News 20111108 germany

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.
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2. News November 8th, 2011
The lack of price competition harms
"Companies need to insure that they will recover their investments. It's 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.
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