The Diplomat no. 1 2013 by The Diplomat-Bucharest

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Vol. 9, No. 1, February 2013

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Vol. 9, no. 1, February 2013

Top meeting: Prime Minister Victor Ponta and Environment Minister Rovana Plumb were be present at the R20 Conference on Energy and Sustainability, attended also by Jose Manuel Barroso, President of the European Commission, Werner Faymann, Chancellor of Austria, and Arnold Schwarzenegger. Mr Ponta stated that he tried to meet top managers of large companies, such as OMV, and promoted Romania as an investment opportunity for renewable energy production.

Elegantly wasted Romanian recycling is a late bloomer, but itâ&#x20AC;&#x2122;s catching up

12 34

Green light The green development market under analysis

Power shortage The short circuits on the energy market

4. GDP revision

9. New loan

6. Expert advice

10. The power of light

7. Relying on wind

38. Glamorous entertainment

8. Privatization strikes again

42. Limitless

This year, Romaniaâ&#x20AC;&#x2122;s GDP will increase by 1.6 percent To accelerate economic growth, Romania must stress certain areas Three Enel wind farms were connected to the grid early this year Government committed to sell a majority stake in CFR Marfa

Raiffeisen Bank lends EUR 30 million to AFI Palace Ploiesti Spanish company plans to invest EUR 100 million into three solar parks One of the main TV players active on the local market shares its secrets BMW shines again with a new sporty baby: X6 M50 D

Address: Calea Mosilor Nr. 306, Bl. 56, Scara A, Etaj 2, Apt. 7, Sector 2, Bucuresti, Romania Have you got a story? Call our news desk on 021 2101336 or office@thediplomat.ro Do you want to place an ad? Call our sales desk on 021 2101336 or sales@thediplomat.ro

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Cover by Nicu Popoviciu ISSN: 1584-8469 All rights reserved. No part of this publication may be reproduced or transmitted by any means without the prior permission of the Diplomat Media Group. Copyright 2013 - Diplomat Media Group SRL

politics BNR likely to miss inflation target for 2013

The National Bank of Romania’s (BNR) annual inf lation target of 2.5 percent this year is likely to be missed due to the impact of regulated price increase, according to bank officials. The inf lation estimate arrived at after discussions with the IMF delegation stands at 3.7 percent for the end of the year. In 2012, the annual inf lation rate was 4.95 percent, missing the target by almost one percentage point.

Romania ‘meets Schengen requirements’, says EC spokesperson

Romania meets the specific requirements to join the border less Schengen Area, according to Mark Gray, the spokesperson of the European Commission (EC). The spokesperson acknowledged Romania’s progress under the Cooperation and Verification Mechanism. The two countries who have blocked Romania’s entry to the Schengen Area are the Netherlands and Germany.

Confusion over local tax hike

Local authorities were left in a state of confusion after seemingly contradictory changes were made to their tax regime. Local taxes were expected to increase to 16.5 percent in 2013, following indexation to inf lation over the past three years, according to a government ruling at the end of 2012. However, in January, the Executive adopted an ordinance allowing local authorities to keep taxes unchanged in 2013. Shortly after, another rule change obliged city halls with arrears to increase local taxes. Under the new law, only city halls that had no arrears at the end of 2012 are allowed to keep local taxes at last year’s level.

The Diplomat February 2013

Energy companies’ tax burden increases A new set of taxes targeting energy companies was approved by the Government a few days after the presentation of the budget for 2013. Companies that exploit and extract natural resources other than gas in Romania will pay a special tax of 0.5 percent on their revenue. Natural gas and electricity transporters will pay a special tax on natural monopolies, based on the number of billable megawatt-hours. Companies that extract and sell natural gas on the local market, including the Black Sea perimeter, will pay additional taxes. The tax will apply to additional revenues following price deregulation in this field and will be effective between February 2013 and December 2014. It will represent 60 percent of additional revenues. ■

GDP predicted to grow by 1.6 per cent in 2013 Budget Minister Liviu Voinea revised GDP growth down to 1.6 percent in January, a dip from the 1.8 percent projected less than two weeks earlier. The revision of gross domestic product growth for 2013 was necessary due to a more conservative and cautious approach, said the minister. The European Bank for Reconstruction and Development

is even more pessimistic, forecasting only 1.4 percent growth. Further adjustments are very likely to follow from the IMF and the European Commission. According to estimations, the budget deficit will decline from 2.3 percent of GDP to 2.1 percent in 2013 while revenues are set to grow by six percent. ■

Romania asks IMF for bailout review postponement

More time is necessary for Romania to fulfil its commitments in view of the country’s precautionary loan agreement with the International Monetary Fund, said PM Victor Ponta after a meeting with the IMF delegation. The EUR 3.6 billion loan

arrangement, due to end in April, needs to be extended by two months in order for Romania to complete reforms at staterun companies. A new precautionary loan arrangement will be sought after the completion of the current one, said Ponta. ■

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economics Michelin to buy EUR 1.6 million land plot

Michelin Group, one of the top tire manufacturers in the world, bought in late January a 20 hectare land plot, worth EUR 1.6 million in Zalau city, in order to expand the plant’s production capacity, according to Ziarul Financiar. “This land will allow the Michelin Group to continue the long-term development strategies applied in Romania,” Michelin Romania officials said. “At the moment, the group carries out several analyses. Afterwards, we will communicate further concrete development plans.” This is the first new investment announced by the French company since April last year.

Accelerate Romania’s economical growth

State-owned companies restructuring, public and private investments targeting the education system and a strong entrepreneurial environment represent several solutions to accelerate economic growth in Romania, according to experts quoted by Ziarul Financiar. The solutions were presented by the Poland, Finland and British ambassadors in early February, during the Romanian Business Leaders Summit, a nongovernmental organization founded two years ago by several executives and entrepreneurs from the local business environment. “I think the challenge for Romania, Poland, Finland and the whole European Union is currently competitiveness. This is the item you need to focus,” said Martin Harris, UK Ambassador to Romania. “We have to see if the public sector is either an engine or an obstacle for economic growth.”

High income taxes for the public sector

Romanian PM Victor Ponta said in an interview to HotNews that the government is looking for the “right judicial and constitutional solution” to allow for higher income taxes for budget sector employees with incomes of more than 4,500 lei (1,000 euro).

The Diplomat February 2013

Record low yields for local Eurobonds Romania’s first bond issue of the year was hailed as a financial success, with the Finance Ministry raising EUR 502.5 million, more than three times the planned amount, and the average yield dropping to a record low of 3.14 percent a year. The funds obtained from the three-year Eurobond will be used to finance the budget deficit. This

record yield was also fuelled by the inclusion by JP Morgan Chase of the Romanian bonds in its GBI-EM local markets index as of March 1. Romania’s gross borrowing requirement is estimated at EUR 14.9 billion in 2013, of which EUR 2.8 billion is needed to finance the budget deficit, according to a report by Fitch Ratings.■

Deadline for privatization of state firms pushed back to end-April The deadline for the privatization and launch of the initial public offerings for companies under the authority of the Economy Ministry has been pushed back to the end of April, said Minister Varujan Vosganian. After numerous delays and pressure from the IMF, the Government will resume its search for investors and sell its shares in energy companies such as Transgaz, Romgaz, Hidroelectrica and Nuclearelec-

trica. The privatization of chemical plant Oltchim Ramnicu Valcea will again be on the table but without a specific schedule. The privatization of CFR Marfa has become a top priority for the Ministry of Transport. Minister Relu Fenechiu stated after the meeting with the IMF delegation that the privatization was due to start in February and would take no longer than six months. ■

IMF puts 2013 growth at 1.5 percent The International Monetary Fund (IMF) projects Romania’s economic growth at around 1.5 percent in 2013. “After almost zero growth in 2012, economic growth is estimated at 1.5 percent,” said Erik de Vrijer, the IMF mission chief to Romania. The financial crisis and hostile international environment are to blame for the country’s modest results last year, commented de Vrijer. He added that the greater

absorption of EU funds could have helped alleviate the situation. The measures agreed with the delegation are meant to accelerate the absorption of EU funds, particularly to finance infrastructure projects. The government also agreed to implement a number of measures to improve performance in the energy and transportation sectors, the including privatization of large state-owned companies such as freight rail operator CFR Marfa. ■

energy Chinese Sinovel to partner Faur plant for wind turbine production The largest Chinese wind turbine producer, Sinovel Wind Group Co, is in advanced discussions with Romanian heavy machinery plant Faur to jointly invest in a wind turbine production

facility in Romania. Company executives expect a deal to be signed within a few months. Sinovel is already active on the market as the operator of two wind parks. ■

InterAgro Group invests in Turnu Magurele cogeneration plant

InterAgro Group has invested EUR 21 million in a 20 MW cogeneration plant in Turnu Magurele. The plant has three power units of 6.75 MWh each and will deliver the energy produced to a company in the group, chemical fertilizer producer Donau Chem.

Three Enel wind farms connected to grid

GE Wind Turbines to Power Energia Verde Ventuno’s Cerna Wind Park in Romania Energia Verde Ventuno has selected seven 2.5-103 GE wind turbines to power its Cerna Wind Park in Romania’s Tulcea region. The project will generate enough clean energy to power approximately 7,000 Romanian households when it enters service later this year. GE announced the 17.5-megawatt (MW) deal, which includes equipment supply and service contracts totalling nearly USD 30 million. The project is cofinanced by the European Union through the Sectoral Operational Programme for the Increase of the Economic Competitiveness, underscoring the strategic importance of green power generation in the region. The financing for the construction of the wind park has been provided by a leading European commercial bank and Quercus Assets Selection. “The Cerna project is the latest example of our commitment to support the

growth of wind power in Romania and across Eastern Europe,” said Stephan Ritter, GE’s general manager for renewable energy in Europe. “The use of GE’s advanced wind turbine technology enables high efficiency and reliability and significantly increases wind park production capacity and productivity for our customers in the region.” GE has also supplied wind turbines for the 600-MW Fantanele/Cogealac wind park, Europe’s largest onshore wind project, which is in full operation and is producing enough clean energy to power more than 1 million Romanian households each year. The project utilizes 240 GE 2.5-MW wind turbines, including the 1.000th 2.5 MW class machine installed by GE worldwide. GE technology also is powering a number of other wind farms in Romania, including Mireasa 2, Silistea 2 and Galbiori. ■

Recolamp Association collected 520 tonnes lighting equipment waste in 2012 Recolamp Association, the not for profit organization founded by General Electric, Osram Romania and Philips Romania, has collected and recycled in 2012 - 520 tonnes of lighting equipment waste registering an increase of almost 350 percent compared to

the waste quantities managed by the organization in 2011. In 2012, Recolamp represented 145 compliant Romanian lighting equipment producers that had transferred their legal obligation regarding the waste management of electrical and electronic equipment. ■

Three wind farms owned by Enel Green Power and located in south-eastern Romania, with a total capacity of 206 MW, were connected to the grid early this year. The sites, Elcomex EOL, Targusor and Gebelesis, will produce around 560 million kWh per year once operational. Following an investment of around EUR 340 million, the three parks will raise Enel’s total installed capacity in wind to almost 500 MW.

ANRE opens debate on gas auction

Energy regular ANRE is launching a public debate on the open auctioning of 45 percent of the gas extracted in 2013 by Romanian state-run producers. As the Romanian Energy Regulatory Authority (ANRE) currently regulates the prices of domestic gas, keeping the rates significantly lower than imported gas, this measure is intended to ensure nondiscriminatory access to natural gas resources and increase market transparency, according to the president of the ANRE, Niculae Havrilet. Private companies are not covered by this regulation but Havrilet says that they could also use these auctions to get better prices. No specific term was set for the enactment of this measure.

Max Boegl taps into Romania’s wind potential

German company Max Boegl is entering the local energy sector with the development of a 99 MW wind farm in the Tulcea area of south-east Romania, which requires an estimated investment of EUR 180-200 million. The project is set to be operational in 2014 and will be equipped with some of the largest wind turbines available. This is Max Boegl’s first energy project in Romania, where it has mainly been active in infrastructure project works.

infrastructure Craiova-Pitesti and Ploiesti-Focsani highways are up for grabs

The national roads authority (CNADNR) intends to put up for concession two contracts for building the Craiova-Pitesti and Ploiesti-Buzau-Focsani highways. The first highway, linking two cities with a strong automotive industry – Craiova and Pitesti – is set to cost between RON 3.7 billion (EUR 660 million) and RON 4.9 billion (EUR 1.1 billion). The Ploiesti-Buzau-Focsani highway, which is also planned to be built under concession, is set to cost between EUR 800 million and EUR 1.07 billion. The concessionaires will have to design, build, finance, operate and carry out maintenance work on the two highways.

The state will allocate three billion to co-finance projects with European funding The amounts allocated by the state budget for the co-financing of EU projects could reach this year about EUR three billion, up 33 percent from 2012. According to preliminary execution of the 2012 budget, Romania spent for co-financing 10.5 billion lei,

compared to 12 billion lei, as scheduled. Of the total structural and cohesion funds awarded between 2007-2013 in the amount of 19.6 billion Euro, Romania only managed to access about 2.2 billion Euro, less than twelve percent. ■

Romania’s highways to get EUR one billion in 2013

CFR Marfa privatization expected to bring around EUR 60 million to state budget

Romania’s Transport Ministry has estimated the value of CFR Marfa at around EUR 60 million. “Privatization revenues are estimated at RON 291.09 million, resulting mainly from the sale of a majority stake of 51 percent in CFR Marfa,” said representatives of the Transport Ministry. According to the calendar of privatizations agreed with the IMF, the Romanian Government is committed to sell a majority stake in CFR Marfa by May this year. The privatization of CFR Marfa was supposed to take place by the end of 2012, but the sale was delayed due to poor market conditions and regulatory proceedings, said Government officials.

EU approves EUR 751 million financing for railway modernization

The European Commission approved financing of EUR 751 million to Romania for the upgrading of a section of railway that is part of the Pan-European Transport Corridor IV. The 89.5-km railway section links Sighisoara to Coslariu and will cost EUR 884 million, some of which is national co-financing. The project should be completed by end-2015.

