Romania exclusive report: Who is who in electricity market

3. November 2014. / SEE Energy News

Romania has a balanced portfolio of electricity generation capacities, including the hydro, nuclear, gas and coal-fired power plants, with a small, but rapidly growing spectre of new renewable energy resources (RER). In 2012, the installed electricity generation capacities in Romania amounted to 22 gigawatts, which makes the country’s energy sector the biggest in the Southeast Europe.

The country’s electricity consumption has varied within the last two decades, primarily owing to the collapse of industry after the year 1989. The situation stabilized after the year 2000, only for the energy sector to be fully capable of responding to the domestic electricity demand today. Moreover, Romania is a net exporter of electricity, with the average annual export of up to 2,91 TWh.

The Romanian electricity market was completely liberalized on 1st July 2007. The supply takes place on a regulated market, which covers the households and a part of the industrial sector, and on a competitive market, which is mostly represented by large industrial consumers.
In accordance with the National Action Plan for renewable energy resources, the Romanian potential in renewable resources amounts to 64,2 TWh. In 2010, the participation of the RER in the total electricity consumption, including two large hydropower plants, amounted to 36.6 percent. A significant increase in the RER participation is expected in the next few years, considering the new projects having been started.
The major player on the wind energy market is the CEZ group, which manages the wind farm Fantanele, which is the first phase of the project for the biggest wind farm in Europe, with the capacity of 600 megawatts. Other important investors are the EDP, Enel, Green Power, Verbund, EON and others.

In Romania, the most important electricity producers are Hidroelectrica, Nuclearelectrica, Electrocentrale Deva, the three power plants Oltenia and Electrocentrale Bucuresti. They generate 89 percent of electricity. Hidorelectrica is the market leader with the share of 28.5 percent, and Nucelarelectrica is the second with the share of 19.3 percent.

The blocks 1 and 2 of the nuclear power plant Cernovoda, with the installed capacity of 1.400 megawatts, the investment of CEZ in the wind farm Dobrogea amounting to 1.1 billion euros and the investment of the company Petrom in the gas power plant Brazi, worth 500 million euros, have been the most important investments in the Romanian energy sector in the recent years.

The pumped-storage hydropower plant Tarnita-Lapustesti (PSPP), with the capacity of 10.000 megawatts is one of the most important green-field projects, of enormous importance to the Romanian energy system. The Romanian Government considers the development of this project a priority within the Energy Sector Strategy. The project worth 1.16 billion euros should be finished in 2020. The sponsor of the project, the state company Hidroelectrica SA, is looking for an investor who would cover the majority of the project costs, but strives to introduce experienced partners who can help with the choice of technology and the project management.

EnergoNuclear SA is a company founded in 2009, after several phases of negotiation with potential investors, with the aim of constructing two reactors of 720 megawatts at the nuclear power plant Cernovoda (blocks 3 and 4). The company owners are SNN with the share of 84 percent, Enele Italy, 9 percent and Arcelor Mittal, 6 percent of the capital. The Romanian Government is involved in the project development and, at this stage, they are looking for an investor so as to reduce the share of the company SNN.

Despite the decline in the value of shares of the company Nucelarelectrica on the Bucharest stock exchange by as much as 30 percent with respect to the level from November 2013, the first phase of the project for the third and the fourth reactor of the power plant Cernovoda has been successfully finished. In the investor selection process, it has been decided that this should be the company China Nuclear General Power Corporation.

However, the project is far from completion. It is necessary to prepare a new feasibility study, to reach an agreement with the EU with respect to the state aid which Romania is planning to offer and to establish a new company with the Chinese partner. And all this provided that the partner has agreed to the set conditions, which include the investment of more than 4 billion euros.

The Romanian Government is planning a minority privatization of the companies SNGN Romgaz SA, CNTEE Transelectrica SA, SNTGN Transgaz SN, CN Hidroelectrica SA, SN Nuclearelectrica SA and S.C. Electrica Furnizare S.A. A majority privatization has been planned for the remaining three distribution companies, as well as for the company Electrica, whereas Serv Cupru Min SA will be fully privatized.

One of the fist exchanges established within the region – the OPCOM, seated in Bucharest, also operates in Romania. Until the Romania’s EU accession, the exchange had not been recording a significant scope of business operations, but in the recent years, a growing interest of traders is noticeable due to a pronounced deficit of the neighbouring countries. The key of the stock exchange success lies in the fact that all electricity producers are obliged to place a part of their production on the market through the exchange. Thereby, the market growth is stimulated and the producers are enabled to achieve higher incomes. The operator also has an exchange for bilateral contracts and a green certificates market intended for the producers of electricity from renewable resources.

It is interesting that, by the decision of the European Commission, the  OPCOM has been fined one million euros because of the restrictive measures it imposed on foreign traders on the Romanian wholesale electricity market. The OPCOM has been fined because, between 2008 and 2013, they demanded from the participants in the exchange the possession of a Romanian VAT registration, refusing to accept the traders already entered into the register of VAT payers in other EU countries.

The plans for raising the OPCOM to the level of a regional stock exchange have suffered a blow by the establishment of the Slovenian electricity exchange, considering that no ex-Yugoslav country had had its own exchange until then. Namely, the Slovenian exchange, the BSP South Pool, has been established with the ambition to attract the traders from the Romanian, Albanian and Bulgarian market. According to the opinion of the analysts, the region of the Balkans is a good area for exporting electricity, considering that the demand is constantly growing, especially in the industry sector.

The company Transelectrica, the transmission system operator, is also  responsible for the interconnections with the energy systems of the neighbouring countries, the management of the electricity market and the issuance of green certificates, via OPCOM.

Electricity distribution is performed by eight distributors that are geographically divided. Five distribution companies have been privatized so far, and the new owners are CEZ, Enele and E.ON. The plan is to also privatize the remaining three distributions, owned by the Electrice. In this sector, privatization has followed the logic – if there is a powerful distributor with a sufficient debt collection and an efficient distribution network, the price of the property of electricity generation plants can be increased when they are privatized.

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