese car brand Great Wall Location: Bucharest, Ploiesti, Prahova County

Local investments: USD 40 million

Local investments: USD 12 million

DH SPORT SA & EUROSPORT DHS

Yuncheng Plate-Making

Location: Deva and Petrosani, Hunedoara County Shareholders: 60 percent Chinese; 40 percent German

The company produces industrial equipment (cylinders) for printing and the textile industry

Location: Buzau

Location: Ploiesti, Prahova County

Local investments: USD 20 million

Local investments: USD 7 million

Holding F&J Romania The group comprises eight companies in wood, construction, trade (Vortex brand), tobacco, textiles Location: Buzau and Bucharest Local investments: USD 15 million Ye Lin Activ Comimpex Location: Bucharest Local investments: USD 12 million Green Fiber International, part of Green Group The group conducts recycling and processes recycled materials Location: Buzau Local investments: USD 10 million

Ricky Impex The company produces and distributes bicycles, scooters and ATVs, with a production plant at Movilita, Ialomita county Location: Bucharest and Afumati, Ilfov County Local investments: USD 15 million DHS Group Shareholders: Prophete GMBH 47.5 percent, Niu Guanghui 52.5 percent Turnover in 2011: EUR 24 million Turnover in 2012 (estimated): EUR 30 million Employees in 2011: 320 Employees in 2012: 400

Source: The Romanian-Chinese Chamber of Commerce and Industry

china tests are successful, due to the regulator’s decision to auction the licenses in August or September, with the announcement due in October. According to ZTE, the two investments in the production lines planned by the Chinese company are awaiting a green light following a meeting between members of the Romanian government and officials in Beijing. “In October this year, China will have elections and the parliamentary elections in Romania are also scheduled for November this year. I think that we could finalize the plans in September and Romania has only to gain from seeing a decision at this time. The closer we get to 2013, the longer it will take for the two countries to sign a bilateral agreement. I want this to happen this year,” said Vintila.

“We are very pleased with the confidence shown by the new investors. The financing sum represents to us recognition of our rapid progress. The first appearance of green companies, above all, is an opportunity to prove out capabilities. This step will help us complete ongoing projects and finance future operations to emphasize the importance of care, environmental protection and compliance with the rules,” said Marius Costache, executive director at International GreenWEEE GreenLamp Recycling. According to the company official, the companies’ move under the same umbrella of the group is a business improvement and development. It represents an integrated approach to the collection and treatment of certain categories of waste and will lead to good risk management when dealing with the waste generated by consumers and industry. “Our goal is to develop businesses that can close the circle of recycling collection systems, treatment and recycling,

the company’s data. Still, in Romania, the improvement of the selective collection system starts with its implementation. To rely on good will is not enough, as no European country has achieved its objectives through voluntary recycling, due to low efficiency, and so they subsequently resorted to mandatory measures. The company had a pilot project in supermarkets, in which people who bought PET products and later deposited the packaging in a selective collection machine received a small sum of money back. Greentech is one of the largest recyclers of PET in Romania. By February 2012, its investments in recycling had amounted to EUR 35 million and consisted of: equipment (the largest share), production halls and related fields. In 2011, the company had a turnover of RON 115 million, a gross profit of RON 5 million and about 450 employees. In addition, in 2011 it recycled approximately 35,000 tons of PET waste, sourced from sanitation companies, collection companies and

“There is a need to understand and respect the Chinese culture and understand the way they conduct business, and show patience,” Ori Efraim, audit partner with KPMG Romania