The Diplomat February 2013

The development of infrastructure projects has been allocated around EUR 800 million from foreign funds and around EUR 20 million from the state budget for priority projects, based on the newly established large projects ministry run by Dan Sova and the priority projects list approved by the Government. The list of priority projects includes the OrastieSibiu Cernavoda-Constanta, Lugoj-Deva, Bucharest-Brasov, Arad-Timisoara and Nadlac-Arad highways and the Arad and Brasov-Cluj-Bors by-passes. The Roma-

nian road authority, the CNADNR, will hold auctions to award contracts for design and construction works on three 71.9 kilometer-long sections of the Lugoj-Deva highway, and on the second section of the Timisoara-Lugoj highway stretching over 25.6 kilometers, with a cumulated cost of around EUR 850 million without VAT. Transport Minister Alexandru Nazare said recently construction works on the first section of the Timisoara-Lugoj highway might be completed before the deadline of April 2013.■

Local infrastructure projects ‘become interesting to banks’ Banks are finding the local state sector an appealing segment for financing, following the collapse of the real estate market and with the private sector still trying to recover from the challenges of the economic crisis, say market players. With forthcoming infrastructure projects announced by the new government, Austria’s Erste Bank is confident enough to move into financing larger projects. Manfred Wimmer, chief financial officer of Erste Group, who was in charge of

BCR’s takeover strategy in 2005, believes that political stability, lower inflation and the reform of the public sector could generate significant interest in Romania from investors, and that healthy growth could return. “We are eagerly awaiting much more extensive infrastructure projects in Romania. We are ready to finance, provide consultancy and structure financing for infrastructure projects,” Wimmer said. ■

real estate Falling prices get land market moving again

Polish call centre enters Romanian market

Polish company Telbridge has leased a 640-sqm space in CSDA Siriului, an office building brought onto the market by Primavera Development Romania, confirming that Romania is still an interesting location for call centres. JLL, the consultant that brokered the deal, said that in its study from October 2012, Romania came 9th globally and 3rd in Europe, preceded by the UK and Poland, in a worldwide ranking of investors’ favourite call-centre destinations, generating approximately 11,400 jobs in the field. Poland-based Telbridge provides outsourced call-centre solutions for corporations. Cheaper land prices have finally persuaded real estate developers to return to the market, with the most activity coming in the retail sector, say property industry sources. In the most recently announced transaction, Romanian-owned DIY player Dedeman bought a 3.2 hectare plot in Galati, a deal brokered by The Advisers/ Knight Frank. The land is in the western part of the city, close to the ring road. “Retail developers are looking for land plots with surface areas of 2,000-20,000 sqm, with good locations in extremely populated areas,” Radu Lucianu, Manag-

ing Partner of Capital Property Advisors, told The Diplomat. “The current price of land is at a satisfactory level for developers and with some negotiations a deal can be made.” The drop in prices is expected to bring new deals involving former industrial platforms in 2013. It is rumored that an 18,000 sqm plot owned by Romprim will be acquired by Kaufland. At the end of last year NEPI announced the acquisition of 12.7 hectares, also in Galati. This city has a population of over 300,000 and is not yet served by a large shopping centre. ■

Bankrupt residential compounds in fire sale Luxury residential projects that went bankrupt after the local property market collapsed have been going up for sale for rock bottom prices. Cortina Residence, the compound that was to be developed by Cefin in North Bucharest, was on offer for only EUR five million, after the developer ran up debts of EUR 26 million back in 2010 when the project was declared insolvent. “If we take into consideration the value of the 7,550 sqm plot and the costs of the existing structure, we will surely obtain at least double the price being asked,” Marius Grigorica, Senior Business Analyst at DTZ Echinox, told The Diplomat. “I think it is an interesting price for a residential investor, but

given the existing financing conditions, the project still remains difficult to sell.” Grigorica said one possible solution would be the reconversion of space within the project into smaller apartments that can be sold with five percent VAT and financed through the government’s First Home program. This solution could be implemented due to the project’s incipient construction stage. However, reconversion would not be viable for Laguna Residence, another bankrupt project, where construction works are at a much more advanced than in the case of Cortina. Its biggest creditors are 80 buyers who had paid installments, as well as La Caixa bank, which financed the project in 2010. ■

AFI Palace Ploiesti borrows EUR 30 million from Raiffeisen

AFI Palace’s shopping centre in Ploiesti was granted a loan of EUR 30 million by Raiffeisen Bank. The new mall, which has a leasable area of 28,000 sqm, is to be opened in the last trimester of this year. AFI Palace Ploiesti is 70 percent leased, with tenants including: Cora, Flanco, H&M, New Look, Reserved, Mussete, Timeout, Collins, Nike, Aldo, Motivi, Otter, Lee Cooper, Il Passo, B&B and Jolidon. The food court is already leased by KFC, McDonald’s, El Bacha Restaurant, Quasi Pronti, Pizza Dominium, Thang Long and Pizza Bonita.

Adora Urban Village to be delivered in March

The first two blocks of Adora Urban Village, a compound comprising 75 apartments, will be delivered in March. The residential project is being developed by Tagor Capital, owned by Israeli businessman Ofer Lieberson, in partnership with Patron Capital. It is located in Bragadiru, on Alexandria Road, in the outskirts of Bucharest, south-west of the city centre. According to the developer, the entire complex will have 12 blocks containing 548 flats, and involves an investment of EUR 34 million.

appointments Christophe Gourlet is the new country manager of Sanofi Romania and chairman of the board of directors of Zentiva SA, replacing Jacques Nathan. His previous job was at the Hungarian branch of the same company and he studied at the Paris-Dauphine University in Paris. His predecessor Jacques Nathan will take over the position of GM for Sanofi Turkey. Johan Gabriels a banker with more than twenty years experience is the new CEO and chairman of the executive board at Banca Comerciala Carpatica. He is coming from the position of general manager and board chairman at RBS Romania.The Executive Board of the bank will also have as deputy general managers Georgiana Coanda, Ion Dobrica and Gheorge Cismaru.

Valeriu Nistor is the new country sales director of American IT giant IBM. He previously held the position of general manager at Xerox Romania and Austria. Herve de Froment is the new general manager of Swiss giant Nestle, replacing Jacques Reber who had been in charge of the firmâ&#x20AC;&#x2122;s Romanian operations for the last four years. Froment held the position of sales general manager at Nestle France. Laurentiu Ciurel has been confirmed as general manager of Complexul Energetic Oltenia, after a private manager selection process that found

that the existing manager was the most suitable candidate for the position. He was appointed for a four-year mandate. Gheorghe Racaru has been reappointed general manager at Blue Air, replacing Sherif Ussama. He also held the position between 2004 and June 2009. Blue Air registered turnover of 150 million EUR in 2011, but a Romanian court declared the airline insolvent in December. Gerald Neumair was appointed general manager and chairman of the board of chocolate producer Kandia Dulce. Neumair, who studied at the University of Innsbruckand, worked previously for Kraft Foods Europe. He replaces Mihut Craciun, who had held the position for the last year and a half.

EVENTS

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10 The Diplomat February 2013

investments China�

SPAIN�

The thermal power plant Complexul Energetic Oltenia will build in partnership with Chinese firm China Huadian Engineering a thermal power plant that will have an installed capacity of 600 MW and will produce five TWh of electricity annually at a production cost estimated at EUR 45/MWh. Construction could start in November and the project should be completed in 36 months.

Spanish company Promocion Inversolar 65 is investing an estimated EUR 100 million into three solar parks totaling 65 MW in Sebis, Arad county. The first phase, of 15 MW is estimated to be ready in April, while the other 50 MW will be injected into the grid by the end of the year. The parks will be developed on 200 hectares of land.

USA�

Policlinico di Monza to invest 20 million EUR in Bucharest cardiology hospital

Huadian Engineering to build 600 MW power plant in Oltenia

Alvogen acquires drug maker Labormed

US pharmaceutical company Alvogen has made public its plans to acquire Romanian drug producer Labormed from private equity firm Advent International. Labormed was set up in 1991 by a group of Romanian doctors and pharmacists. Following a EUR 13 million greenfield investment, Labormed opened a drug production unit in Bucharest in May 2007. In February 2008, the firm was taken over by investment fund Advent for EUR 123 million. Labormed was the 15th largest Romanian drug producer with sales of around EUR 52 million and a market share of two percent.

Promocion Inversolar 65 builds 65 MW of photovoltaic in Sebis Arad

ITALY�

Italian group Policlinico di Monza will invest another EUR 20 million over the next two years in its cardiology hospital in Bucharest. This will take the total investment to EUR 60 million. The hospital has 140 beds and was opened last year.

poland�

Discount retailer Profi has 18 million EUR expansion plan

Discount retailer Profi budgeted EUR 18 million for the expansion of its network in Romania in 2013. The expansion will be done both through new openings and the acquisition of

local store networks. Profi is owned by Polish investment Fund Enterprise Investors and currently has a network of 150 units.

Kazakhstan�

KazMunayGas will invest another 300 million dollars in Rompetrol and Petromidia

Rompetrol Group owned by Kazakhstan’s state-controlled oil and gas company KazMunayGas plans to invest 200 million dollars in expanding the network of filling stations in Romania and another 100 million in the refinery at Petromidia, said Rompetrol’s Group Vice President, Azamat Zhangulov. Rompetrol wants to open 150 new gas stations in Romania, being part of a larger plan to expand by at least 50 percent in the Black Sea region

netherlands�

Van Oord signs contract to extend Constanta Dam

Dutch company Van Oord Dredging and Marine Contractors has signed a contract to lengthen the dam in the Port of Constanta, on a contract valued at EUR 146 million. The value of the contract includes construction works, consultancy services and other costs. Haskoning DHV Nederland BV will provide consultancy and supervising services.

energy

Power play:

the sorry saga of Romania’s energy projects

omanian politicians, at least those in charge of the energy field, are very ambitious. They have all stated that Romania is or can clearly be a power in the field all over the region and that the country will achieve energy independence. They have designed energy strategies setting out targets to be reached in 20 years’ time. But what are they really doing in order to make Romania a true player in the South-East European energy field? Besides making plans, which rarely reach fruition, they make promises – promises they either forget or postpone. Or they change their mind without explanations. The history of at least the past seven-eight years has been a series of postponements, changes of plans and minds, and cancellations. Energy production projects worth billions of Euro, income of hundreds of millions of Euro from privatization and listing on the capi12 The Diplomat February 2013

tal market have been waiting for years for the moment to come to life.

“This is old news, sir!”

Started by Ceauşescu in 1975, the TarniţaLăpuşteşti hydropower plant project, which includes accumulation by pumping stations, is still a “strategic objective” for Romania, having been on the agenda of every government for the past 22 years. Each President, Prime Minister and Minister of Economy has stated that the establishment of the Tarnita hydropower plant is essential for the good functioning of the national electro-energetic system. The supportive statements have increased over the last six years, creating the general impression that Tarnita will finally come to life, but so far nothing concrete has been done in order to meet this objective. The draft project for the Tarnita hydropower plant

is no fewer than 37 years old. It has been talked about ever since the present leaders of the country were either teenagers or just becoming adults. The hydropower plant was to be built at the Tarnita accumulation lake, 30 kilometers from Cluj-Napoca. The investment was over one billion Euro and it would create, according to official data from Hidroelectrica, 4,000 jobs. Which would be very welcome given Romania’s present economic situation! The first analyses regarding the building of the hydropower plant with pumping stations were carried out over 1975-1985, by the Hydro-energetic Studies and Designs Institute (ISPH), which identified 17 possible locations for the plant. The best place was considered to be the basin of the Somesul Cald River, more specifically the Tarnita accumulation lake. Things didn’t end there, as between 1988 and 1994 the then leaders of

energy the country and their direct successors held discussions with several international companies over the purchase of the necessary equipment for the construction. Ansaldo GIE (Italy), Alsthom-Neyrpic (France), Hitachi, Mitsubishi and Toshiba, all from Japan, were among the companies showing interest in the project at that time. The momentum seemed unstoppable. Until it finally stopped. For about 20 years, this investment has failed to pass the stage of feasibility studies. The first was carried out by ISPH in 1994. Another study was performed between 1999 and 2000 by the Japanese Institute, Electric Power Development Co, financed by a grant scheme from the Nippon government. A third feasibility study was drafted in 2007 by the consultant chosen by Hidroelectrica, IPA/ Verbund/ Poyry. This study was financed through a World Bank (WB) program and the International Bank for Reconstruction and Development (IBRD). The Minister of Economy in 2007, Varujan Vosganian, announced that the study would be done again, as the one conducted by the WB deemed the project unnecessary and too expensive. If the works had started then, the Tarnita hydropower plant would have been ready in 2014-2015. Even the German energy group RWE was willing, at that time, to get involved in the project, as well as companies from Hungary. In 2008 the ISPH started updating the 2007 feasibility study. It was Vosganian again who said, in 2008, that Hidroelectrica was at a “very advanced” stage in the project and that the Government was ready to finance 50 percent of the investment. Moreover, the Government talked to three investors described as “very interested” in the project, who were willing to fully cover the construction costs. The Tarnita hydropower plant was meant to produce electricity by daytime and to consume it by nighttime, when market demand drops. More specifically, the hydro-energetic complex, made up of two lakes, a lower and an upper one, would take over surplus energy and use it for the actuation of some pumps to carry the water from the lower lake to the upper lake. Then, the water from the upper lake would return to the lower lake, thus producing electricity later to be delivered to the system. Another advantage of the hydropower plant would

be the balancing of the national electricity system when thousands of megawatts of electricity produced in renewable energy sources, such as wind, solar and cogeneration plants, come online. Just like many other energy projects, Tarnita did not lack express support from the state. Moreover, a manager from Hidroelectrica, the company that was to handle the investment, said in the middle of the last year that the authorities had talked to more than 150 investors interested in the project, including more than 10 companies, some from China, could be found on the shortlist. The names of those companies and investors have never been made public by anyone from Hidroelectrica or from the Government. This investment was even included in a national energy strategy approved by the Government in 2007, although members of the Government were not clear on whether the hydropower plant was going to have 500 MW or 1,000 MW. In 2009, the Prime Minister at that time, Emil Boc, displayed the same commitment to Tarnita, stating that it was a “priority” objective, and the beginning of the actual works was imminent, as the Government had ordered this through a Memorandum. In 2010, things seemed to be moving; Hidroelectrica hired the consultant Deloitte to help Hidroelectrica find investors. The deputy general manager of Hidroelectrica at the time, Traian Oprea, predicted that Tarnita would be operational in 2017. Moreover, in 2011 the Government included the Tarnita and Cernavodă nuclear reactors 3 and 4 projects on a list of 18 investments to be made jointly by the public and private sector, and in the same year Boc stated that in the spring of 2012 the Government would choose the company to participate, in partnership with the state, in the construction of the hydropower plant. According to the calendar presented by the Government in 2011, the process of attracting investors should have taken place between June 2011 and January 2012, and the project company was supposed to be established in February 2012. According to the latest governmental calendar for Tarnita, the submission of contracting offers should have taken place in September 2012, and in November the agreement with the selected

investors should have been negotiated. Over December-January 2013, the investors were supposed to sign the agreement and the project company was to be registered, so that the first half of the hydropower plant would be commissioned by 2017, and the entire project finished in the second half of 2019. Valeriu Binig, Deloitte consultant, says that this project could be completed by 2020, depending on when the investor selection process begins, which is up to the state. As we already witnessed several times, the Government is still postponing the investment in Tarnita, even if this is considered a priority on paper. According to the recent statements of Prime Minister Ponta, Tarnita was included in a new list of priority projects, together with the Cernavoda 3 and 4 nuclear reactors. According to Ponta, all these projects will be developed through public private partnerships.

