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    Romania Power Competitive Landscape

    January 20, 2022 - Fitch Solutions Sector Intelligence


      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Romania Power Competitive Landscape

      • 20 Jan 2022
      • Romania
      • Power

      The various parts of the energy system have been unbundled, creating separate companies for the generation, transmission, import and supply of energy. Five of the eight distribution/supply companies have been privatised, with the majority shares being sold to European utilities Enel, CEZ and E.ON. Romania has also implemented the EU's Third Package Directives, designed to liberalise fully the electricity and gas markets, as well as improve consumer rights.


      Transelectrica is the sole transmission company operating the National Energy System, with 58.7% of the shares being held by the Ministry for Economy, Trade, Industry and the Business Environment, 13.5% by Fondul Proprietatea and 27.8% being floated on the Bucharest Stock Exchange or held by other investors. It is regulated by the National Authority of Electric Power Regulation. The company currently has 81 power stations in the country and 8,834km of overhead lines.


      Electrica is the leading distributor and supplier of electricity in Romania. The company manages 198,988km of electric lines - 7,598km for high voltage, 46,062km for medium voltage and 145,328km for low voltage. In 2019, the company distributed 17.7TWh of electricity in Romania in its three designated distribution regions. In July 2014, the company was partially privatised under a EUR4bn (USD5.5bn) aid deal led by the IMF. The government put a 51% stake up for sale on the London and Bucharest stock exchanges in June 2014, a deal that raised USD605mn in an initial public offering, giving it a market value of USD1.2bn. The buyers included the European Bank for Reconstruction and Development, which took an 8.6% stake. The company is listed on the stock exchange of London and Bucharest.


      Termoelectrica is a state company responsible for the production of electric power and thermal energy, which it generates from a thermal power plant and district heating. It is the biggest generator in Romania and there are plans to privatise some of its generating facilities. Thermal power plants in Romania are increasingly in need of refurbishment, some 60% are more than 20 years old.


      State-owned Hidroelectrica was established in 2000 as the operator of Romania's hydropower facilities. The company operates 209 hydropower plants (including five operational pumping stations) with a combined installed capacity of 6.5GW as of December 2019.

      The firm was declared insolvent in June 2012 and endured a severe drought as well as a string of contracts under which it sold the bulk of its output below market prices, losing USD1.4bn over six years. The company exited insolvency proceedings in June 2013, underwent restructuring - posting record profits in 2014 - and cancelled a number of deals. However, Hidroelectrica was pushed back into insolvency in early 2014 when contract holders challenged the cancellation of their contracts. The firm was expected to stay in insolvency until June 2015, but due to lengthy legal challenges Hidroelectrica exited insolvency only in June 2016.

      Over August 2021 the government announced plans to partially privatise the country’s largest power utility, Hidroelectrica, over the second half of 2022. The public offering will float a 15% stake in the firm which could increased to 20% should large scale investor interest be found. The firm is heavily involved in power projects throughout the country drawing investor interest. An IPO was planned for 2012 but was suspended owing to contractual obligations. We highlight the move marks a further turning point in the liberalisation and opening up of the power sector in the market.

      The government was planning to float a 10% stake in Hidroelectrica on the Bucharest Stock Exchange. According to the government's 2019-2022 Convergence Programme approved in May 2019, this was expected to happen in September 2020. However, this did not materialise, following the government's decision in August 2020 to impose a ban on the sale of stakes in national companies, banks, as well as any other companies in which it is a state shareholder for two years. The new government is now considering removing the ban. If that happends, Hidroelectrica has already indicated that it can launche the IPO by December 2021.

      E.ON Energie Romania

      E.ON Energie Romania was created by the merger of E.ON Moldova and E.ON Gaz Romania in 2011. Based in the city of Bacau in north-eastern Romania, E.ON Energie Romania supplies energy to around 2.8mn customers. According to media reports, its parent company E.ON is currently reviewing options for its presence in the country as it struggles to compete with state-backed Hidroelectrica, Romania’s largest power producer.


      Enel has been present in Romania since 2005 and has a market share of about 30%. Enel owns three former subsidiaries of the Romanian electricity distribution and supply company Electrica, covering southern Muntenia, including Bucharest, Banat and Dobrogea. In July 2014, Enel announced plans to sell its distribution and sales assets in Romania (Enel Distributie Muntenia, Enel Energie Muntenia SA, Enel Distributie Banat SA, Enel Distributie Dobrogea and Enel Energie) as well as its 100% interest in services company Enel Romania. Enel, one of Europe's most indebted utilities, had earmarked the sale of distribution assets in Romania as part of a broader disposal programme designed to raise up to EUR4bn (USD4.6bn) by the end of 2014. These plans were, however, halted in February 2015 after the company reported a 2014 debt reduction target. In September 2019, the company announced plans to sell its operations in Romania in a process led by French bank BNP Paribas (BNPP.PA) and expected to value the assets at about EUR1bn. In October 2019, Hidroelectrica submitted a non-binding letter of intent to buy some of the assets and in December 2019 hired the consulting firm Ernst & Young to advise it in placing a bid for assets put up for sale by CEZ Romania. However, in May 2020, it was reported that the company had decided against selling assets.


      Czech energy company CEZ is one of the leading integrated energy companies in Romania. The group operates the largest onshore wind farm in Europe, which comprises 240 turbines with a total installed power of 600MW. Its assets include one of the largest distribution companies in the country with a customer portfolio of 1.4mn and 6.8TWh of electricity delivered in 2018. In Romania, CEZ also owns Europe's largest on-shore wind park Fantanele-Cogealac with installed capacity of 600MW and production of 1,105GWh last year and a modernised hydro electric system Resita consisting of four water reservoirs and four small hydro electric power stations with 22MW capacity in total, which produced 83GWh in 2018. CEZ Romania also provides electricity and gas sales to end customers, selling over 3.4TWh in 2018.

      In September 2019, the company announced plans to dispose of its assets in Romania to streamline activities with the focus on the home country. Bids were submitted on June 25 2020. In August 2020, the company announced that it had entered into exclusive talks with Macquarie Infrastructure and Real Assets to sell its power production and distribution assets in Romania. The sale was approved by the European Commission in January 2021. The sale was completed onApril 1 2021.

      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.


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