Going Green

GreenTech SA, GreenFiber International SA, GreenWEEE International SA and SA Recycling GreenLamp have pooled their activities in Romania under the same name, Green Group. They became the only integrated recycling park in Romania in a transaction that the majority shareholder, Romcarbon SA, concluded with the European Bank for Reconstruction and Development (EBRD) and South Eastern Europe Fund (SEEF), managed by Global Finance, the companies’ representatives announced in May this year. The total investments made by the EBRD and SEEF are estimated at EUR 22.7 million. Company officials announced that the project is a major capital transaction in the recycling field in Romania and voiced their support of the Green Group’s strategy to become the most important recycling park in South-Eastern Europe. 48 The Diplomat September 2012

which means actually saving the natural resources of raw materials and energy,” said Mihaela Savin, CEO of Greentech International Greenfiber. In February this year, Greentech, the company in the group that does the collection and recycling of plastic material waste, announced its plans to invest EUR 8 million in 2012 in a project to increase recycling capacity and to modernize the flow in the company’s existing recycling stations. According to Greentech’s representatives, as an EU member country, Romania will soon be forced to account for the amounts collected and not the collection points set up. They add that there are two ways to meet the EU requirements: the implementation of mandatory selective collection with the adoption of coercive measures, as most European countries have chosen, or the introduction of a deposit system (guarantee) for PET bottles and aluminum, as ten European countries opted to try. The collection rate of PET in countries where the recycling system has been introduced exceeds 80 percent and in Germany it is 93 percent, according to

garbage pits. The amount of PET waste in Romania recycled in 2011 was about 10 percent higher than in 2010. The figures for 2010 and 2009 are similar. According to the company’s data, Romania had a PET waste collection rate of 25 percent in 2010. The average for the EU plus Switzerland and Norway was 48 percent, while in CEE, Hungary posts 30 percent, the Czech Republic 60 percent, Slovakia 48 percent and Bulgaria 25 percent. Greentech officials say the highest collection rates are in countries that have implemented the deposit system, which post above 70 percent. Green Group has over 1,500 employees and workstations operating in Buzau county, Bucharest, Ilfov, Iasi, Arad and Cluj, as well as Serbia, Macedonia and Germany.

Huawei’s local support center feeds on specialized know how

In 2011 Huawei Romania, the local subsidiary of Huawei Technologies, launched 11

china mobile handsets models under the brand, of which three are smart phones. “The peak of sales was at Christmas, and this was also when we introduced mobile phones with the Android operating system. Sales have been increasing, and all the new models sold better than the previous ones. Regarding tablets, the Orange Tahiti tablet and the S7slim by Cosmote sold very well,” said Elena Simona Stefanescu, key account director at Huawei Technologies. So last year was a good one for the company, in spite of the difficult economic context. “Our relations with our customers were consolidated. Also, we targeted a cost-effectiveness strategy in our business. It’s true that there were no investments in large expansion of the network but, more importantly, we delivered tailored solutions for mobile operators, adjusting to the current market needs,” said Stefanescu. The company has developed a global support center in Romania owing to the

tions and partnerships with all big telecom retailers and operators, such as Vodafone, Orange, Romtelecom and Worldcomm, Arsis, Germanos, Internity, Fonomat, Proton and Say. Its operations in Romania cover telecom handsets, fixed and mobile, modems and also projects for mobile communication technologies such as GSM, UMTS, CDMA, fiber optics and xDLS.

DHS saddles up in western Romania

Local business of bicycle producer DHS group in Deva, western Romania, is controlled by Chinese and German investors, and, according to company data, the shareholder Prophete Gmbh acquired a package of 7.5 percent to reach a total stake of 47.5 percent. The firm’s turnover increased by an estimated 10-14 percent in the first half of 2012, year on year, along with a growth in exports, according to representatives of the company. In 2011, DHS group stepped up its marketing activities, which resulted in

and drop in consumption appetite. In 2011, according to DHS estimations, the bicycle market in Romania was worth approximately EUR 16 million. Last year, besides its existing retail network, DHS opened a 420-sqm sales office in Timisoara, following an investment of EUR 50,000. In January this year, DHS opened a new store at Constanta, with 126 sqm. Currently, DHS runs 5 stores and 15 franchised DHS Special Line, representing a total investment of approximate EUR 500,000. According to the company’s plans, the franchise network DHS Special Line is estimated to reach 30 stores in Romania. Every year, DHS organizes two important national contests: “DHS CUP” in cooperation with Ministry of Education, Research, Youth and Sport and Ministry of Administration and Interior - the most