Give me five, but nuke me slowly

Another project as old as the Tarnita hydropower plant is the Cernavodă power plant. The Cernavodă nuclear electric power plant, the only one of this kind in Romania, was designed to function with five reactors, all using Canadian technology and each having an installed power of above 700 MW. Ceauşescu designed the Cernavodă power plant to function with four reactors, whose construction began simultaneously, in 1982, at the same time as the laying of the first brick at Unit 1. Ceauşescu’s plans changed in 1983-84, when he decided to build a fifth reactor as well, in response to American pressure on Canada to stop financing a program by the communist government in Bucharest, invoking violations of human rights. The first feasibility study on the pros-

“Tarnita was among the new priority projects, alongside Cernavoda’s 3 and 4 nuclear reactors. All will be developed through public private partnerships,” Prime Minister Victor Ponta 13

energy

“We do not have enough funds to finance the construction of the reactors three and four nor that of Tarnita,” Varujan Vosganian, Minister of Economy pects of such an investment was conducted in 1976, and two years later, in 1978, the first agreements to begin the project were signed. At that time, the communist government was planning to build only one reactor. The works on the first reactor began in 1982 and ended in 1996. In December 1989, the works were 45 percent finished. Unit 1 was built by the Romanian company Romenego in partnership with the Atomic Energy of Canada Ltd. (AECL) and ANSALDO-Italy. The two foreign companies also built, in partnership with the Romanian state, Unit 2 at Cernavodă, which was commissioned in 2007. Works on the first reactor lasted 14 years, with a few years of interruption owing to the political changes in 1989, as well as the severe lack of government money after December 1989, whereas the construction of Unit 2 was much quicker. In 2001, the authorities said that when Unit 2 was commissioned, the building of Tarnita hydropower plant would be useful as well, as it would supply regulatory services within the national energy system. Not necessary, just useful. But Tarnita would become necessary when reactor 3 was put into service. This is exactly what the government has been trying to do for almost seven years. Moreover, if an accident led to the shutdown of both nuclear reactors, the other domestic energy pro-

Barajul Vidraru

14 The Diplomat February 2013

duction capacities would not meet national consumption but, by building the Tarnita hydropower plant, the problem would be solved. Reactor 2 was not without delays either, with the first date proposed by the Government for connection to the grid being 2005. What were the Government’s plans in 2001 concerning the nuclear program? “We are thinking of using units 3, 4 and 5 of the Electric Nuclear Power Plant and to jointly exploit, after an international auction, the energy from these units for a period of ten years and, subsequently, transfer them to the state property,” said Adrian Nastase, prime minister at that time. In practice, the building of Unit 2 started in 2001 and was completed in 2007. How much did Romania’s first two nuclear reactors cost? According to some market specialists, the value of the investments in Units 1 and 2 is difficult to estimate because for the first reactor, some equipment was purchased based on barter contracts, with Romania delivering other products in exchange to the foreign partners, such as tractors, food etc. Meanwhile, the severe devaluation of the Romanian currency after 1990 fully contributed to the uncertainty over the overall cost. However, the hundreds of studies performed by Nuclearelectrica in the past in this area led to the idea that the first reactor meant total

investment of 1.8 billion Euro, whereas for Unit 2 the investment was around 1.6 billion Euro. While the works at reactor 2 were developing, the Government announced in 2002 that it wanted to carry on and build Unit 3, with construction to begin in 2004, and foreign investors from the USA, South Korea, Italy, Japan and Romania allegedly having displayed “interest”. At that time, i.e. in 2002, government officials stated that works at reactor 3 were 15 percent completed. Two years later, in 2005, the authorities said they hoped to attract private investors for the project, including the Romanian state-owned company Electrica, Enel (Italy) and Korea Hydro, and the old collaborators AECL and Ansaldo. At that time, the timescale proposed by the Ministry of Economy for the project was 2006-2012. Starting from the third reactor, the Romanian state indicated, in its statements, that it was favorable to companies, with state representatives mentioning several times the interest of Chinese or Korean companies in the project. In 2005, officials from the Ministry of Economy said that they had invited the South Korean companies Korea Hydro Nuclear Power and Doosan to participate in the construction of the unit. It never came to pass. However, in 2012, official discussions have echoes of those from seven years before: “we are planning to…”, “we will…”, “investors are interested…”. How do things look now, as far as reactors 3 and 4 are concerned? The state has given up the idea of building reactor 3 alone and adopted a new strategy, announcing that Units 3 and 4 were to be built at the same time. The beginning of 2006 brought the first concrete idea for the construction

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energy of the two reactors in parallel. The investment, evaluated at that time by the Ministry of Economy, was 2.2 billion Euro. Some experts in the field expect the actual sum to exceed that figure, the more so because in 2007 the price of steel soared because of massive demand in China. From the very beginning, the Government considered the possibility of the Romanian state investing alone in that project, an idea opposed by President Traian Basescu, who said that the state “has other things to do with its money too”. Meanwhile, Romania is getting ready for a new loan from the IMF, still hoping not to be the sole investor in these reactors, even if some enthusiast politicians are saying, “Why not”? How has this project flat-lined? In 2007, the state organized an international auction to attract foreign partners for the project. Towards the end of 2007, Nuclearelectrica, the company operating the Cernavodă nuclear plant, accepted all the offers received, which came from the following companies: Enel of Italy, GDF SUEZ of France, Iberdrola from Spain, CEZ of the Czech Republic, ArcelorMittal Romania and RWE of Germany. Under this set-up, none of the shareholders had a majority stake. At that moment, the state estimated that the construction of the two nuclear units would cost 2.3 billion Euro, with commissioning to take place in 2014-2015. Within less than a year of the selection of the private partners, the first signs of tension had started to appear. “The negotiations are frozen,” said the head of CEZ Romania, Jan Verskrna, in April 2008. Two months later, the Government decided to raise Nuclearelectrica’s share in this project from 20 percent to 51 percent, with the financing being provided from money obtained by the state from other privatiza-

Rafinaria Petrobrazi

tions. Since then, the project has effectively stalled, with all the subsequent discussions between the state and the investors leading nowhere. Another unpleasant surprise was the doubling of the value of the investment in those nuclear reactors. State officials never explained why the investment suddenly rose from 2.3 billion Euro to four billion Euro. Meanwhile, the Minister of Economy at that time, Varujan Vosganian, was hoping for construction works to begin in 2008. At the end of 2008 the investors’ agreement was signed, but for two years, nothing happened – until September 2010 when CEZ announced that it would withdraw from the association. Towards the end of 2010, the Government started to reconsider its position and called the companies that were still involved in the project to talk about reducing its share. Another blow for the Government was the withdrawal from the project of GDF Suez, Iberdrola and RWE. In less than half a year, the state had lost more than half of the investors, whose share reached 84.6 percent But no state official considered the withdrawal of the investors to be a failure. Moreover, politicians continued to call this investment a “priority”. Immediately after this event, the Government started looking for other investors. For the last two years, there have been many “statements” that American, Russian, Korean, Chinese and other companies will join the project. None have been confirmed. Other positive noises have consisted of

assurances made by state representatives that this investment can be made by Romanian companies. To date, no Romanian company has expressed interest in entering the game. The latest twist in the saga, within the last few months of last’s year, has seen the state send letters to CEZ, GDF SUEZ, RWE and Iberdrola, inviting them back into the project. Nobody from the first or the second Ponta Government declared anything related to the reaction of the companies. A study ordered by the National Prognosis Committee stated the obvious, i.e. the commissioning of nuclear reactors 3 and 4 is uncertain before 2020, because of the confusion over Romania’s ability to finance the investment and the structure of the partnership.

However, the Government still believes it could finance the project alone

In November 2012 Government extended the validity period of the investment agreement until after January 1 2013, when it was due to expire. Also, Nuclearelectrica will have time until the end of this year to renegotiate the agreement for the investment with ArcelorMittal Romania and Enel. If no result is reached, Nuclearelectrica could remain the sole shareholder in this project. Moreover, Prime Minister Victor Ponta stated some months ago that he was willing to give the majority of the shares for reactors 3 and 4 to the investor provid-

“The collaboration (between Romgaz and Gazprom) is a winning project, it could last for 30 years,” Adriean Videanu, former Minister of Economy 16 The Diplomat February 2013

law

Legislative measures aimed to increase the efficiency and transparency of the Public Procurement Procedures

ue to the entry into force, on 1st January 2013, of the Government Emergency Ordinance no. 77/2012, the provisions of the Emergency Ordinance no. 34/2006 on the award of public procurement contracts, public work concession contracts and service concession contracts were amended with the purpose of increasing the transparency and efficiency of the public procurement process. A first measure is represented by the introduction of the legal obligation incumbent upon the contracting authority to notify in the Public Procurement Electronic System - PPES (Romanian: S.E.A.P.) the direct acquisitions whose value exceeds the RON equivalent of the amount of EUR 5,000 without VAT, maintaining the possibility to perform direct acquisitions when the value of the acquisition does not exceed the RON equivalent of EUR 15,000. Another amendment brought by the Government Emergency Ordinance no. 77/2012 is the modification of the thresholds over which there is the obligation of publicity at European level. The modification of these thresholds was determined by the necessity to correlate the national legislation with the European legislation in the field. The value threshold stipulated for the publication of the intention announcements and the participation and awarding announcements in the Official Journal of the European Union for the work contracts increases from EUR 4,845,000 to EUR 5,000,000. Furthermore, the value thresholds for the publication of the participation and awarding announcements in the Official

Journal of the European Union increase from EUR 125,000 to EUR 130,000 for the award of the unsectoral supply or service contracts and from EUR 387,000 to EUR 400,000 for the award of the sectoral supply or service contracts, while the thresholds for the intention announcements for the supply and service contracts remain unmodified. The Government Emergency Ordinance no. 77/2012 brings another important amendment with regard to the legal nature of the public procurement contract which, according to the previous regulation, was defined as a commercial contract. According to the provision of the Emergency Ordinance no. 77/2012 the public procurement contract was assimilated with the administrative deed which includes, as until now, the category of the sectoral contract. The amendment of the legal nature of the public procurement contract determined also the amendment of the functional jurisdiction of the law courts mandated to solve the claims for indemnities for the remedy of the damages caused during the awarding procedure, as well as of the damages regarding the fulfilment, nullity, cancellation, termination, rescission of or unilateral withdrawal from the public procurement contracts. Pursuant to the new regulation, the jurisdiction for the settlement of the litigations in this field belongs, for the litigations arisen after 1st January 2013, to the administrative contentious sections within the Courts of Law.

had classified the public procurement contract as having commercial nature, in a not very clear manner, in an apparent contradiction to the Law on contentious administrative matters. Against this background, the amendment of the legal nature of the public procurement contract should eliminate the ambiguities occurred in practice and should contribute to the development of a more unitary practice of the law courts. On the other side, the assimilation of the public procurement contract with the administrative deed offers to the contracting authority the legal framework for it to be regarded as privileged party within the contract, whereas the contractual partners are left less space of negotiation. Raluca Botea, Senior Associate, E-mail: raluca.botea@noerr.com Alexandru Ene, Head of Dispute Resolution, Litigation, Restructuring & Insolvency Department E-mail: alexandru.ene@noerr.com Noerr Str. General Constantin Budisteanu nr. 28 C, sector 1 010775 Bucuresti / Romania T +40 21 3125888 F +40 21 3125889

Thus, a correlation with the provisions of the Law no. 554/2004 on contentious administrative matters, but also with the provisions of the new Civil Code was accomplished. The old regulation 17

energy ing the financing. So the project has been given another year, until the end of 2013. A new declaration of the Minister of Economy Varujan Vosganian shows the difficulties of the state budget to finance these projects. “We do not have enough funds to finance the construction of the reactors 3 and 4 nor that of Tarnita” said Vosganian in the Parliament. Ironically he was also saying in 2008 in his capacity of Finance Minister that teh state should have a greater majority stake in the company building teh reactors 3 and 4 in Cernavoda.

If you fight it, we quit!

Closely related to the building of the nuclear reactors 3 and 4 is the project for the low and average radioactive waste storage in Saligny, Constanţa County. More than 20 years old, this idea joins the “dinosaurs” of the Romanian energy field that never came to life. Shut down after 1989, this storage site was mentioned again in 1992, when the late state monolith RENEL announced its selection of a potential location for this unit. The conclusions were that the Dobrogea area has almost 40 such sites where the burned nuclear fuel from the Cernavodă power plant could be stored. The 37 possible locations were then reduced to three, namely Cernavodă, Mireasa and Saligny, and the latter was chosen. After six years of stagnation, in 1998 procedures to obtain the permit for the location of the storage site in Saligny. Another six years followed when nothing happened, so in 2005 the entire authorization process had to start all over again, this time under the guiding hand of the National Agency for Radioactive Waste (ANDRAD). In 2007, officials slated the commissioning of the storage location for 2012. In Romania, there is only one such storage site, at Băiţa, in Bihor County, which was commissioned in 1985. As with the Tarnita hydropower plant or Mărgineni gas storage site, there has been a lot of talking about the Saligny unit and, until now, it has been in vain. Over the years, different politicians and managers of state companies have proposed all kinds of deadlines for the beginning and the end of the works or opinions as to the value of the investment. In 2007, the cost of the construction of the storage site was 180 million dollars. In 2011, the then president of the Nuclear Agency for Radioactive Waste (ANDR), Ion Năstăsescu, stated that the first step towards the achievement of the project had been made by the Mayor’s Office in the Saligny commune, which had issued the certificate for the drafting of the urban plan for the storage area. Meanwhile, the year the storage was supposed to start functioning was also put back to 18 The Diplomat February 2013

2019. In mid-November 2012, enthusiasm for the project was dented by statements from the ANDR general manager, Antoniu Sorescu, who said, “If the public opposes it, we cannot build a storage facility here.” As several years passed, the value of the project rose, too, reaching 450 million Euro, the investment estimated since 2009. The storage site was to function for 60-70 years and store the nuclear fuel used by the Cernavodă nuclear electric power plant for the production of electricity. The surface allotted to the building of the storage site is approximately 40 hectares, out of which 22.5 hectares will host the construction. However, officials responsible for the development of the site are optimistic. “Certainly, by the end

nuclear power plant would be built, after having evaluated more than 100 possible locations. This power plant was going to have two or four reactors and would have been provided with CANDU technology. In 2010 Videanu said that the unit would be located in Transylvania. The project had hardly started when it was delayed by ten years, until 2030. Since 2010, it has not been mentioned.

Love letters between people who don’t love each other

The Mărgineni gas storage, in Neamţ County, is another project by the Romanian state that has been talked about for at

Cernavoda

of this year, the necessary documentation for the characterization of the location will be obtained,” said the president of ANDR, Florin Tătar, in November last year referring to the radioactive waste.

