Romania Energy Report - Electricity - Q4, 2014

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Romania Energy Report - Electricity - Q4, 2014

The report covers the period since August 1 to December 15 – including time series up to full-Q3, 2014. It also includes the detailed energy balances for the year 2013 [released in the fall of 2014]. At the end of the report, you can check the content of the previous similar report – issued on July 30.

LONG-TERM INDUSTRY SCENARIO. Romania’s energy sector is built on relatively abundant primary resources – moderate crude oil reserves, significant natural gas reserves [nearly self-sufficiency and offshore potential], abundant coal deposits and significant wind power potential. Resources are depleting, but the energy-intensive industries are also shrinking as the energy becomes more expensive. There exist a functioning power market and the potential for export of power is robust – yet not supported by sufficient transfer capacities. There exist on the other hand robust potential for the development of such connections [for power and gas] – supported and actually required by the EU directives. The government as well as other policy-makers lack any firm strategy for the sector. In the absence of such internal drive, country’s policies fully rely on the EU directives – meaning adequate but slow response to challenges and acceptance of rather global [than local] optimisation. Excessive green energy support created investment euphoria – but part if the support was already reversed prompting protests from investors.

ONGOING STORIES - POWER. Romania has joined the single day-ahead market of Czech Republic, Slovak Republic and Hungary. Local producers seek export opportunities. Moldova seems a good opportunity, given their dependence on imports from Ukraine. Hidroelectrica opens offices in Hungary and Serbia.

Key Points:
• Romania confirms 3.2% y/y GDP growth in Q3, expects 2-5% growth rates in coming years
• EC agrees to waive green energy surcharge for large Romanian industrial consumers
• IPO at CE Oltenia power generator scheduled for November 2015
• Quintana of US interested in brown coal / power company CE Hunedoara
• Use of primary energy resources up 2.3% y/y in Q3 as more oil refined
• Net use of primary energy resources contracted by 4% y/y to 12.8mn toe in the H1 2014 …
• … - while the gross intake of raw energy resources increased by 3.4% y/y to 15.4mn toe.
• Domestic power production up 8% y/y in the 12M ending Sep-14
• Hydropower output surges by 26% y/y and accounts for 28.5% of total
• Wind power generation increased by 13% y/y and accounted for 7.6% of total
• Romania achieves day-ahead electricity market coupling with CZ-SK-HU area
• Energy market regulator moves to standardise power trading
• Nuclearelectrica accepts sole bid from Chinese company for €6.5bn nuclear plant expansion
• Romania invites Hungary to join €1bn Tarnita reversible hydropower project
• Romania wants Moldova as partner in nuclear power project
• China Huadian Engineering ready to invest in EUR1bn coal-fired power plant in Romania
• Sale of Enel's holdings in Romania remain in limbo
• CEZ not to exit Romanian market, but also plans no takeovers


Table of Contents

Executive Summary 4
1. MACRO UPDATE 5
Romania confirms 3.2% y/y GDP growth in Q3 driven by industry, ITC. 5
GDP recovers slowly, fiscal gap widens in 2015 – EU Autumn Forecast. 6
Industrial output up 3.7% y/y in October – trends updated. 6
1.1 REGULATORY 7
EC agrees to waive green energy surcharge for large Romanian industrial consumers… 7
… but asks Romania lift conditions set to industrial users in exchange for lower green energy surcharges. 7
Romania’s power market regulator cuts profitability of distribution companies. 7
1.2 STRUCTURAL REFORMS – PRIVATISATION 8
IPO at CE Oltenia power generator scheduled for November 2015. 8
Quintana of US interested in brown coal / power company CE Hunedoara. 8
1.3 RAW ENERGY RESOURCES 8
Use of primary energy resources up 2.3% y/y in Q3 as more oil refined. 8
1.4 DOMESTIC USE OF RAW ENERGY 10
1.5 DOMESTIC ENERGY PRICES 13
2. POWER 15
Romania achieves day-ahead electricity market coupling with CZ-SK-HU area. 15
Energy market regulator moves to standardise power trading. 15
2.1 QUARTERLY UPDATED STATISTICS 16
2.2 POWER MARKETS 19
2.3 USE OF ELECTRICITY IN ECONOMY 21
2.4 CORPORATE ROUND-UP 23
Nuclearelectrica accepts sole bid from Chinese company for €6.5bn nuclear plant expansion. 23
Romania’s Hidroelectrica reports 28% higher profit, 24% more power produced in Jan-Nov. 23
Power trader EFT sues Romania’s Hidroelectrica for €80mn. 24
Romania invites Hungary to join €1bn Tarnita reversible hydropower project. 24
Romania wants Moldova as partner in nuclear power project. 24
China Huadian Engineering ready to invest in EUR1bn coal-fired power plant in Romania. 25
Sale of Enel’s holdings in Romania remain in limbo. 26
Romania’s Nuclearelectrica considers buying some of Enel's local holdings. 26
CEZ not to exit Romanian market, but also plans no takeovers. 27
Appendix: Previous issue’s Content 29

Figure 1: Quarterly GDP, 2000=100 5
Figure 2: Industrial output, swda 2010=100 7
Figure 3: Raw energy resources use; thous. tonnes oil equivalent, quarterly. 9
Figure 4: The breakdown of raw energy resources; 2013. 9
Figure 5: The breakdown of raw energy resources; 2006 9
Figure 6: The breakdown of raw energy resources, 9M: 2014 vs. 2013 9
Figure 7: Domestic energy intake of energy, thousands toe; annual, last quarterly/annual data. 10
Figure 8: Annual change in the annual average energy prices – nominal terms 14
Figure 9: Annual change in the annual average energy prices – expressed in euros 14
Figure 10: Power generation, by source (mn MWh). 15
Figure 11: Dynamics of main electricity market segments [TWh]. 16
Figure 12: Electricity use in economy vs. GDP. 17
Figure 13: Use of electricity in households. 17
Figure 14: Prices, volumes on futures and DAM markets [RON] 21
Figure 15: Price in future vs. day-ahead markets [avg., EUR/MWh] 21
Figure 16: Graphic representations of the electricity use by economic sector. 22

Table 1: Jan-Sep, 2014 GDP dynamics 5
Table 2: Gross energy intake dynamics; 9M: 2014 vs 2006 10
Table 3: Raw energy resources: consumption, production, self-sufficiency; latest annual data. 11
Table 4: Raw energy resources: consumption, production, self-sufficiency; latest quarterly data. 11
Table 5: Primary energy resources, original balance from INS adjusted for the exports of electricity and petroleum products; annually 2000-, thousand tonnes oil eq.. 12
Table 6: Consumer prices – energy, expressed in nominal terms, real terms, euros and US dollars [annual averages and y/y]. 13
Table 7: Structure of the domestic electricity market [TWh]; by free/regulated and residential/non-residential segments. 16
Table 8: Electricity simplified balance quarterly, mn MWh. 17
Table 9: Wholesale electricity market breakdown, annual latest quarterly. 19
Table 10: Future and DAM markets; annual, latest quarterly – volumes, prices [RON] 20
Table 11: Future and DAM markets; annual, latest quarterly – volumes, prices [EUR] 20
Table 12: Use of electricity, by main economic sectors; mn KWh; annually. 21
Table 13: Energy balance – electricity [2007-2013, MWh] 28

Number of pages: 31
Release Date: Thu, 18 Dec 2014