Romanian Government wants to give 100 million lei state aid to Hunedoara Energy Complex

22.04.2015 | By Oana Stanciu

Romanian Government wants to give to Hunedoara Energy Complex (CE Hunedoara) individual State aid in the form of a loan of nearly 100 million lei for a six months period.  The money comes from privatizations.

CE Hunedoara is one of the major electricity producers in Romania, with an installed capacity of 1,225 MW, providing a share of approx. 6-7% of the total national production of electricity. It is the largest electricity producer in the north-western Romania.

The company, controlled by the Ministry of Energy, was established in 2012 as an integrated energy-mining company, through the merger of state power plants Deva and Paroşeni producing electricity by burning coal from the mines in the Jiu Valley, which belonged to the National Coal Company. CE Hunedoara is the only company supplying heat to the Jiu Valley cities and Deva, Hunedoara County.CE Hunedoara has nearly 6,500 employees working in four mines in the Jiu Valley (Lonea, Livezeni Lupeni, Vulcan) and two power plants.The company is facing a difficult economic and financial situation.

The company has to reimburse USD 7.4 million from an external loan with the state guarantee contracted from IBRD to finance the rehabilitation and modernization of the energy sector and 1.05 billion yen from a loan with the state guarantee from JBIC to finance the rehabilitation of Paroşeni power plant. Moreover, CE Hunedoara received a loan amounting to 65.3 million euro for environmental investments from the Ministry of Public Finance. The remaining withdrawals from this loan amount to 7.03 million euros.

On the occasion of a joint EC/WB/IMF mission in February 2015, the international financial institutions asked the Romanian Government to liquidate this company.During the meeting held in Brussels on 24 February 2015 between Romanian Government and EC representatives on the topic of the current situation of energy companies Oltenia and Hunedoara and the possibility to support them through state aid measures, it was proposed to grant CE Hunedoara a state rescue aid.

Thus, according to an emergency ordinance draft (OUG), the Ministry of Public Finance may grant, at the request of the CE Hunedoara, an installment loan, in the amount of 98,476,896 lei to cover the minimum current  expenses for a period of 6 months from granting, including the expenses required to purchase the greenhouse gas emissions allowances.

The loan will be granted at the market conditions, following economic and financial analysis performed by Eximbank, in order to determine the risk class of the company and the interest margin over the ROBOR communicated by the National Bank of Romania within 3 days before the date of granting the loan installments.

On March 20, 2015, the Competition Council approved the notification of the state aid for CE Hunedoara, which was submitted to the EC for authorization. Pursuant to the OUG draft, within 6 months from the state aid granting, the company must submit a restructuring plan to ensure the long-term sustainability. The restructuring plan must be notified to the EC for approval. If the company does not present the restructuring plan or the proof of refund of the individual aid granted it shall submit a liquidation plan.

According to the state aid rules, in the coal sector state aid may be granted only for closing the mines. In order to prove that the state aid will not be used in the mining sector, after the authorization of the state aid by the EC, the mining division will be legally separated from the energy division.

The restructuring plan will focus on three areas: energy production units (energy division), viable mines, and mines economically unsustainable. The latter ones, planned to be closed, can benefit from the aid for closing, including the costs related to the staff dismissal. The state aid for closing will be separately notified to the EC for approval. To compensate the social effects resulting from the restructuring process, nationwide funding solutions will be identified.

Picture: QuarkRosso

About Author

Oana Stanciu

Master’s degrees in Economics at Academy of Economic Studies of Bucharest, Romania and Engineering at Polytechnics University of Bucharest, specialist in competition and state aid. Professional experience in Central Public Administration: competition inspector at Romanian Competition Council, expert at Ministry of Finance of Romania. Currently living in Krakow and getting acquainted with the Polish language and culture.