We want a second nuclear power plant, although we haven’t even finished the first one

Another idea presented by Romanian politicians is the construction of a second nuclear power plant. It is not a new idea either, dating back to the 80s. Little was said about this power plant between 2007 and 2010 by the country’s leaders, followed by silence. The idea was raised in 2007, at the official opening of reactor 2 of the Cernavodă power plant. The prime minister at the time, Calin Popescu Tariceanu, said that the Government would invest in a second nuclear power plant sometime in the 2020s and assigned Vosganian to search for a location at which to build it. Vosganian didn’t have the chance to fulfill his task, as he replaced, along with the entire Government. The new leaders announced in 2009 that in 2010 they would say where the second

least 11 years and which at present has been either abandoned or kicked into the long grass. This storage site was going to be built by the gas producer Romgaz Mediaş, controlled by the state through the Ministry of Economy, and the Russian giant Gazprom. Information concerning the evolution of this subject is almost non-existent. The idea of a gas storage site first came to light in 2001, when the Minister of Industries at that time, Dan Ioan Popescu, said that the Russians of Gazprom would come to Romania. The idea to build the storage site in Mărgineni was, at that time, not a primary consideration, as Craiova had first been mooted for the building of such a site. This storage site was to have had an annual storage capacity of two billion cubic meters of natural gas, immense in comparison with Romania’s total quantity at that time, of only 1.5 billion cubic meters. At present, Romania has underground storage sites for three billion cubic meters of gas, mostly owned by Romgaz. Government plans at that time were to have the two storage sites ready in 2004, in order to meet the gas needs of several counties. However, in 2002 Romgaz began seeking a company to conduct both the feasibil-

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energy ity study and the Mărgineni storage development works. According to the data at that time, construction should have been finished in December 2005. The state-owned company Mediaş started discussions with Gazprom in 2003, but the firms did not come to any agreement. In 2006, it was said that the value of the investment in this storage site would be somewhere between 120 and 258 million Euro, and the storage capacity would range between 600 million cubic meters and two billion cubic meters of natural gas. Romania’s point of view, the storage site would be useful because it would meet all gas needs in the North-Eastern area of Romania and could also provide a capacity reserve for supplementary deliveries to third parties. From 2006, things somehow began to move, meaning that Romgaz and the Ministry of Economy, on the one side, and the Russian giant Gazprom, on the other, met several times, both in Moscow and Bucharest. Besides the executives from

of the consultant to draft the feasibility study. Romgaz organized an auction, where only one company signed up, Petrostar of Ploieşti, whose activity is research, technological engineering and design in the oil and gas extraction industry. Since 2006, the estimated value of the storage site had doubled, reaching 500 million Euro. Discussions between Romgaz and Gazprom, which started in 2003, led nowhere, as the two companies didn’t agree on which one would perform and finance the feasibility study. In the same year, 2008, it was announced that OMV Petrom was interested in the project and in a possible collaboration with Romgaz – another deadend. However, the time was not completely wasted. In 2009, something happened that scared many people, and gave others the illusion that the desideratum displayed by all politicians since December 1989 for cheaper natural gas imports from Russia was not just words. More specifically, in

The vast graveyard of good intentions

Transgaz

the Ministry of Economy and those from Romgaz, the delegations were also made up of state secretaries, sometimes even the relevant minister, counselors and the inevitable “technical experts”. After each such bilateral encounter, the Romanian officials were enthusiastic, although reluctant to give firm information. However, every statement made to the press was very optimistic. As of 2006, the media was told that in the “upcoming period” a mixed company would be set up between Romgaz and Gazprom, whose purpose was the construction of the storage site. “We have reached the moment when we must replace the simple supplier-purchaser relationship with a partnership relationship, in order to set the basis for a long term agreement,” said the Minister of Economy at that time, Codrut Seres, in 2006. However, until 2008, nothing concrete happened, so that year Romgaz was barely at the negotiation stage for the selection 20 The Diplomat February 2013

Adriean Videanu, in 2009. At the same time, Videanu added that Russia could take part in the building of the second nuclear power plant, of some thermal power plants in cogeneration or in the privatization of some hydropower plants. Meanwhile, the bilateral visits between Romania and Russia on that topic continued, but became less frequent. Symbolically or not, after one such encounter in February 2010, none of the parties involved wanted to make statement to the media. According to the latest pronouncements by Romgaz executives, what stage the project is in cannot be specified. The deputy general manager of Romgaz, Lucian Stancu, could not say whether the project was still on the Government’s list or had been completely abandoned. He also explained the company’s silentio stampa period, saying that the listing on the stock market of a minor share package of the gas producer in Mediaş was being prepared.

June 2009, Rogaz signed the first collaboration agreement with Gazprom since 1989, which included the establishment of a mixed company for gas storage and capitalization. Under the memorandum, Romgaz would build several gas storage sites, whose capacity would reach 5-6 billion cubic meters, almost double Romania’s storage capacity. The agreement between the two companies provided that the shares in the mixed company would be split 50-50 – a desirable outcome, considering the recent history of privatizations or the associations many state-owned Romanian companies were driven to form after 1989. The agreement also stipulated that the two companies would sell the gas, including for the production of electrical power in the thermal power stations in cogeneration. “The collaboration (between Romgaz and Gazprom) is a winning project, it could last for 30 years,” said the then Minister of Economy,

Almost any politician in Romania believes that Romania could be a regional force in the energy sector. All politicians say that this sector has great perspectives, from which the country could gain money and prestige. They all argue how essential investments in energy are, and how important the security of the energy supply is. They will plead the importance of investing. But when it comes to doing concrete things, silence reigns. Such is the case with another energy project, one that it is no longer talked about, namely the direct export of electricity from Romania to Turkey through an underwater electricity cable. It isn’t a new project. The idea emerged in 1999, when the projected investment was 700 million dollars. The project was going to be carried out by the operator of the national energy system Transelectrica, a state-owned company, and by the Turkish company TEIAS. In 2004, the governments of Romania and Turkey signed a memorandum on the development of the investment. The pipeline was supposed to be built at the maximum depth of 1,000 meters in the Black Sea, approximately 400 kilometers from the shore. Things didn’t go too smoothly, as the Turkish party was not sold on the idea. At least that’s what the Romanian officials said. Anyway, in 2007, Transelectrica signed an agreement with the Swedish company Vattenfall Power Consultant AB for the feasibility study. Also in 2007, Nuclearelectrica said that it was willing to enter the partnership. According to the deputy general manager of Transelectrica, Octavian Lohan, all is not lost, and the company is currently awaiting approval

energy

“Azerbaijan-Georgia-Romania Interconnector (AGRI), along with Nabucco, are “first-class” objectives for Romania,” President Traian Basescu of the feasibility study results. “We are in the process of approving the conclusions of the feasibility study. We have put some money into this project and we want to do it,” said Lohan. According to him, the project could develop in private hands, which would mean a significant shift from the initial plan which was for the cable to be installed by the state-owned companies Transelectrica and TEIAS. Time will tell when and if this project becomes reality and which investors will be involved. Another transient investment on the agenda of politicians the AzerbaijanGeorgia-Romania Interconnector (AGRI), which would see the delivery of natural gas through pipelines from Azerbaijan to Georgia and its liquefying in a terminal to be built on the Georgian shore of the Black Sea, from where it will be transported by sea to Romania. The Romanian terminal, which would be on the Black Sea shore, will see re-gasification and the transfer to the national transmission system through pipelines, either for transit or for internal consumption. The delivery of the gas to Hungary will be done via the Arad-Szeged pipeline. The investment in the AGRI project was estimated at 1.2 billion Euro or 4.5 billion Euro, depending on transmission capacity. The agreement for the development of this project was signed in 2010 by Romania, Georgia and Azerbaijan. The Romanian officials stated at that time that AGRI could be developed faster than Nabucco. Romgaz, Georgian Oil and Gas Corporation (GOGC),the State Oil Company of Azerbaijan Republic (SOCAR), and Magyar Villamos Művek (MVM) are part, as shareholders, of the mixed company AGRI LNG Project Company. Investment strategies and options concerning the transmission capacity and financing sources were drafted. Official meetings have been organized, as well as press conferences and political statements. In the first half of this year the feasibility study was supposed to have been finished. The last official reference to this project came from President Traian Basescu, who said in January 2012 that AGRI, along with Nabucco, were “firstclass” objectives for Romania. Nothing has been added since. The next abandoned project is the Pan

European Oil Pipeline (PEOP), the ambitious conduit that was supposed to transport oil from the Constanta harbor to the Italian harbor Trieste, crossing Serbia, Slovenia and Croatia, from 2012. In 2007, Romania, Serbia, Croatia, Slovenia and Italy signed an agreement for the building of the pipeline, which would have been 1,400 kilometers long, with an investment ranging from 2 to 3.5 billion Euro. The annual capacity of the pipeline was estimated at 60-90 million tons of oil (1.2-1.8 million barrels a day). The problems appeared immediately, as Italy did not show any concrete sign of support for the investment, and Slovenia has grown more and more distant. On Romania’s side, things appeared to be more optimistic, with President Basescu stating in 2008 that the participation of France and Kazakhstan in this project would be welcomed. After all, the agreement for the development of the project was signed only by Romania, Serbia and Croatia, with Slovenia and Italy not having responded to the invitation. Things showed no improvement in 2009, due to the lack of clear commitments from the partners. Eventually, Croatia withdrew from the project company, stating that without the involvement of Italy, the investment made no sense. So the project company was left with only Romania and Serbia, who tried to bring PEOP back to life and shorten it, from Constanta to Pancevo. A final revival of this oil pipeline took place in 2010, when minister Videanu tried to persuade Azerbaijan and Kazakhstan to support the project. In 2008 the state-owned company Termoelectrica signed partnerships with several European energy companies, which should have materialized in the building of three new thermal power plants in Galati, Braila and Borzesti. The agreement for the project in Borzeşti, signed with Electrabel, a branch of GDF SUEZ, centered on the building of a power generation plan with a capacity of about 400 MW, an investment estimated at 300-400 million Euro. The building of the unit was scheduled to start in 2010 and to end in 2012. In Galati, Termoelectrica was planning to build, along with CEZ, an energy group of 400 MW in a combined cycle drawing on natural gas, an investment estimated at 300-400 mil-

lion Euro. Also, along with Enel and E.ON Kraftwerke, Termoelectrica is planning to build a new thermal power plant on bituminous coal, of 800 MW, on the platform of existing facilities in Braila, through an investment of about one billion Euro. All three projects are on stand-by, having been mentioned neither by state representatives, nor by the privately-owned companies. Also in 2008, ELCEN, a branch of Termoelectrica, made an announcement that it would select external partners for the building of a thermal power plant of 300 MW in Fantanele (Mures County). This is exactly what happened a year later when ELCEN chose the companies Unit Investment (Belgium) and Wienstrom (Austria) to build two power plants, one of 400 MW at CET Progresul, in Bucharest, and another one of 1,000 MW at Fantanele. That was the last time this project was ever mentioned. Romania has an energy strategy for 2007-2020, but none of its points has been followed. In 2011, the Ministry of Economy started working on another strategy for 2011-2035, which has not yet been approved by the government, and therefore remains, much the same as the investments outlined hitherto, an unfinished project. Let’s see, however, what this “new” strategy is about. It says that the production of electrical power will come mostly from nuclearelectric and wind plants for 20-25 years, whereas the percentage of thermal power plants will drop significantly. The document says that in 2020 both Tarnita and Cernavodă reactors 3 and 4 will be operational. All we have to do is to wait until then. Since so many European companies have withdrawn from the project, where could the rescue solution come from? According to the latest statements by representatives of the Ministry of Economy, 21

energy Nuclearelectrica

from China. The former State Secretary in the Ministry of Economy, Rodin Traicu said at the end of October, that the Government had suggested to several Chinese companies they invest in Romania, in the Mintia thermal power plant , an investment of about 400 million dollars, Tarnita or a new group of 500-600 MW at Rovinari, an investment of 1.1 billion dollars.

I change my mind, therefore I postpone. I postpone, therefore I do nothing

Maybe the state’s biggest failure is its inability to make transparent the activities of the controlled companies, by listing them on the stock market. The Government has been talking about floating some minor shares packages in state-owned companies since about 2004. For the time being, only Transgaz and Transelectrica have entered the capital market. For others, such as Romgaz, Electrica, Hidroelectrica and Nuclearelectrica, the listing process has undergone successive postponements, slowness in decision making and repeated changes of heart. Every year since 2004, all the prime ministers and ministers of economy have announced that they will be listing companies at the stock market. Besides privatizations, this has been the most long awaited signal by foreign investors – private or state-owned. Dan Ion Popescu kicked things off in 2004, when the Government’s plan was to list share packages representing five percent of the Transgaz, Romgaz and Transelectrica social capital and two other branches of Electrica. With the change of the minister, comes the change of mind. In 2005, Popescu’s successor, Codruţ Şereş, said that ten percent of Romgaz would be floated on the capital market. This option wasn’t good either, because again in 2005 Romgaz was proposed for privatization, 22 The Diplomat February 2013

and only afterwards to be listed on the stock market. It was the same story with other companies. Meanwhile, in 2006, Transelectrica was listed, and in 2007 Transgaz. Lucky change of government, again. The new leaders said in 2008 that the procedures to list the state-owned energy companies Nuclearelectrica, Hidroelectrica and Romgaz on the stock market could all begin at the same time, that year. But the regime changed again, and responsibility for the listing was passed on to the new officials. Meanwhile, 2010 came and the state-owned companies still hadn’t made the stock market. The government promised that Romgaz, Hidroelectrica and Nuclarelectrica would be listed in 2011, and the share packages on the stock market of Transgaz and Transelectrica increased. Calendars for the sales are being drafted, terms are being set, it is being decided which share packages will be sold. Analysts said that the Romgaz offer could be the highest in the history of the Bucharest Stock Market, possibly reaching 300 million Euro. The target was the end of 2011. Missed again, and in August 2012 the Government was still promising the International Monetary Fund that next year it would definitely be ready. Romgaz, Hidroelectrica and Transgaz (increasing by 15 percent the shares already traded on the Stock Market) were ready to be listed by the end of 2012. The deputy general manager of Romgaz, Lucian Stancu, said, “We are proceeding with the listing,” without mentioning when it would actually happen. According to the Government’s latest promises to the IMF, Romgaz will be listed in March 2013. The offer will be brokered by the consortium made up of Goldman Sachs, Erste, BCR and Raiffeiesen Capital & Investment. In the case of Hidroelectrica, to the company is expected to exit insolvency before being listed. It is not clear