“The boost came as a result of marketing, production, promotion of new types of bicycles and expansion of children product range,” Niu Guanghui, president DHS Group local abilities of Romanian specialists in telecommunications. “The technical schools in Romania produce very well prepared specialists. We decided to open the global support center here in spite of the local labor costs which are not the lowest in Europe in telecommunications, in order to benefit from the specialized professionals,” said Stefanescu. Currently, Huawei has 600 workers in Romania and, by the end of 2012, it will hire more than 400. In 2011, Huawei Technologies invested over 3 billion in R&D and the investments in this area are growing, due to the specifics of a market in which a company has to constantly keep pace with new technologies and innovations. The company expects growth in 2012, albeit muted growth, but the changes on the local market regarding the 2G and 3G licenses will present interesting challenges to the Chinese firm. In Romania, the company carries out the local operations run by the group’s regional hub in CEE and Northern Europe, which facilitates integrated business solu-

an increase in business. At that time, officials said, “The boost came as a result of marketing and production, following the promotion of new types of bicycles, the expansion of the product range for children and the overall greater interest in this type of vehicle.” Following the company’s investment plans announced in 2011, DHS launched a production line for electric-assisted bicycles (the E-Bike), which company officials say have been a hit in Europe and hope will enjoy similar success in Romania. According o the company statement, this is the first plant in Eastern Europe to produce high-end E-Bikes. The best sales of bicycles so far are registered by the hypermarket chains in Romania. Currently, DHS group in Romania is on sale through a network of 320 dealers. According to company data, the network has increased from 260 to 320 dealers, due to the products targeting children. The bicycle market is estimated to post a slight growth this year, of some 5 percent, due to the overall economic situation

important bicycle riding skills contest and road traffic education for school children and “DHS Corvin MTB Marathon” aiming professional riders. The latter project was started this year in association with CS Silver-Fox, DHS Tibiscus Team, Hunedoara City Council and City Hall and involved more than 600 professional cyclists. DHS success story will go on and keep the promise of promoting cycling as a healthier way of life. In 2012, “DHS Cup” will develop further and extend its presence from local to national while “DHS Corvin MTB Marathon” will position itself as one of the most important national and European contest for professional bikers. Community programs like free bike sharing or giving away 3000 bicycles to children from disadvantaged villages to ride to their schools will also be on track for next year. ■ 49

business leader

Property Fund takes on critics of second listing Greg Konieczny, fund manager of the Property Fund, tells The Diplomat – Bucharest the fund’s latest plans for a secondary listing on the Warsaw stock exchange and describes the main challenges on the local market. By Dana Verdes

or the manager of one of the most important funds on the local market, the Property Fund, things are not going as smoothly as he might have hoped. The job comes with lots of responsibilities and obstacles and is not the cushy gig that many would guess. “I have always been involved in investments in this part of the world but it is very different actually doing business locally and being responsible for such a mandate. It’s very challenging, it requires a lot of time and sometimes it is very frustrating. Here, very often we agree on something and it does not happen. I have to adjust as the Romanian climate is very different from my country,” Greg Konieczny, fund manager of the Property Fund, tells The Diplomat – Bucharest.

The secondary listing

Who is Greg Konieczny? Greg Konieczny, executive vice-president and portfolio manager, joined the Templeton organization in 1995. He has research responsibilities for companies in Central and Eastern Europe (excluding Russia). Prior to joining Templeton, Konieczny was director of capital market transactions at Bank Gdanski, one of the largest financial institutions in Poland at the time. He earned a master’s degree in economics and foreign trade from the University of Gdansk (Poland). In 1994, he obtained an investment advisor license from the Polish Securities and Exchange Commission.

