News 20111108 germany

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News 20111108 germany

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News 20111108 germany

  1. 1. News November 8th, 2011 How to make more profit in Romania than in Germany European energy companies regulated energy demand increase and gas prices, although they quickly recover investments in Romania than in other countries, blaming the country risk. Romania is one of the most interesting energy markets in the region, due to strategic position and availability of various resources, said yesterday Frank Hajdinjak, president of the Energy Utilities Companies Association (EUCA) and CEO of E.ON Romania. He noted that investment demand is high and to attract the money market must be liberalized and final prices, increased. "We need €40 billion in energy sector for new generation capacity. Now there are very few projects and will be very difficult for Romania to attract investment", he said. But Hajdinjak acknowledged that the investment is recovered faster in Romania than in other countries such as Germany, and argued that, in Romania, the investment climate is more risky.Eng. Paul Keisch Page 1
  2. 2. News November 8th, 2011 The lack of price competition harms "Companies need to insure that they will recover their investments. Its about country risk. Romania has a higher risk than Germany, so investors should have a higher rate of return (IRR)", said official of EUCA, without specifying the other countries’ indicator, compared with Romania. According to information held by "Adevărul", equity IRR of the Romanian companies (an indicator which measures the rate of return without taking into account bank loans) is 22% for wind projects, while in Bulgaria the indicator is 11 %, in Poland - 17% and in Serbia - 12%. Group Executive Director of Applied Economics (GAE), Liviu Voinea explained, for "Adevărul" that this is due to the fact that in the local energy market there is no competition. "Investors see higher risk in Romania and then they intentionally provide a higher return. The fact that this is possible due to lack of competition in the energy market", said Voinea. In turn, Cristian Pârvan, general secretary of the Romanian Businessmen Association, says that energy groups present on the market in Romania are able to derive greater profit margins because they have monopoly activities. "If there is no institution to stop them, of course they make huge profits generated by price increases from monopoly activities. Moreover, require market liberalization although they have very small investment. Their motto is: "prices as in the West, spending as in the East, maximum profit", said Pârvan. Hajdinjak also said that since taking over Electrica Moldova and Distrigaz Nord in 2005, E.ON has invested about €450 million in Romania during a period of 6 years, around €80 million per year. E.ON is not interested in the mines of Oltenia "Romania needs to resume privatization with strategic investors who want to develop business and looking to buy majority stake in state companies. We will see when they are released and what will be successful, but it is a good step", said Hajdinjak. He said that E.ON is not interested in buying future power plant complex consists of thermal power plants and lignite mines in Oltenia, adding that it will not provide the rate of return that the company aims to achieve.Eng. Paul Keisch Page 2

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