when this might happen. The new Government did not advance any clear date for Hidroelectrica’s exit from insolvency , but promised that as soon as this happens they will list 10 percent of the shares. Meanwhile, the listing of Nuclearelectrica has been postponed until 2013, but the government has promised the IMF to speed things up. The only progress of 2012 was the sale of 15 percent of the shares of Transelectrica through a secondary public offer. It was the only listing of a state-owned company made since the listing of Transgaz in 2007. On the promises list for this year there was also the listing of a supplementary package of 15 percent of the Transgaz capital. This was due to take place by the end of the last year, but at the beginning of November, President Traian Basescu and Prime Minister Ponta agreed to postpone the listing, considering the time inappropriate. It was a decision which, according to the former state secretary in the Ministry of Economy, Rodin Traicu, bothered the representatives of the IMF. The privatization of Cupru Min Abrub and the Chemical Plant Oltchim should have taken place last year, too. Oltchim’s insolvency is another issue on which politicians keep a silent voice for the outcome of the company. Meanwhile, the newly set up energy plant Oltenia was supposed to be listed on the stock market. Everything was postponed until 2013. Surprise or not, the listing of these state owned companies was again postponed to terms ranging until the end of 2013. According to Mediafax the letter of intent agreed with the IMF states that the listing of 15 percent of Romgaz will take place by the end of October, seven months later than the previous term. The 15 percent of Energy Complex Oltenia will be listed also in October and the majority package is to be sold to a strategic investor. The end of May is the term agreed with the IMF for the listing of ten percent of the shares of Nuclearelectrica. ■

recycling

Romanian waste law hits new targets An EU citizen produces about 500 kilograms of municipal waste per year, according to calculations made in 2010 by the European Court of Auditors, which, if not collected, treated and disposed of properly, can have a negative impact on the environment. The Diplomat – Bucharest talked to representatives of the authorities to find out both Romania’s new targets for 2013, and solutions to improve the waste recycling system. By Alexandra Lopotaru

ecycling involves reusing old materials in order to generate new ones, a process that leads to energy savings (from the reduced use of raw materials) and a reduction in greenhouse gases. From all the waste on the market, paper, glass, plastic and electronic devices are just a few of the materials that can be recycled, thus reducing environmental impact. Waste management is a complex process that begins with the waste collection and transportation system and ends with treatment by incineration or recycling. However, recycling is one of the last steps in the waste management system and, in order to improve its structure, it is necessary to influence the others. “In Romania, the Integrated Waste Management system is being implemented, a programme based on the European experience,” National Environment Guard (GNM) representatives tell The Diplomat – Bucharest. “We must be aware that a mechanical approach to the procedure may not bear fruit. Unfortunately, the selective collection of household waste remains a problem, especially in some rural localities, compared with industrial waste which is the responsibility of the manufacturer. One of the problems in implementing this system in Romania is people’s mentality.” The way economic operators and other institutions manage the waste is mostly verified by environmental commissioners. In 2012, the GNM commissioners conducted 46.551 inspections. “During these inspections, the main deficiencies found were improper waste disposal, the incorrect filling in of forms regarding management waste evidence or even the lack of them,” GNM representatives say.

Selective waste collection, to be expand nationally

Selective waste collection is one of the main requirements to achieve an adequate recycling and recovery level, according to representatives of the Ministry of Environment and Climate Change. The local implementation of selective collection procedures started years before Romania joined the European Union, and involved three stages: 1) from 2004-2006, the authorities stressed both pilot projects and public awareness; 2) over 2007-2017 selective collection is expanding nationally; 3) 2017-2022 will see selective collection implementation in difficult areas (apartment buildings, remote rural environments, mountainous areas). Between 2004 and 2006, separate municipal waste collection procedures for packaging (paper, cardboard, glass, metals, plastics) were conducted locally in pilot projects, initiated by the sanitation companies and municipalities, in cooperation with operators that market packaging and packaged products. However, from 2007, selective collection began to expand. That year recycling banks were set up in 183 villages, reaching 698 localities three years later. “By 2015, Romania will have separate collection systems at least for paper, metal, plastic and glass. Along with the implementation of integrated waste management systems and given the new laws regarding the collection and recovery of municipal waste, it is expected that selective waste collection will grow much faster in the coming period,” say Ministry of Environment and Climate Change representatives. “Subsequently, the National Waste Management Strat-

egy was launched, reflecting the current stage of implementation, the progress made, the weaknesses which have prevented the fulfilment of strategic objectives and new European trends in the waste field.” Waste management is an EU-wide concern, according to officials from the European Court of Auditors. “Proper waste management can lead to an improvement in the use of resources, because treated municipal waste can also be a source of raw materials,” they say. “As a result, the EU has introduced common standards and targets in the form of directives for the management of municipal waste and co-finances waste management infrastructures in specific regions. The EU contribution to waste management infrastructures is significant: structural measures earmarked amounts represented 10.8 billion EUR during the 2000-2013 period.”

Same waste, new targets

For Romania’s recycling system to reach European standards, the authorities provide several annual recycling targets. Thus, under Government Decision no. 621/2005 concerning packaging management and waste, in 2012 Romania’s objective was to recycle 50 percent of total waste: 60 percent of paper and cardboard, 18 percent of plastic, 54 percent of glass, 50 percent of metal and 15 percent of wood. The objectives are mandatory for economic operators who market packaged products, for companies that over pack packaged products individually, for resale or redistribution, and for distributors. Furthermore, under GD no. 1037/2010, Romania has to recycle

recycling Type of material

The amount of recycled waste in 2010*(tonnes)

Glass

91,031

56,78

Plastics

79,391

28,24

Paper & Cardboard

177,636

66,78

Metal -Aluminium

2,445

15,38

Metal - Steel

33,822

86,07

Metal - Total

36,267

65,70

Wood

38,451

18,15

TOTAL

422,776

43,36

2012 and, in 2013, another three landfills will be closed. “As planned, activity was halted at all waste landfills, but closure and rehabilitation works have not been completed in all cases. According to the schedule, there are still 49 landfills that need to be closed by 2017,” GNM representatives say. “The problem is not the closure of the landfills, but finding efficient solutions to manage waste disposal properly, like ecological landfills.”

Law still awaiting full implementation

* These are the last statistics released by the Romanian authorities. For 2011, the figures are in progress.

between 50 and 80 percent of the weight of both electrical and electronic equipment waste and gas discharge lamp waste collected. In addition, under GD no. 1132/2008, Romania has to recycle between 50 and 75 percent of batteries and accumulator waste collected. New targets have been set for 2013, namely the overall recovery by recycling of 55 percent of total packaging waste: paper and cardboard, 60 percent; plastic, 22.5 percent; bottle, 60 percent; metal, 50 percent; and wood, 15 percent. “Collection targets have not been established for public institutions, but the requirement for selective waste collection for waste types such as paper and cardboard, metal and plastic, and glass waste is mandatory. So far, Romania has not been penalised for its failure to meet certain targets,” GNM representatives say. The increase in production and poor resources management has led to the generation of large amounts of waste, say experts. By implementing laws aimed at companies and local government, the impact of waste management on the environment and human health is expected to be significantly reduced. “Waste generation is the thing that best illustrates the extent of interaction between human activities and the environment. Waste generation usually follows consumption and production trends. For instance, waste generation (quantity/ capita) increases with rising living standards,” say Ministry of Environment and Climate Change representatives. “Therefore, it is necessary to amend both the consumerist mentality and desire to maximize short-term gains through adequate policies and instruments.”

Ways to increase recycling efficiency

In order for Romania to become a “recycling society”, the authorities believe that 24 The Diplomat February 2013

waste management efforts should be prioritized in accordance with the waste hierarchy. Moreover, for greater resource efficiency, they encourage waste prevention, waste reuse and the growth and expansion of separate waste collection systems, in order to promote high-quality recycling. “With the help of several information campaigns and educational activities, people will be more informed, responsible and educated regarding waste collection. We believe that the authorities’ efforts should be directed firstly towards the citizens, in order to change their attitude,” GNM representatives argue. “Romania has transposed into law all relevant European standards. In other words, there are legal requirements, but they must be implemented and respected. We believe that every management system applicable in a Member State may be an example and a source of information for developing better systems.” Moreover, reducing the quantities of waste disposed of in landfills should be a priority for Romania, experts say. Under rules agreed with the EU about the decommissioning or compliance of existing landfills, all irregular landfills must be closed by 2017. Accordingly, 26 dumps have already been closed in 2010, six were taken out of commission in 2011, 21 in

Romanian legislation on the waste management sector was permanently amended in line with European legislative changes. However, the European Commission believes that the legal framework has not yet been fully implemented, not only in Romania, but in all EU countries. “A recent study prepared for the Commission estimates that full implementation of EU waste legislation would save 72 billion EUR a year, increase the annual turnover of the EU waste management and recycling sector by 42 billion EUR and create over 400,000 jobs by 2020,” said EC officials. They add that Romania is among the Member States that are furthest from implementation, along with Cyprus, the Czech Republic, Estonia, Greece, Italy, Lithuania, Latvia, Malta, Poland and Slovakia. “Failings include poor or non-existent waste prevention policies, a lack of incentives to divert waste from landfills, and inadequate waste infrastructure. Heavy reliance on landfilling means that better waste management options such as re-use and recycling are consistently underexploited. The outlook is accordingly poor. Austria, Belgium, Denmark, Germany, the Netherlands, and Sweden by contrast have comprehensive waste collection systems and landfill of less than five percent of their waste.” ■

Type of Waste

Romania’s targets Romania’s targets for 2012* (%) for 2013* (%)

Glass

Plastics

22.5

Paper & Cardboard

Metal

Wood

Global target for recovery through recycling

55 *Out of the total amount put on the market

recycling

Recycling, the elegant way to dispose of waste

Romania’s recycling system had a late start compared to other European Union countries. Several significant associations and companies on the local market are now making efforts to meet the targets set by European legislation, in order to boost the recycling system. The Diplomat – Bucharest talked to the main waste players to gauge the difficulties they are currently facing, and potential solutions. By Alexandra Lopotaru

ecolamp, which deals with the waste management of light sources, collected and recycled about 500 tonnes of lighting equipment in 2012. This represented 40 percent of the equipment put on the Romanian market by the producer members. “There is still much unmanaged waste on the market,” Bélá Kovács, general manager of Recolamp, tells The Diplomat – Bucharest. “Many companies throw away this type of dangerous waste and much of the population doesn’t even have access to collection points, where they could bring electrical waste to be collected and then recycled.” Under Romanian legislation, lighting equipment waste is regulated by GD 1037/2010. In August 2012, the European Commission enacted Directive 2012/19/CE, which the Member States should adopt by February 2014. This new law brings some significant changes, including the collection and recycling targets which the Recolamp association has achieved in 2012. “Recolamp prepares and submits operating plans and reports on the actions taken by the organization to the environmental authorities,” Roxana Sunica, marketing director of Recolamp, tells The Diplomat – Bucharest. “These documents stipulate that the purposes of the funds we manage are to provide waste collection and the recycling of lighting equipment and to support information campaigns, all aimed at fulfilling the country’s targets.” In 2012, Recolamp implemented several

programs, aimed at increasing the amount of collected waste, such as “Coltul verde din scoala mea” for school education and “Ziua verde in organizatia ta”, addressed to state and private companies. However, Kovács believes that there are several solutions to reduce the amount of waste. “Light sources have a life span of six years,” says Kovács. “However, due to new technologies, there are some marketed products with higher operating hours, which are currently available, like LEDs, for instance. By using the new equipment, the amount of generated waste will decrease naturally over time.”

From PET to R-PET bottles

The concept of recycling is not new for Romania, but to implement this system properly is a big challenge, according to Mihaela Sofronea, the Green Group PR manager. There are many plastic and electronic waste resources in Romania, but not all materials can go to the recycler directly from the consumer. There are certain factors that prevent this from happening, like the nonexistence of a sustainable collection system or the poor national collection infrastructure. Genentech is one of the largest plastics recyclers in Romania and the first of the four Green Group companies, active since 2002 in Buzau. “When we first entered on the market, we faced many difficulties, including

inconsistent legislation in terms of overall vision for collection and recycling procedures and the lack of a collection system imposed nationwide,” Mihaela Savin, executive director of Greenfiber International and Greentech, tells The Diplomat – Bucharest. Greentech has a 48,000-tonne per year processing capacity for PET bottles and 6,000 tonnes per year for polyethylene, holding a market share of 77.5 percent. In 2012, the company made a nine million EUR investment in order to improve the recycling line. Genentech will increase its capacity to 50 percent due to professional chopping and PET bottle washing lines and will improve the quality of its finite materials (PET flakes) by replacing the manual sorting line with an automatic one. “Until now, the PET flake production capacity was 40,000 tonnes. They came from the sorted PET waste that followed the manual sorting procedure and the five-line passing through the grinding and washing flow,” says Savin. “The new investment improvements are visible in the figures,

“The purposes of the funds we manage are to provide waste collection and the recycling of lighting equipment,” Roxana Sunica, Recolamp 25

recycling

“Unfortunately, in the last three years, the quantities of WEEE collected have decreased from year to year,” Marius Costache, Greenweee International & Greenlamp Reciclare increasing the production flow to a 60,000tonne PET flake capacity, coming from unsorted PET waste, but using an automatic sorting line and six chopping and washing lines.” Another Green Group company, Greenfiber International, emerged as the only firm to recycle synthetic polyester fiber and PET band in Romania. Currently, it has an 11 percent market share of the total production in Europe. By recycling 75,000 tonnes/year of PET waste, Greenfiber International manufactures 50,000 tonnes/year of synthetic polyester fiber and 5,000 tonnes/year of PET band. The synthetic fiber and PET band are 100 percent made from recycled PET flakes, and the main fiber users are active in the automotive (37 percent), hygiene (26 percent) and geotextile, industrial filters and construction industries (37 percent). In late 2012, Greenfiber International invested in two technological lines for PET granule production for human consumption, called R-PET. The lines have a 16,000tonne/year processing capacity. “This new R-PET title is actually a green solution. It is well known that a PET plastic bottle is made of oil (by different processes). The ecological solution is to produce PET bottles by using R-PET as a raw material instead of oil. Basically, this recycled PET or R-PET requires less energy than manufacturing a virgin PET,” says Savin.

WEEE not the champions

In 2009 and 2010, Green Group continued to develop and expand by opening two factories, electrical and electronic wasterecycling Greenweee International, and Greenlamp Reciclare for used lighting equipment. “The moment they appeared on the market, those two companies encountered an obstacle in terms of raw material quantity for several reasons: inefficient nationwide collection systems, lack of information, plus loss of waste in other flows like scraps and landfills,” Marius Costache, executive director of Greenweee International and Greenlamp Reciclare, tells The Diplomat – Bucharest. “The investments we have made in infrastructure, in the collection system and in the modern technologies, which come to 40 million EUR (all green companies), place us among the top European recyclers as promoters of a proper recycling system.” As a recycler, Greenweee International has a 50,000-tonne treatment capacity, but the endeavor is not feasible due to lack of marketed WEEE (waste electrical and electronic equipment), representatives say. Greenlamp Reciclare can recycle 3,600 tonnes/year, using three recycling lines and a particular Romanian distiller, designed to recover mercury from fluorescent powder, collected from both fluorescent lamps and mercury vapor light bulbs. The amounts collected nationally are 50 percent below the company’s treatment capacity. “Unfortunately, in the last three years, the quantities of WEEE collected have decreased from year to year, from 1.5 kg/ capita in 2010 to less than 1 kg in 2012,” Costache says. “This greatly influences the amount of recycled waste. Our companies have their own collection system, but we also collaborate with collective associations

which take on the producer’s responsibility, with public institutions and with companies that own waste.” To increase collection capacity and recycling efficiency in Romania, Greenweee International will launch a collection program, especially designed for people to manage their own rubbish, receiving financial incentives in exchange. “The national waste management status for all types of waste is delicate,” adds Costache. “To encourage the growth of WEEE on the market, citizens need simple and effective methods in order to dispose of material.”