50 The Diplomat September 2012

The fund’s short-term plans are very clear. They include its listing on the Warsaw Stock Exchange. “We have emphasized many times that the success of the fund depends on the development of the domestic market and with this secondary listing we have been getting a lot of comments from local brokers and other people involved in the market that by doing this, the local market is going to suffer. Based on our experience, and the experience of the investment banks, the local market should benefit from this, big time, and those who refuse to accept it must at least acknowledge our arguments behind it. In terms of secondary listings, it is always the local market that wins, as eventually all the liquidity really concentrates on this market,” said Konieczny. He added, “For us, the listing in Warsaw is not about creating better liquidity there, but just to add to the demand from investors. There are, of course, benefits for the Romanian market. The fund listed on another market would be very visible. It would be one of the largest companies and, as a result, there will be a lot of news and comments about the FP in the Polish and international press. We’re trying to promote the Romanian market, our fund and obviously our portfolio.” According to the manager, the fund’s main target is to increase its value. “In this regard we are trying to increase the profitability of the companies in which we are involved. The current discount is 58 percent and we are not happy about it. We have

business leader stopped making any new investments because of the discount which is very hard to beat. We are analyzing ways of increasing demand for shares through the buy-back program, the secondary listing and encouraging long-term investments through dividend payment,” said Konieczny. On the Warsaw listing, the manager says there is a persistent impediment: there is no link between the two depositories, and without this link it is impossible to really trade the shares. He has also detected a resistance, or reluctance, on the part of the Romania Depository and the CNVM. “Up to now, we have been able to attract more than EUR 600 million of fresh investments to the Romanian market, a situation that hasn’t happened in years. We plan to continue to do so but we need some support from the local authorities. We can’t say everything is great and then when investors come and hear about the issue with the link, they say: ‘If they don’t want you, why should we invest in the fund?’,” said Konieczny. He added, “We do not understand this reluctance as this could be a good way to increase Romania’s stock exchange exposure and could bring new investors here. The CNVM and the Depository are trying

to amend the regulatory framework but we do not have a deadline. That’s the issue. We started to think about the secondary listing of the fund in order to allow more investors to buy, to increase the price of the shares.”

The listings saga

The fund manager believes that any other listing of energy companies will follow if those companies are run by professional managers; otherwise it is not going to happen. “The best example is Petrom. Many people do not like this company but before it was acquired by OMV in 2004 its profit was – regardless of the old gas price – EUR 50 million and the year after OMV took it over it jumped to EUR 500 million. This shows how much useless weight there is,” said Konieczny. In his opinion, the local energy companies can finance their own projects internally, by the cash flow they generate, if it is not directed towards other interests. “So far, so good, but we need action. Things seem to be going in the right direction and in some cases there needs to be some kind of decision taken. I have had discussions but the final decision will depend on the price presented by the investment bank and it might be postponed until the market

improves. Work is being done to improve these listings, there are important companies involved and they can wait until the market conditions improve. What is important is that the offer is ready to be launched as soon as a decision is taken, depending on the market conditions,” said Konieczny.

The Hidroelectrica thorn

Hidroelectrica has been raising many issues as the company is characterized by a lack of transparency and many dubious contracts. “We are not happy about it because we think it is the ‘nuclear’ option to address the company’s liquidity problem. We are very much affected. For us, it is important to make sure that the insolvency process runs smoothly and we are ready to cooperate with the administrators. We also want this process to end as quickly as possible and, hopefully, as a result of this process, Hidroelectrica to emerge as a much stronger company,” said Konieczny. He added, “We are not going to support any asset sale by the temporary administrators. We think that, if the company decides to sell assets, this decision should be taken by, hopefully, at that time, professional managers.” ■

events Power Players: The Top Attorneys Gala awarded the most powerful law firms in Romania and the Republic of Moldova, based on

the results obtained in 2011. Special guest was Dr. Rupert Wolff, president of the Austrian Bar Association, which sent the audience a message about ethics in the legal profession. The Gala was also attended by George Amihalachioaiei, Chairman of the Bar of the Republic of Moldova and Ion Ilie-IordÄ&#x192;chescu, dean of the Bucharest Bar.

