EMIS May 2015EN

Organization: Emerging Markets Information Service (EMIS), DealWatch

Journalist: Magda Munteanu

ROEC expert: Eugenia Gusilov

Date: May 4, 2015

Magda Munteanu: How would you characterize the evolution of the energy sector last year and what is its current status?

Eugenia Gusilov: Currently, the Romanian energy sector faces hard choices, especially in district heating which has the biggest difficulties. Heat production and supply has probably been the most neglected sector in Romanian in the past 25 years and is a very politically sensitive topic. There is a plan to merge the heat producer in Bucharest (ELCEN) with the heat distributor (RADET Bucharest) in order to increase the quality of supply service and make it more efficient. But, this process is advancing very slowly and seems to be somewhat on the ropes right now. Generally, investments have contracted in 2013-2014, but the listing of Electrica in June 2014 is considered a positive development and the biggest news of last year.

Magda Munteanu: What’s your forecast for the coming year?

Eugenia Gusilov: Romania has to finalize the updated version of its Energy Strategy. The next priority is to secure the necessary financing for the big infrastructure projects that have been tabled. There is a large investment requirement for modernization of Romania’s energy sector: 30 Billion EUR (a conservative estimate). To attract this kind of money, Romania needs to send all the right signals and consolidate investor confidence.

Magda Munteanu: Is renewable energy still an option for investors? In which conditions?

Eugenia Gusilov: Yes, for those willing to invest, but it is not as profitable an option as it used to be a few years ago. The investment boom in wind and solar peaked in 2011-2012, and is now behind us. But, opportunities remain in biomas, bioliquids, biogas, waste fermentation gas, fermentation gas of the sludge from waste water treatment plants, so biomass cogeneration projects. This area of renewable energy did not live up to its potential (at the end of 2014, there were 19 biomass producers accredited by the regulator, with a total installed capacity below 100 MW). Now, biomass has been identified as the new priority segment for investments in RES. The focus of regulatory support is shifting too from big renewable projects to distributed generation and small production capacities.

Magda Munteanu: Which would be the next stars from the investors’ perspective?

Eugenia Gusilov: The next star is definitely Hidroelectrica, the last of the three state-owned enterprises (alongside Nuclearelectrica and Romgaz) considered to be the “crown jewels” of Romanian SOEs in energy. Expected to be listed on the stock exchange after it exits insolvency, Hidroelectrica has all the premises for a successful IPO and for becoming (in time) a blue chip company.