One tonne of recycled cardboard saves about 15 trees

European Union recycling targets assumed by Romania have increased from year to year, experts say. For packaging waste, recycling obligations relate to each type of material (plastic, glass, paper, cardboard, metal and wood) and since 2011, targets for PET and aluminum packaging have been introduced, making Romania among the few Member States with such objectives. Eco-Rom Ambalaje meets 78 percent of Romania’s recycling targets on packaging waste, according to the latest ANPM (National Agency for Environment Protection) report from 2010. The company

“2013 is the year when Romania completes its transition period and must get in line with other European Union Member States,” Sorin Popescu, Eco-Rom Ambalaje 26 The Diplomat February 2013

recycling invested eight million EUR in 2011 in order to streamline the Romanian recycling field. “As in 2012, 55 percent of all packaging put on the market must be recycled,” Sorin Popescu, general manager of EcoRom Ambalaje, tells The Diplomat – Bucharest. “From this point of view, 2013 is the year when Romania completes its transition period and must get in line with other European Union Member States.” Currently, 402 locations (60 per cent higher than in 2011) and about 8.8 million Romanians have access to the selective collection system provided by Eco-Rom Package. By the end of 2012, Eco-Rom Ambalaje had processed 398.463 tonnes of packaging waste, representing 61 percent out of 651.126 tonnes of packaging put on the market, a 12 percent increase compared to 2011. Over 70 percent of the packaging on the Romanian market comes from Eco-Rom Ambalaje member companies. “We are talking about over 600,000 tonnes of packaging put on the market through our system in 2011 and 2012,” says Popescu. “This is a significant decrease, to the 2006-2007 level. In an adverse economic context marked by a reduction in consump-

tion, the annual increase in the amount of packaging waste selectively collected and recycled is a good performance.” Since 2012, companies responsible for putting packaged products and retail packaging on the national market are required to implement a Waste Management Prevention Program, under national legislation (Law no. 211/2012, art. 43), adds the Eco-Rom Ambalaje general manager. “Waste prevention is a priority in order to save resources, because it reduces the amount of raw materials and energy consumed in the manufacturing, distribution and sales of products systems,” says Popescu. “From the producer’s point of view, eco-design packaging (easily recyclable packaging or recycled materials of the optimum size) should gain more and more followers gradually.” In Europe, about 34 million milk and juice cartons are recycled every day. A producer of these is Tetra Pak, one of the founders of Eco-Rom Ambalaje. Worldwide, the number of Tetra Pak packages recycled increased from 10 billion to 36 billion over the last decade (2002-2011), a sustainable growth exceeding one billion cartons a year.

“This growth is the natural cause of several campaigns, aimed at informing consumers about the importance of both selective collection and collaboration with the authorities, the organizations for responsibility transfer and recyclers,” Cristina Dumitru, communications manager for Tetra Pak South Eastern Europe, tells The Diplomat – Bucharest. Since 2009, Tetra Pak has run various projects to encourage the selective collection and recycling of milk and juice cartons, in partnership with the authorities, companies and non-governmental organizations. For instance, under the “Cu fiecare ambalaj colectat, ești și tu un SuperPak” program, which ran from 2009 to 2011, the amount of cardboard collected increased significantly, from 500 kg in 2009 to 2,500 kg in 2011. “Having started in 2009 as a pilot program in ten schools in Medias, the campaign was extended to several schools in the north of Sibiu County in 2010 and in Ramnicu Valcea in 2011,” says Dumitru. “Pupils were taught that each bit of paper or paperboard is important, because one tonne of recycled cardboard saves about 15-20 trees from being cut down.” The 2012-2020-environmental strategy

recycling requires Tetra Pak to maintain the 2010 CO2 emission level, in the context of growth in the number of sold packages. “Moreover, we are developing processing and packaging solutions that are designed to reduce energy consumption. For example, Tetra Therm Aseptic Drink pasteurizers will reduce their power consumption by up to 30 percent,” adds the communications manager.

Can do: aluminum cans are recyclable too

Aluminum cans are another source of recyclable waste and one of the Romanian recyclers is Alucro. In 2012, the association managed to collect around one tonne through several events and about six tonnes through partner locations. “Certainly, things will be different in 2013,” Adina Magsi, general manager of Alucro, tells The Diplomat – Bucharest. “We

in exchange for a certain number of empty cans, the individual receives a full can of beer or soda. One of the problems that Alucro has faced, however, in the implementation of these events, is individuals’ lack of information. “Most of the people we addressed were not aware that aluminum cans could be recycled. For this reason, most of our actions emphasize citizen information in different ways, such as press releases, print, events and social media.” Magsi is disappointed with the Romanian collection process, saying that in a European collection ranking, Romania is the second to last country, alongside Bulgaria and Greece. Moreover, the general manager of Alucro puts forward environmental legislation providing harsh penalties or the greater involvement of the authorities as solutions. “We tried to present the Every Can Counts program to all district mayors and especially to Bucharest City Hall,” Magsi says. “We offered them collection boxes, communication materials such as posters, flyers, brochures, stickers and even authorized collectors. We asked for one thing in return: to inform their

elements are then reinstated into the production cycle, and are used to manufacture new batteries in Rombat’s factory, in Bistrita.” Besides Rebat, there are two other plants of this kind in Romania, so the country has higher processing capabilities than the demand generated by the domestic market. Specialists speak about a fierce competition in terms of battery acquisition, and purchasing prices are among the highest in Europe. In terms of environmental protection, battery waste is one of the waste categories that have a recycling level approaching 100 percent. In other words, all batteries put on the market are purchased and recycled in a very short time. Regarding the legislation, GD 1132/2008 is regulating the battery waste system by applying the “deposit” procedure, a program designed to encourage vehicle owners to recycle used car batteries. The law provides an additional payment of ten percent of the price of the purchased car battery if the buyer doesn’t give the seller, in exchange, a used car battery. “This decision is a transposition of EC

“We are developing processing and packaging solutions that are designed to reduce energy consumption,” Cristina Dumitru, Tetra Pak South Eastern Europe network of subordinate units of the beginning of this program. We haven’t had any response yet and we are no longer expecting one.”

have become well known and more companies want to join our programs, which will definitely increase the amount of aluminum waste collected and sent for recycling.” To increase the capacity and efficiency of Romania’s collecting and recycling systems, Alucro has launched several programs, including Every Can Counts, in Bacau Cluj, Arad, Timisoara and Bucharest. “Every Can Counts was initially not well received by those we were targeting, but along the way, after we explained the program’s structure, they began to show interest and have implemented it in the relevant locations,” says Magsi. “We focused mainly on the partner cities, which can collect the entire quantity of aluminum cans for the locations that have joined the program.” Another Alucro event is the Recycling Fest, which takes place each year at the coast. The collection strategy is efficient and simple: 28 The Diplomat February 2013

Car battery waste moves up a gear

In Romania, more than 90 percent of the car batteries on the market are recycled. Moreover, in the past few years, the number of recycled car batteries has constantly increased due to tough competition on the market in terms of waste batteries, according to Emilia Neagos, purchasing manager at Rombat, one of the leading manufacturers of car batteries in Romania. Rombat purchases used lead-based batteries through waste collectors, as well as through individuals and its own distribution network. Afterwards, the used batteries are transported to the Rebat recycling facility, in Copsa Mica, Sibiu County. “Rebat machines allow us to apply the most advanced recycling technologies that currently exist internationally,” Neagos tells The Diplomat – Bucharest. “With this technology, we recover lead, polypropylene and sulfuric acid from the used batteries. These

Directive 66/2006, which means that we can talk about a policy applicable to all countries in the European Union. Unfortunately, we can tell you that in most cases the ‘deposit’ system is not used,” says Neagos. Another difficulty that Rombat is facing concerns waste transportation on Romanian soil, a process governed by GD 1061/2008. The provisions make waste transportation more expensive, according to Rombat’s purchasing manager.

Glass, the waste queen

The glass industry was affected by the appearance of PET as a packing material, especially in the beer field. However, the market is still immature and unsaturated, clearly an advantage for Stirom, the largest glass manufacturer in Romania, according to its representatives. “Romania’s glass industry doesn’t have enough recycled glass to work properly. To manufacture a bottle, besides raw materials, you need a certain percentage of recycled glass. Otherwise, the composition might be wrong. Right now, we have enough recycled glass only for the recipe,” Spiros Vamvakas,

recycling general manager of Stirom, tells The Diplomat – Bucharest. “To fix that, we need to focus on two main areas. Firstly, informing people and motivating them to recycle glass from their households, meaning that the selective collection starts with the consumer. And, secondly, the application of the legislation. All customers who use recyclable packaging materials are required by law to collect all recyclables materials separately. Unfortunately, this is not happening.” Stirom sells between 110,000 and 120,000 tonnes of glassware per year, but the percentage of the recycled glass used in production is quite small compared to the company’s capacities. “The percentage used in the production process depends on the supply. At the moment, we are using about ten percent of recycled glass [15,000 tonnes], when, in fact, we could use up to 70 percent,” says Vamvakas. Besides saving energy, the glass recycling process has another advantage: glass can be recycled a thousand times without losing its properties, says Vamvakas. One of

disposed of as garbage. Dumitrache believes that there are various ways to streamline the recycling system and to avoid glass loss. “Glass is stylish trash. You can leave it in a corner and it will not disturb you. However, any waste should have a place somewhere. Therefore, instead of throwing it away, you should use it. We only need some civic attitude and sense of diligence,” says the TC Rom Glass CEO. “I think one of the best forms of education is the penalty system. In addition, increasing the number of specialized containers located in built-up neighborhoods would be another solution. Thirdly, selective separation stations should be installed on all landfills. And, last but not least, we need to separate the recyclable materials in the Horeca system (hotel, restaurant and catering). Horeca is an important glass provider. Out of the 90 percent lost glass, at least 45 percent comes from Horeca.” Besides the advantage of not wasting objects, recycling glass helps reduce greenhouse gas emissions into the atmosphere. “If we want to get 100 kg of glass, we need

selectively,” says Calcan. Since 2012, Romprest has been running a large project, which stresses the importance of improving selective collection, and the sorting and transport procedures. “The project calls for a necessary automated sorting station, through which the ramp storage will be reduced by a minimum of 25 percent. Currently, under EU legislation, we are required to reach a target of 15 percent,” adds Calcan. Regarding the collection system in Romania, Calcan believes it is important to emphasize the partnership between the authorities, storage operators and ecological services. “A very good example is the selective collection policy adopted in the West, where the authority has clearly outlined the duties and obligations in order to comply with fair pre-collection and selective collection processes,” says Romprest’s Calcan.

“Romania’s glass industry doesn’t have enough recycled glass. To manufacture a bottle, you need a certain percentage of recycled glass,” Spiros Vamvakas, general manager, Stirom the leading glass recyclers in Romania, TC Rom Glass, is a partner of Stirom, member of Yioula Group in Romania. TC Rom Glass recycles about 12,000 tonnes of glass per year, according to Cristian Dumitrache, the company’s general manager. “In 2007, when we started, we collected 13,324 tonnes and we recycled only 8,218 tonnes, because we were testing the factory,” Dumitrache tells The Diplomat – Bucharest. “Afterwards, we recycled all the collected amount, our full capacity being 65,000 tonnes/year/three shifts. For example, in 2008, we collected and recycled 14,320 tonnes of glass, and in 2012, 10,500 tonnes. Sanitation companies brought us around 200-250 tonnes per month; the rest came from individuals and from our clients. I can say that I noticed an increase in the amount of glass brought by individuals last year.” Due to both Stirom production and the glass imports coming from other manufacturers, the amount of glass on the market reaches 175-180,000 tonnes per year, according to Dumitrache. From the amount of marketed glass, TC Glass Rom recovers and recycles up to ten percent, with the other 90 percent

120 kg of raw material. If we use only shards, we’ll need only 104 kg to manufacture 100 kg of glass. In other words, by using a smaller amount of heat, we will save energy. Plus, using shard, the CO2 emissions in the atmosphere will be reduced,” adds Dumitrache.

Collecting waste, recycling more

Currently, in Romania, 12 associations specialized in the selective collection of various packaging waste are authorized to operate, out of which seven are focused on packaging waste and five on waste electrical and electronic equipment (WEEE), according to Adriana Calcan, marketing manager of Romprest, the company that implemented the Romanian collection system in 2008. The amount of waste collected in 2012 was not higher than in previous years, but stayed the same. “The 2013 predictions are optimistic; according to the forecast released by the Romanian Government, this year we will see economic growth, namely consumption, which, in our opinion, will generate by default an increase in the amount of waste collected

“The ‘waste owner’ being clearly established, the public authority delegates the selective waste collection to the sanitation operator, supporting this process by levying fines on citizens, if the waste is in the wrong container.” The local waste management system has an advantage, according to Adrian Iancu, general manager of Cameleon Invest (a waste management company), namely the lack of strong players. Moreover, Iancu believes that this system can be improved with better legislation. “I think some of the solutions for streamlining the waste management system would be limiting and auditing several ‘firms’ permanently, firms which took over the responsibility of the authorities,” says Iancu. “We also need to remove the unfair competition and, of course, to improve people’s education.” ■ 29

The Recycling Ambassadors The recycling industry has its rightful place in the annual Green edition of The Diplomat. Our reporters researched the market with the objective to highlight the best initiatives, campaigns, projects, actions or statements. Our attention was drawn by the approach of one compliance scheme that operates in Romania in the field of e-waste recycling and that speaks to us in familiar terms about ambassadors and diplomacy. We spoke about “recycling diplomacy” with the President of the Romanian Recycling Association, Mr. Liviu Popeneciu. You often mention in your statements the “ambassadors” of RoRec Association. Who are they, how did they join your projects and … how do the “letters of accreditation” recommend them? Liviu Popeneciu: If we speak about diplomacy, I would like to start with a few words about us and our projects, as actors on the European stage. RoRec Association is a collective, not-for-profit organization that operates to develop a coherent e-waste management system, on behalf of an important part of the electrical and electronic industry in Romania. We have assumed tasks and measurable commitments to support, as a reliable partner, Romania’s objectives as a member of the European Union in the complex field of environmental protection. In order to reach these objectives, RoRec Association carries out campaigns and proj-

ects aimed at building a national network for e-waste collection and recycling, based on the current legal provisions and under safety conditions for both the environment and human health. This process entails many stakeholders, a great amount of work and … indeed, a lot of diplomacy. And I would mention here our main partners, the authorities. Both central and local, they are all preoccupied with the same issues as we are: our country’s collection and recycling targets. First of all, we support a good cooperation with these authorities as the legal framework and mainly the implementation and control of the law are key factors underpinning our activity. This year is fundamental for the transposition of the European WEEE Directive into national law. On 4 July 2012 the new directive was signed by the president of the European institu-

Liviu Popeneciu, President of the Romanian Recycling Association tions in Strasbourg and received the number 2012/19/UE. Romania should ensure that the directive will be transposed into national law by 14 February 2014. Thus we have a busy year to work on this issue. Then the cooperation with the local authorities is essential. We now have a collection center network in 25 cities and small towns and we are planning for the enlargement to 70-80 centers. This project can only be unfolded with the support of local authorities. And the legislation that provides for a collection center at every 50,000 inhabitants also comes to support us. And since we talk about community services, of paramount importance is communication and the voice of authority is of course the one recognized by the citizens. And that is how the ambassadors start to come forward...