Shop till you drop: Baneasa Shopping City

hosted the three-day event Summer Extravagance Discounts, during which customers could shop until midnight. To mark the event models from MRA Models staged a fashion show to display the collections available in stores.

Environmentally friendly festival: One of the most eagerly anticipated music festivals of 2012, Bâ&#x20AC;&#x2122;ESTFEST, went green this year. In the three days of good music and hot temperatures, the more than 61,000 participants contributed to 26 recycling points provided by Eco-Rom Packaging. Some 3,800 kilograms of packaging waste was deposited. Vintage jewelry: Artmark has established a special

category of auction dedicated to vintage and collectible jewelry. Diamond rings, pendants, brooches and bracelets with precious stones are among the approximately 100 exceptional pieces that were auctioned simultaneously in Mamaia and Bucharest. The most valuable item was a Crivelli evening necklace, made up of five white gold chains and decorated with 1,000 diamonds totaling 36 carats.

Local player scores: One of 64 finalists of Indesit Football Talents, a competition organized by Indesit for football fans worldwide, is a Romanian who won the chance to train with Gianfranco Zolo and play in the colors of Paris Saint Germain at the Emirates stadium in London. The 64 finalists were divided into four teams, who were trained by Robert Pires, Daniele Massaro, Zola and Jean-Pierre Papin. 52 The Diplomat September 2012

Football fest: Carlsberg, one of the most long-standing European Championship sponsors, was running a promotion for football supporters, which includes special activities in fan camps, online applications and activities on Facebook, and betting contests. In Romania, football fans keeping up with Euro 2012 could watch matches in Carlsberg-sponsored locations across the country and could bet on their favorite teams in partner pubs in Bucharest and 16 other cities.

events

Seeds of growth: The Romanian AgriBusiness Forum 2012, an event organized by The Diplomat â&#x20AC;&#x201C; Bucharest in partnership with AgroBiotechRom, Monsanto, Pioneer and BRD-Groupe Societe Generale, gathered the top managers and representatives of the largest agricultural and agriculture-related companies on July 10 to discuss the trade dynamics of agricultural products in Romania over the last decade, opportunities for the development of local farming in the context of the Common Agricultural Policy and the issue of GMOs.

Financing hurdles: More than 150 people attended the conference Financing PV in Romania, organized by the Romanian Photovoltaic Industry Association (RPIA) in July. During the event banks including BCR, Volksbank and UniCredit Leasing joined investors to discuss the main demands and concerns regarding PV project financing on the local market. 53

city life Lenny Kravitz postpones Bucharest concert for 2013 Lenny Kravitz, one of the most popular American musicians of the last 20 years, will again perform before his local fans, not in September (as it was progammed), but in 2013. He had to postpone his meeting with the Romanian fans for 2013 due to contractual obligations that forced him to stay in the US. He is currently filming for the movie “The Butler”. Throughout his career, the New Yorker has frequently topped the charts and has gained a global following. With four Grammy Awards for Best Male Rock Vocal Performance, nine studio albums, a total of over 35 million albums sold worldwide and an unmistakable voice, Kravitz is an atypical rock star. His hits include I Belong To You, Are You Gonna Go My Way, Fly Away, American Woman and Again, and his musical style combines elements of rock, soul, funk and reggae. ■

Hallelujah! Leonard Cohen has idea to return to Romania Iconic Canadian artist Leonard Cohen returns to Bucharest on September 22. His concert, which will form part of the promotional tour for the singer’s twelfth album, Old Ideas, will be held in Constitution Square. Material from the album, which contains ten new songs, was released in late January and topped the charts in

Italian music legend to make local debut Umberto Tozzi, whose hit song Gloria still enjoys extensive airplay more than 30 years since its release, will perform on September 15 at the Palace Hall in Bucharest. Famed for songs such as Tiamo, Mama and Si puo dare di piu, the Italian artist has sold over 45 million records worldwide. Tozzi, a singer, composer and music producer, embarked upon his career in 1968 at the age of 16, as a member of the Sound Off band. Since then he has released 25 albums, featuring over 20 international hits. Gloria, which remains his most famous song, featured American singer Laura Branigan and spent 36 weeks in the US pop charts. Ticket prices go from RON 135 to RON 315. ■ 54 The Diplomat September 2012

nine countries. In a career spanning over 40 years, Cohen’s distinctive style has seen him rewarded with over 25 gold and platinum discs and a global fan base. His hits include Suzanne, Dance Me to the End of Love, First We Take Manhattan and Hallelujah. Tickets for the concert are available through the Eventim network.■

