2010-02-03

On 29 January, the Romanian government approved a plan for restructuring the state-controlled electric energy sector and creating two large holdings on the basis of existing companies. It seems that the chosen form of restructuring will reinforce the negative features of this sector (a lack of transparency and a shortage of investment funds) and indicates that Bucharest is more ready to protect jobs in inefficient state-controlled companies than to carry out the necessary reforms in this sector.

The government’s plan envisages the creation of two giant corporations, Electra and Hidroenergetica. The former will take control of the Cernavoda nuclear power plant, the largest CHP plants, a brown coal mine (SNLO) and three hydropower plants. In turn, Hidroelectrica will consist of the other eight hydropower plants, Romania’s largest mine in Petrosani (CNH) and  CHP plants in the central part of the country. The two holdings will control 92% of the domestic production of electric energy. This decision has to be accepted by the Romanian Competition Council. However; considering the long process of reform consulting (more than a year), this seems not to be a problem.
The purpose of the plan announced by the government is to boost the competitiveness of the entire sector and to encourage investments in energy transfer to neighbouring countries (Romania wants to become the main exporter of electric energy in the region). Meanwhile, most experts point out that a reorganisation of the sector in this way will in fact prevent the achievement of such goals. The creation of such holdings means the subsidisation of unprofitable mines by hydropower plants, which generate high profits. Moreover, a strong concentration on the market is unlikely to contribute to increasing investments. <dab>
 

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