So a town hall can be considered an ambassador of your Association? Liviu Popeneciu: Even more, it is the head of our “diplomatic corps”. And I would quote here one of our partners who said at the opening of our Alba Iulia Collection Center: “We need a collection center in our town as we need the school and the church. People were asking what to do with the ewaste, now we have an answer: we collect it at a center built at European standards!” The local authority is the one that builds the “roads” for the citizens to “drive on” and only the power of example can entail action. The voice of the local authorities is the one that reaches the citizens’ ears. And where the local town hall got involved, we had good results. And there are about 1,000 such examples. We cooperate with almost 1,000 local authorities from cities, towns and villages. We see the spirit of “good householder” developing. If at the beginning they were suspicious about us “we have a lot of things to do, why do they bother us?”, now they call us, take part in our campaigns, come up with new projects. The most recent example is a special project that we launched last November together with Timisoara City Hall. It is a monthly free pick up from home collection service, with a dedicated call center. Every last Saturday of the month all collection orders registered during that month are honored. Even on 29 December, we had over 100 requests for large WEEE pick up from home. And there are other town halls that would like to implement this system

with our support. This is what the power of example means… and people’s reaction is impressive. I remember what a teacher from Timisoara said when we went to her house to pick up a large household appliance: “I am glad that we are becoming Europeans and not only based on geographical criteria”. You can say that we have a large “diplomatic corps” … Liviu Popeneciu: And I am just at the beginning of the list. A great contribution in the dissemination of our message is brought by the citizens that we meet during our campaigns. In 2012 we carried out almost 850 collection actions in more than 1,000 towns and villages, which is an average of 20 actions/month in each county. These add up to 300 actions carried out since mid 2010 and in 2011. People have started to look for us, to contact us, to ask for our support. We have a data base of more than 100,000 people who disposed of WEEE during our campaigns in the last years. And those who got in contact with us understand our message and our endeavors, support us and convey the message further to relatives, family, colleagues, friends or to the “gang” from facebook. We have more than 45,000 friends on our accounts. Not all of them have e-waste to dispose of, but they recommend and support our actions, they ask questions, make comments and come up with suggestions. The most frequently asked questions are: „When do you come to our town?”, „When will there be a collection center in our area?”, „How can we

become volunteers in your projects?” and many other statements of support, congratulations and appreciation of our activity. And here we come to another category of ambassadors … the citizen who wants to responsibly dispose of his waste and not to throw it at hazard or take it to iron scrappers… I have recently read a statement of a big recycling plant in Romania saying that more than 30,000 tones of e-waste go to iron scrappers. It is true? Liviu Popeneciu: The recyclers represent another important category of ambassadors. The big recycling plant you are talking about is GreenWEEE, one of our partners that fight along our side for this cause. They were the first to point out this fact including to our authorities, as it is reflected in their business indicators. And we have common objectives, they are interested in building up a waste management system based on solid, fair and transparent principles, fact also demonstrated by their acceptance to undergo the WEEE Forum first audit of recycling standards. Last year we both took part in the first European training on the implementation of WEEELABEX standards or the Label of Excellence in recycling of WEEE Forum. And where do you think it took place? In Bucharest! Our Association was their first supporter of these standards in Romania. We are proud to point out the fact that 90% of the WEEE collected by RoRec Association have already been treated and recycled according

to WEEELABEX standards. Moreover, all our contracts with the recycling partners provide for the respect of these standards. Very briefly, I would mention that since its establishment up to present, RoRec Association collected and transferred to recycling more than 300,000 refrigerators, more than 266,000 CRTs and other significant amounts of WEEE. And the recycling industry’s activities are meant to help the implementation of the law. Thus it contributes to the promotion of our common message. We found out that in December you received the Grand Prize of a gala for your activity in 2012. Do these prizes, tops have any value today? Does a diploma still counts today? Liviu Popeneciu: Of course, the paper per se is not valuable, but what lies behind is, in terms of performance. You have referred to the Grand Prize awarded by the Infomediu Europe Magazine. It is a specialized magazine on environmental and ecological issues, member of the European Environmental Press, that thoroughly scans the developments in the field. To quote them, „Infomediu team decided, after a journalistic meticulous analysis, to award this year’s Grand Prize to RoRec Association. Why? It is very simple: because they want to take attitude, to create opportunities, to do something different! They do not wait for things to happen, they make things happen.” We do not want to display false modesty. This prize honors us and rewards us for our endeavors on the difficult road that we chose. The fact that mass media appreciates these endeavors, binds us to keeping the same path and developing

what we have started a few years ago – the building of a coherent collection infrastructure, represented today by RoRec’s National Collection Network, as well as constant awareness raising, education and information campaigns for the population to activate a sense of responsibility for the environment from the earliest age. You see, the press thoroughly follows us and supports our projects. A monthly average of 200 articles on WEEE collection in the local press – published and online, the result of our Public Relations Department’s intensive work, which adds up to news aggregators cannot pass unnoticed. The support that we benefit from the local and central media shows the increased interest for our activity of the media and the authorities, and especially the citizens, the main target of our messages. The press has become our ambassador and has started to ask more information about our activity. And guess what? We even told Infomediu representatives that we intend to take their award this year too! As our projects have all the potential to be developed, to become even stronger and much more visible, contributing thus to the increase of the national collection rate . Talking about projects, you mentioned the collection centers, the campaigns carried out in all counties. How do you manage to support such a great deployment of forces? Where do so many resources come from? Liviu Popeneciu: It is obvious that we speak about ambassadors in this case too. We have more than 5,000 volunteers that joined our activity and take part in campaigns disseminating flyers, managing the

collection points, they are everywhere. They believe in what we achieve together. That is why they are authentical. And by their enthusiasm and the message they constantly send to the communities they live in, they become role models for the others. And they convince people to do a good, normal, natural thing. If you read their posts on our facebook account, you will see the „ecological spirit” blooming with their help. The same as we learn to say „good afternoon”, to be polite, to respect the others, we learn to be ... ecologists and to take care of the environment. The parents, the school, media and ... the law ... help us develop the taste for what is beautiful and settle behavior rules. And who are these volunteers? How do you find them? How do you convince them to join you? Liviu Popeneciu: Most of them are students and teachers. In Galati, for example, we had a team of foreign volunteers who came to work on a humanitarian project. Volunteer work is voluntary. It is not about convincing anyone. But you need to respect them. To respect their dedication, the time they spend for the project, their enthusiasm, their trust. And you must not disappoint them. I would rather let my colleagues who work directly with them to tell you more about this. One of the team members joins us - Alexandra Arnautu, project manager. I repeat the question and here is the answer. Alexandra Arnautu: We have learned to listen and be very careful with details. The respect and wish to achieve something to the benefit of the community creates the bridge

for communication and trust that we need. The meeting with the volunteers – mostly students and their teachers – is always for us the key moment for the organization of a campaign. They put a lot of questions, sometimes look at us suspiciously… some of them who were disappointed before by other volunteer projects came only as the teacher asked or by curiosity. Signing a volunteer contract with the Association represents for most of them a new experience. Some of them pleasantly surprise us as they read it carefully before we ask them to do so. It is for all of us a moment when we assume responsibilities, including against one another. At the beginning, on the collection day, we were asking ourselves “Will they be in time? Will they all come?”... Later we gave up these questions. Even if there were cases when someone was late or did not show up, they always came up with solutions. They already form a group whose reputation should be protected. We strive ourselves to be close to them, to listen to their suggestions and find what other extracurricular projects they take part in. My colleagues tell me a lot of stories about volunteers. In a campaign they could not convince two youngsters to close the collection point earlier, although it was raining heavily and they got soaked to the skin. They had to wait for two persons who had promised to come back with other household appliances. We could not believe that on such weather they would come back. However they came. Only then did the kids accept to close the collection point and go home. Then we thought that their parents might get upset. But in the

evening we met at the award ceremony and everybody was smiling. The children had done their duty. Or there were moments when I asked them to work extra hours. “Of course I can wait. Did you collect somewhere else as much as here?” The local pride contributed to the success of our action. Sometimes it was difficult to convince volunteers not to lift heavy and large appliances. The youth gave them wings. “Do you think we are not able to do it?” The supreme argument was that they signed a contract. It seemed to have the strongest effect. Everywhere in the country, due to the volunteers, we learn again to laugh with pleasure. We become young again! We found out that high school students, and youngsters in general, are much more responsible and better informed than we used to be at their age, that there are many cultural and educational projects for local communities, but they are not sufficiently known and promoted. We know that we carried out a successful campaign when we are asked whether we come back. It means we did not disappoint them, that we convinced them about the advantages of WEEE separate collection and we leave trustful that they will convey our message further. Mission accomplished!!! The diplomatic corps has enlarged a little bit. We have many stories about the volunteers. How many pages did you spare for us?, she asks me laughing. Now they seem to be insufficient. I would just like to ask one more question. I understand that you cooperate a lot with the schools. Besides these campaigns, are

there other projects for the educational institutions? Alexandra Arnautu: We have a very nice project that we are very proud of: The Recycling Patrol. It is already at its third edition. We started in spring 2011, with a pilot project, in Timisoara. At less than two years since its launching, we have almost 700 schools from 27 counties registered in the program and more than 20,000 agents of the Recycling Patrol. They are absolutely amazing children who were also lucky to have wonderful teachers. We receive amazing projects from all educational institutions, kindergarten or high school. I would rather invite you to visit our account on facebook - facebook.com/patruladereciclare - to convince yourself. There every day they post pictures, ask questions, tell us about their “heroic adventures”, about their plans or projects. Liviu Popeneciu: And I would also like to mention the artists who joined our projects and who convey our message further: Analia Selis, Nicola, Mircea Vintila, Johan Pohrib, Cargo… We are becoming a noteworthy community. With many ambassadors, our hosts end smiling.

www.rorec.ro facebook com/asociatiarorec

green buildings

Green buildings:

development fad or money saver? The Diplomat – Bucharest takes a look at the green development market to see what opportunities there are for consultants, developers and clients, as well as how local authorities are encouraging these types of constructions.

hile some years ago, a company looking for headquarters in a green building would not have had too many options, today it can choose from a variety of office developments in different locations around Bucharest, proof that the market for green buildings has increased significantly. A green (sustainable) building generally means a property that is environmentally responsible throughout its life cycle: starting from the design and continuing with the construction, operation, maintenance, renovation and demolition. On the local market, the best-known organizations offering green accreditation are the US Green Building Council, which offers LEED (Leadership in Energy and Environmental Design) certification, and the UK Building Research Establishment, which provides BREEAM (Building Research Establishment Environmental Assessment Method) certification. Officials from Colliers International 34 The Diplomat February 2013

also mentioned a third organization, the German Sustainable Building Council (Deutsche Gesellschaft für Nachhaltiges Bauen e.V., DGNB). Lucian Anghel, Managing Partner, BSS, told The Diplomat that the main criteria that qualify a property as a “green building” under the LEED system are: the integrated, holistic design process, which includes the sustainability of the building during its life cycle; an optimal location taking into consideration the community’s

ecological requirements; minimizing the impact of construction upon the environment; the design and the use of materials with a high energy efficiency and low consumption; water preservation and the reduction of water consumption; the use of eco-friendly materials (non-polluting and recyclable); generating and maintaining a healthy and safe environment for the building’s users; and management operations with a positive impact upon the costs, comfort and health of these users.

Increasing building value trough green design New constructions

Existing Buildings

Operating Costs

13.6%

8.5%

Building Value

10.9%

6.8%

Occupancy

6.4%

2.5%

Rent

6.1%

ROI improvements

9.9%

19.2% Source: McGraw Hill Construction (2010)

green buildings Green certified buildings, LEED Certification Willbrook Platinum Business & Convention Center Mixed use project: office & retail, Bucharest - LEED Gold

Cameron Facility Manufacturing Plant Industrial use, Ploiesti – LEED

Lufkin Industries Industrial use, Ploiesti – LEED

Randy Tharp, Managing Director of Epstein Architecture & Engineering, argues that green constructions benefit both the building’s occupants and society overall through sustainable design strategies including the use of renewable and locally produced building materials, reduced energy consumption, the reduction of chemical content in materials and cleaning products, conservation of water, healthy HVAC systems, natural day-lighting, low-energy light fixtures/lamps, and even encouragement of the use of mass transit. “These benefits go beyond the building’s users because they have an impact that supports the sustainability of our environment worldwide. For example, the use of locally produced materials promotes the local economy but also reduces the fuel needed to deliver products from other regions or countries, lowering the fossil fuels needed for the development of buildings. Using natural cleaning products improves the health of workers in buildings and eliminates the need for plants to process so many chemicals that go into cleaning products,” Tharp said. A significant NGO that actively promotes green building development on the local market is the Romanian Green Building Council (RoGBC), whose mission is to nudge the construction industry towards greater environmental responsibility, energy efficiency and economic opportunity, essentially to create a green construction economy. “Green designs and energy-efficient solutions are more important when money is scarce so we want to ensure decision makers understand this is an excellent way to save money,” said Steven Borncamp, President of RoGBC. “Every industry must contend with rising energy costs and resource scarcity whether they construct, own or lease.”