Anathema forecast to bring Weather Systems to Jukebox Venue

Anathema will be back in Bucharest on September 23 in a concert promoting their newest album, Weather Systems. The event, which will take place at Jukebox Venue, is being organized by Phoenix Entertainment. The concert is part of a promotional tour for the latest album by Anathema. Weather Systems marks a stylistic departure from its predecessor, We’re

Here Because We’re Here, both in terms of lyrics and production. Though Anathema started out as a doom metal outfit, the British act moved on to play alternative, progressive and post-rock. The band, which was founded in 1990 in Liverpool, has so far released nine studio albums, including A Natural Disaster and A Fine Day to Exit. ■

SIMPOZIONUL ICPE ACTEL, ediţia a IX-a INOVARE ŞI TRANSFER TEHNOLOGIC ÎN DOMENIUL ACŢIONĂRILOR ELECTRICE DE PUTERE 13 septembrie 2012 Palatul Parlamentului, Sala Nicolae Bălcescu

AGENDA MODERATORI:      

Dr. ing. Iulian Iancu, Preşedinte CNR-CME Dr. ing Ion Potârniche, Director General ICPE ACTEL Prof. dr. ing. Florin Teodor Tănăsescu, Preşedinte Comitetul Electrotehnic Român Prof. dr. ing. Nicolae Vasile, Preşedinte Consiliul Ştiintific CNR-CME Prof. dr. ing. Valentin Năvrăpescu, Decan Facultatea de Inginerie Electrică, UPB Prof. dr. ing. Mihai Octavian Popescu, Profesor Facultatea de Inginerie Electrică, UPB

08.30-09.00

Inregistrare participanţi. Invitaţie la cafea.

09.00-12.00

SESIUNEA I

1. Cercetarea şi inovarea - catalizator al soluţiilor eficiente energetic Prof. dr. ing. Valentin Năvrăpescu, Decan Facultatea de Inginerie Electrică, UPB 2. Inovarea – necesitate obiectivă in activitatea inginerească performantă Dr. ing. Ion Potârniche, Director General ICPE ACTEL 3. Soluţii şi echipamente electrice pentru forajul de hidrocarburi eficient energetic Drd. ing. Adrian Rădulescu, ICPE ACTEL 4. Implementarea în practică a eficienţei energetice în domeniul producerii energiei cu ajutorul hidrogeneratoarelor Dr. ing. Simona Voina, ICPE ACTEL 5. Lansare de carte: ”Transformatoare uscate. Inductanţe. Proiectare. Aplicaţii” Ing. Emil Lăzărescu, Dr. ing. Ion Potârniche, Editura AGIR 12.00-14.00

Bufet

14.00-17.00

SESIUNEA A II-A

1. Ingineria electrică - mediator în relaţia sursă şi consumator privind calitatea energiei electrice Prof. dr. ing. Mihai Octavian Popescu, Facultatea de Inginerie Electrică, UPB 2. Calitatea energiei electrice la consumator - prioritate absolută pentru soluţiile ICPE ACTEL Dr. ing. Ion Potârniche, Director General ICPE ACTEL 3. Politici de firmă în vederea transferului tehnologic al propriilor soluţii şi produse inovative Ing. Cornelia Popescu, ICPE ACTEL 4. Energia fotovoltaică - o energie curată şi de viitor? Ing. Cristian Lungu, Director General EOSOL DESIGN 5. APREL - liantul unei politici coerente în domeniul ingineriei electrice Ing. Valeriu Velciu, Preşedinte APREL

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