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​Romania Energy Ministry risking destruction of major profit-making energy company through fusion with burdened colossus

de Claudia Pirvoiu, adapt. C.I.     HotNews.ro
Luni, 30 septembrie 2019, 8:49 English | Business


Hidroelectrica
Foto: AGERPRES
Romania's Energy Ministry is trying to save the Oltenia Energy Complex (CE Oltenia), a colossus facing major financial issues, by pushing for a merger: CE Oltenia to be absorbed by Hidroelectrica, a major energy company with considerable profit. That might mean that the whole Hidroelectrica profit be passed on to cover due payments amounting to billions of RON in the name of CE Oltenia, a company which will close within years anyway.

Should the merger not be approved, then consumers are expected to cover the costs through a state aid package of RON5 billion for the period of 2020-2026. But, because the aid would not be approved by the European Commission in due time, the ministry is calling for an emergency guarantee from the state for a credit amounting to RON1.2 billion for CE Oltenia.

The requests are included in a memorandum stamped September 24 which the Energy Ministry wants adopted by the government urgently.

The CE Oltenia company has over 1,300 employees and delivers a quarter of the necessary energy of Romania. But it has been going through major financial problems for a long time. The company management, supported by the Energy Ministry, has long been trying to hide the disastrous situation there. According to information obtained by HotNews.ro, risks of closing CE Oltenia units have been known since 2016, due to higher and higher costs of carbon emissions certificates. But all governments since then have left the issue unsolved in the idea that it be solved by other governments later on.

Years have passed since the Government should have take measures for CE Oltenia units be replaced with profitable plants using gases and renewable energy sources, which should have also taken over part of the 13,000 employees. This means investments. Nobody moved and, along with lacking investments, the management proved disastrous, according to reports by the Court of Accounts and the Energy Ministry' control body.

Hidroelectrica obtained a historical profit of RON1.5 billion last year, while CE Oltenia reported a historical loss of RON1.1 billion. For 2019, Hidroelectrica expects a profit of less then a billion as natural circumstances can't help much with production. CE Oltenia may exceed its loss record this year.

So, anything coming Hidroelectirca's way would go to cover CE Oltenia's losses, in case of a merger. The situation would become even more serious should CE Oltenia costs become bigger and bigger, prompting Hidroelectrica to lose money itself.

The Energy Ministry memorandum includes to big issues:

1. Giving the Finance Ministry the responsibility to submit a Memorandum for government approval for giving guarantees for a credit or loan amounting to RON1.2 billion necessary for CE Oltenia to balance its finances this year.
2. Approving the informal submission of Romania's request to the European Commission for the start of negotiations on a state aid in the form of a financial support mechanism for CE Oltenia, to secure supplying electricity to the National Energy System in 2020-2026.

The Ministry document depicts a grim situation at CE Oltenia, saying it may go bankrupt next year and may even close doors in 2022. Then it says the energy production sector has to be re-organised through a "merger by absorbtion of the CE Oltenia by Hidroelectrica".

The Energy Ministry also says a key fund, Proprietatea Fund, opposes the merger, so compensation from the Romanian state would be needed for the merger to take place.



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