Sustainable constructions: pure PR or a viable economic option? Embassy of The United States of America Office use, Bucharest - LEED Certified

Source: RoGBC

36 The Diplomat February 2013

Is green development just a trend for real estate developers trying to attract tenants, or is it a viable economic option? Tharp of Epstein says: “One of the most obvious benefits for many companies in green buildings is to be able to say, ‘We are in a green building’ and, ‘Our corporate values promote sustainability and the global environment’.” However, the bottom line still matters. “Most companies will not pay a premium on their rent just to say this. Major corporations know that green buildings are less costly for them, provide healthier work environments for their employees, reduce long-term maintenance and utility costs, lower employee turnover and worker

Stock of green certificate office BUILDING

GROSS LETABLE AREA-SQM

Swan Office & Technology Park

29,124

The Lakeview

23,255

Eurotower

16,000

Crystal Tower

23,500

Olympia Tower

9,600

Victoria Center

8,350

TOTAL

109,829

absenteeism and increase worker productivity, as well as benefiting the local and global environments. Corporate financial managers are all about return on investment, and green buildings provide verified returns. In a study conducted within the last two years, returns for green buildings as compared to standard buildings include a 6.8-10.9 percent higher building value, a 2.5-6.4 percent higher occupancy rate and 1-6.1 percent higher rents. Furthermore, the return on investment for making ‘green’ improvements was between 9.9 percent and 19.2 percent. Clearly, it pays to have a green building,” he concludes. Local authorities are also trying to encourage the development of green buildings. Last year, the City Council of ClujNapoca voted to cut tax to as little as 0.25 percent for companies owning buildings with green certification and energy certification. Research conducted by the Property Management team with the Research Division of Colliers found the impact that a potential reduction in property taxes could have on the balance sheets of companies active on the Romanian market – both as tenants and developers. The level of property tax to be paid by landlords is established by each local council, at between 0.25 percent and 1.5 percent of the inventory value of the building. The study looked at the level of property tax in five major business hubs in Romania. Under market practice, in the case of leased properties, these costs are reflected in the service charge paid by each tenant, along with utilities, management fees and insurance. The service charge is to be paid by each tenant, directly proportional to the leased area. For office buildings, the average share of property tax in the service charge is between 35 percent and 50 percent. In Cluj-Napoca, which has a total modern office stock of 46,000 sqm with a ten percent vacancy rate, tenants of modern

green buildings buildings in Bucharest MAIN TENANTS Emag, Flanco, Bilfinger Berger, Tebodin, Tecnoservice PwC, RBS, Huawei, Colgate Palmolive Schneider Electric, Avon, Banca Romaneasca, Huawei ING Eureko, Namco Bandai, Optaros Citibank, Ursus Source: Colliers

buildings pay over EUR 600,000 each year in property tax. Under the new City Council measure, from 2013, the property tax will decrease to a minimum of 0.25 percent for certified green buildings. At city level, if all class A office buildings were certified as green buildings, tenant savings could reach the equivalent of the average annual salary of 108 employees. As for the landlord, a reduced property tax translates into significantly lower service charges, thus increasing the building’s attractiveness on the leasing market, while reducing the costs of vacant spaces. With regards to owner-occupied buildings, the reduction in property tax has a significant direct impact on the owner’s cash flows. For instance, a 20 million EUR office building owner in Cluj-Napoca can save EUR 130,000 annually if the building is or becomes a LEED, BREEAM or DGNB certified property.

What drives investments in green buildings?

Investments in certifying a building as environmentally friendly may differ depending on when the landlord decides to obtain this accreditation. Cezar Florea, LEED Green Associate and Head of Project & Development Services for Jones Lang LaSalle Romania, tells The Diplomat: “If the decision to obtain a green certificate is taken from the planning phase, then the entire design will be based on this, maximizing the synergies between different interconnected systems in the building and minimizing the costs. But sometimes the decision is not taken at the early stage of a project, and costs can increase according to the targeted level of certification.” Officials from Colliers claim that there is no significant difference between the costs of developing a green building and those of a conventional one, quoting a study by private equity fund Good Energies, based on 146 green-certified buildings.

The study found that although the perceived cost difference is 17 percent, the necessary effective investment in a green construction is less than two percent more than the costs of conventional constructions. Nevertheless, operating costs are significantly optimized for a green building. Florea of JLL points out that green buildings function efficiently, translating into lower utilities bills and a smaller service charge. “Electricity costs can be reduced by 20-30 percent compared with a conventional building,” Florea says. So who is occupying green buildings? “Multinationals were the first companies interested in buildings with a green certificate, recognized worldwide (companies from the US first, followed by firms in Europe with a powerful CSR component). For many multinational tenants, leasing a space in a green-certified building is a must,” Stefania Baldovinescu, Director of the Property Management Department at Colliers, told The Diplomat. RoGBC outlined for The Diplomat the complete stock of green-certified buildings in Romania, including not only office constructions, but also industrial facilities and embassies. According to RoGBC data, it comprises: Nokia Plant, in Jucu-Cluj, Cameron Facility Manufacturing Plant and Lufkin Industries in Ploiesti, Willbrook Platinum Business &Convention Center, Embassy of United States, Swan Office & Technology Park, Lakeview, Cascade EuroTower and Crystal Tower, all in Bucharest.

Green certified buildings, BREEAM Certification Swan Office & Technology Park Office use, Bucharest - BREEAM Very Good

Lakeview Office use, Bucharest - BREEAM Very Good

Euro Tower Office use, Bucharest - BREEAM Very Good

The future is green

All the analysts consulted by The Diplomat agree that demand will grow for green-certified buildings. “As we leave behind the current financial challenges in the short term, all projects of any significance will pursue green goals. Much like many other markets around the world, the question will not be whether to certify but at what level. We have seen and will continue to see a strong preference from occupiers for energy-efficient, well-located buildings that incorporate the health, comfort and functionality benefits of a green building. Longer term, market leaders will react to the new ‘nearly net-zero energy’ target for buildings that comes into force by European Directive in 2020 for private buildings and 2018 for public buildings. Obsolete buildings that consume high amounts of power will be upgraded or become not feasible as investments for owners. Those builders who get proficient at ‘doing more with less’ will be very successful in the not so distant future,” Borncamp of RoGBC predicts. ■

Crystal Tower Office use, Bucharest - BREEAM Very Good

Source: RoGBC

decision maker One’s professional path does not always go in a straight line, but may have unpredictable twists and turns – something to which Haluk Kurçer can certainly attest.

Lending expertise to entertainment A

fter more than thirty years in banking, a handshake with Dogan Group officials took Kurçer from the rigid financial sector to the glamorous world of entertainment. This might seem like a dramatic change, but not for Kurçer, who embraced the challenge and was rewarded with the satisfaction of taking Kanal D to third place on the fiercely competitive TV market. Kurçer’s previous experience in Romania was in 1997 when he joined Demirbank Romania (currently Unicredit Tiriac) as Vice President. Following the establishment of Demirbank Romania, he was appointed CEO of Demirbank Bulgaria but returned to Romania in 2004 to join Unicredit Tiriac. In February 2008, his lifelong banking experience, appetite for a clear vision and understanding of the intricate language of figures persuaded the owners of Dogan Group to offer him the job of Executive Board Member of Dogan Media International as well as President of Dogan Group in Romania. “They gave me the job of taking care of all areas of the investments that Dogan Group was planning for Romania. Before the crisis hit, we acquired a 55,000-sqm piece of land in Pipera, where we were planning to build a hospital, a hotel and a shopping mall. Unfortunately we had to halt these plans, like many others, for obvious reasons.” The magnitude of Dogan Group’s business reaches beyond the media: in Turkey, the group has major operations in the energy field. “We already have a big investment in energy in Turkey, in both hydro and wind energy. The hydro power plant has a 550 MW installed capacity – a EUR 1.3 to 1.5 billion investment in joint venture with Dogus Group and Unit Group– and as we speak we are in the process of building another one in joint venture with Dogus Group and Anadolu Group that will be operational in September 2013,” says Kurçer. In Romania too, Dogan Group is now planning to enter the energy sector. “We are really interested in the opportunities offered in Romania’s energy sector and we 38 The Diplomat February 2013

decision maker are looking closely at opportunities in wind and photovoltaic. we will decide in about three or four months if we enter the energy sector in Romania as an investor.” Coming back to the business that is taking up all his energy for the moment, the management of Kanal D, Haluk Kurçer is proud of his accomplishment. “At the moment we are in the top three most watched TV stations; we are playing with the big guys. It is very demanding as we are in another world now, the premier league.” Climbing to one of the top positions in the TV rankings is not an easy job, but Kanal D seems to have found the secret of getting into the homes of Romanian viewers. “We are a TV station for the whole family. Everyone in the family will find something interesting to watch on Kanal D, and our job is to entertain the viewer the best we can,” says Kurçer. The road was paved with mistakes, he admits, “but we learned and we hope not to repeat them. There were some TV shows that did not perform as expected. We also changed our profile, from a TV station targeting mainly women to one addressing the whole family.”

Dogan Media Group is the leader of the Turkish media market with numerous TV stations (around 27 percent market share), many publications in print media (approximately 49 percent market share for print operations) and radio stations. Locally, the group has decided, at least for the moment, to retain ownership even though over the years there have been proposals to sell parts of the station or even the whole business. “We have had such discussions but for the moment the plan is to stand alone. We started with Ringier, which had 25 percent of the shares, but now we have bought their shares and Dogan Media International is the only shareholder. But the market is unpredictable – who knows what will happen in a few years? A lot of things can change in the market and in the world economy.” Asked if the group is still planning further investments in the Romanian media, Kurçer confirms that it is looking for opportunities. “These opportunities might materialize in another TV or radio station, but also in projects related to websites and online presence.” Online is another area where Kurçer proudly presents his new baby. The tabloid

website wowbiz, which covers Romania’s highlife, is a success story just three months from its launch. “We definitely want to increase our online presence, and we are strongly encouraged by the fast growth of our wowbiz.ro project.” Even though the audience figures look promising, the life of a media business is not easy these days. With shrinking advertising budgets and strong competition, the race for profitability is tough. “We have reached our target for the first five years for performance, but financially I cannot say the same thing. This is due to the dramatic drop in advertising revenues that is common to the whole market. Still, we hope that Kanal D will become profitable this year,” says Kurçer. The dedication of the people working at the TV station and the young management team are the secret weapons that Haluk Kurçer relies on in the battle for ratings and market share. “We are working with a very young team and we have got tremendous results, especially in 2010 and 2011. We need to keep close contact with the audience and balance our programs between revenues and viewers’ needs,” says Kurçer. ■

events History repeating: Hotel Cismigiu, one of

the symbols of Little Paris, as Bucharest was once known, reopened for the public. The Spanish company, Hercesa, bought the hotel in 2004 and invested in its renovation EUR 15 million, presenting it officially on 19 December 2012.

Addressing the issues:

DHL Romania registered a single-digit rise in 2012 revenue, from around EUR 25 million in 2011, and it might post similar or higher growth in 2013, DHL Romania’s managing director Daniel Kearvell said Wednesday. In 2013, DHL Romania plans to increase its transport capacity and improve transit times for capital city Bucharest and Romania’s eastern region, through investments in operating a new cargo aircraft, at Otopeni international airport.

Share the joy: Two years

since Proprietatea Fund’s listing was celebrated by Franklin Templeton Investment Management Limited, investment manager and sole administrator of the Fund. Greg Konieczny, Fund Manager, presented its views on the Fund’s activity, also on economy and political issues, following the Opening Bell Ceremony which was held on this occasion.

New player: Gothaer Group enters the Romanian insurance market as Gothaer Asigurari Reasigurari, by acquiring the majority stake of Platinum Asigurari Reasigurari SA. The German company looks to insure its key place on our emerging market through its financial resources and expertise, as part of the strategy to expand to Eastern and Central Europe. 40 The Diplomat February 2013

events

meeting of the minds: On 25-28 January 2013, president Traian Basescu attended the first EU-Latin America and Caribbean Summit 2013, in Brussels. During the Summit, the leaders adopted a political Declaration and expanded the Action Plan previously adopted in the Madrid Summit in 2010 for biregional cooperation.

Olympic Drive: On 9 February 2013, Renault Romania

sent four cars to escort the Olympic Torch through Bucharest. The Torch was carried 16 kilometres through the capital for the first time in history, making short stops at different Bucharest symbols like Arcul de Triumf, Piata Victoriei or Palatul Parlamentului.

Pit Stop: Socar Romania, the Azerbadjan state-owned oil and natural gas company, inaugurated a new petrol station in Targu Neamt, Neamt county. This is a EUR 800,000 investment by which the company reaches 14 petrol stations in Moldova with 220 employees. The establishment has an infokiosk, tablets and a Cafe Nar with traditional Azerbadjan products such as pomegranate fresh-squeezed juice and coffee on sand.

Clean Competition: On 14 December 2012, ECOTIC, HotNews.ro and RECOLAMP, together with Ateliere fÄ&#x192;rÄ&#x192; Frontiere, hosted the Awards Gala for a Clean Environment (Galei Premiilor pentru un Mediu Curat), under the auspices of the Ministry of Environment and Forests and the National Environment Guard. The events recognised environment protection and CSR projects, Rompetrol, Vodafone and Siemens counting themselves among the winners. 41

driving

? t i m i l e h t s i e r e h W A

bout two years ago, I was writing about the phenomenal bi-turbo engine developed by BMW, which solved one of the major drawbacks of these oil burning machines, the turbo lag. But guess what... for an unknown reason, this was not enough, engineers at BMW were not happy, so they thought why not add another turbo. We have now a car with three turbines. And to show how happy they were with the result, the engineers decided that this engine is worthy of bearing for the first time on a diesel, the M badge. So, the BMW M50d was born. They looked around in the yard and picked two models to transplant them the beast’s heart, the X5 and the X6. I got the chance to sit behind the wheel and drive around for a few days in the X6 M50d. I was looking forward to this for a number of months now, so I prepared with everything there is to know about the car. The specs show that this six cylinder 3.0 liter diesel will only be 0.6 seconds slower than it’s big brother the full X6M version powered by the thirsty V8. How about that!

42 The Diplomat February 2013

Let’s talk a bit more about those turbos. This is how they work: - one by one, they kick in sequentially across the rev range. A small one gets to work at almost 1000 revs, a larger one takes over from about 1,500 rpm, then a third kicks in from about 2,600 rpm. And, guess what... the full 750 Nm is available from just 2,000 rpm, enough to give you a headache if you are not used to such a violent push in the seat. The intelligent ZF eight-speed automatic transmission complements brilliantly the power of this motor, short-geared when needed, but not lacking flexibility. The sport mode will allow the gears to be shifted close to the limiter while keeping the revs in the best performance range. In terms of fuel efficiency, even if it seems a bit vulgar to talk about this in such a car, I managed to have a 10 litres /100 km. Consumption on a gentle freeway cruise. If you hit the pedal to the metal, the consumption will rise significantly to almost double. Still, it’s an unbeatable figure if you compare with the V8 powered X6M. The chunky steering wheel is indica-

tive of the way the X6 goes about its business. The driver has to deal with a two tonne vehicle but miraculously, the engineers have done their homework here in a way that you cannot feel this weight. It grips the tarmac like a veritable sports car, balanced and smooth, without giving the driver that chilly feeling of loosing control. Inside, the BMW X6 M50d is quite dull. The personalization of the interior to the M specs is kept to a minimum. A small badge on the wheel will remind you that you are in an M Sport vehicle. To be honest I would have expected more creativity from this department. The two rear seats of the pre-facelift X6 have now turned into three, probably following the complaints of male clients that could not justify in front of a practical mum the necessity of buying such a large four seat vehicle. Now there is your practical SUV reborn and reinvented to please also families. But families with deep pockets as the tested version hits the 100.000 Euro mark. ■ Adrian Ion