Romania Energy Report - Q4, 2013

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Romania Energy Report - Q4, 2013

This report covers market trends and outlook for Romania’s energy sector up to Q42013. The report also includes corporate news for market players including Chevron, Kazakhstan’s KazMunaiGaz, Rompetrol, OMV Petrom, Hidroelectrica, France’s Filasa International, the Netherlands’ Enel Green Power, ArcelorMittal, China’s Green Vision Seven, Italy’s Saras Group, Russia's Gazprom Neft, Energias de Portugal, ExxonMobil, and others.

The most important macro developments facing Romania’s energy sector in 2013 were the drop in energy consumption (particularly gas and power), and the change in the renewable energy support schema and ensuing investor reactions. The failure of the Nabucco project has had a significant impact on the country’s energy sector. The natural gas market, though already formally set up, faces even weaker prospects of becoming a fully functioning market as long as the supply side is currently supported by only two producers plus imports from Russia. Shale gas production could completely change the market structure—though for the time being this is purely speculative.

The power generation sector, if helped by adequate regulations and significant investments in interconnections, could also generate significant surpluses in the coming years. But again, it is premature to predict the country’s involvement in major power exports since Europe’s energy policy seems slightly unclear at this moment. As elsewhere in Europe, an awkward combination of green renewable energy and cheap, lignite-based power is gaining ground.

Key Points:

• In corporate news, France’s Filasa International has confirmed its plans to resume works at a 519MW/EUR 780mn wind project in Romania's Suceava county after the project was delayed for more than a year.

• In the solar segment, Dutch firm Enel Green Power has completed 36MW of photovoltaic capacity and is diversifying from major wind farm projects. Chinese investor Green Vision Seven is to build a 85MW solar power farm.

• Chevron started shale gas explorations in its two blocks despite public protests.

• OMV and ExxonMobil are expected to deliver the first quantities of natural gas from the deep water offshore field around 2020.

• In the oil industry, KazMunaiGaz is close to reaching a deal with the authorities on past debt issues; this would help Kazakh owner KazMunaiGaz further expand into Europe. Rompetrol, which operates the largest refinery in Romania, might acquire another one in Europe through The Rompetrol Group. The business models of OMV Petrom remains the exploitation of domestic resources while Rompetrol is mainly involved in oil refining/processing, where the profit margins are thin (if positive at all).

• Romania’s Conpet and Russia’s Gazprom Neft are to build oil pipeline from the Black Sea to Serbia.

• Energias de Portugal has moved forward with building its 264MW/EUR 300mn wind farm in Romania. Italy's Saras group has put on hold plans for EUR 200mn wind farm.

Table of Contents


Executive Summary
1. Macro Update
1.0.1 Romania’s potential GDP growth to rise to 4% after 2015 – Erste Group
1.02. S&P improves Romania's rating outlook to positive, expects upgrade in H2/2014

1.1 Regulatory
1.1.1 Lawmakers endorse government amendments to renewable energy law – re: existing projects
1.1.2 Government lowers support for new renewable energy producers – re: new projects
1.1.3 Market regulator suggests further, thorough reconsideration of renewable energy strategy

1.2 Structural Reforms—Privatisation
1.2.1 Romania hopes to ink major energy contracts as China’s PM Li Keqiang visits Bucharest

1.3 Raw Energy Resources

1.4 Domestic Use of Raw Energy
1.4.1 Use of raw energy resources down 11.6% y/y in Jan-Sep…
1.4.2 … and also down 10.2% y/y in Jan-Oct

1.5 Domestic Energy Prices

2. Oil, Petroleum Products
2.1 Domestic Fuel Prices
2.2 Quarterly Updated Statistics
2.3 Regional Outlook: Car Fuel Production/Demand; By Country
2.4 Corporate Round-Up
2.4.1 Court invalidates KazMunaiGaz debt settlement in Romania
2.4.2 KazMunaiGaz’s Rompetrol freezes investments after court rejection of debt settlement
2.4.3 Rompetrol refinery cuts losses by 40% y/y in H1…
2.4.4 … and reports smaller losses in Q3 as it increases operations.
2.4.5 OMV’s local branch Petrom says H1 net profit jumps 18% y/y despite 5% lower revenue…
2.4.6 … and its net profit jumps 46% y/y in Q3, up 26% y/y in Jan-Sep
2.4.7 Romania’s Conpet and Gazprom Neft to build oil pipeline from Black Sea to Serbia

3. Natural Gas
3.0.1 Natural gas market set up, but not really functioning
3.0.2 End-user gas prices up 1-2% in Jan 2014 – under “regulated liberalisation.”
3.0.3 OMV and Transgaz help Nabucco project company avoid insolvency

3.1 Quarterly Updated Statistics
3.1.1 Domestic Production vs. Imports

3.2 Corporate Round-Up
3.2.1 Romgaz Jan-Sep net profit down 18% y/y to EUR 180mn
3.2.2 Romanian gas transport company Transgaz sees lower profits amid Nabucco failure
3.2.3 Romania sells 15% of natural gas firm Romgaz for EUR 383mn
3.2.4 PM Ponta confirms commitment to shale gas extraction
3.2.5 Chevron carries shale gas prospecting operations at two sites despite protests
3.2.6 Anti- shale gas demonstrations and their political dimension
3.2.7 Mercuria energy trader invests USD 50mn in Romanian natural gas producer Amromco Energy

4. Power
4.0.1 Country’s installed capacity of renewable energy hits 3,670MW at end-Oct
4.0.2 CEZ files complaint with EC over Romania’s cut in renewable energy support
4.0.3 Households to use a mix of nuclear and hydro power in 2014 – market regulator
4.0.4 Market regulator caps share of power sold on regulated market by major producers
4.0.5 Market regulator also cuts profitability cap for power distribution firms…
4.0.6 … and eliminates transport fees for exported/imported electricity

4.1 Quarterly Updated Statistics
UPDATE: Romania’s use of electricity down 6.3% y/y in Jan-Oct.
4.2 Power Markets
4.3 Use of Electricity in Economy
4.4 Corporate Round-Up
4.4.1 IPOs at Major Power Plants
4.4.2 Romania’s Hidroelectrica to pick up consultant for 15% IPO
4.4.3 Government to sell 15% in major power generator CE Oltenia in H2
4.4.4 Romania’s state-controlled nuclear plant raises EUR 63mn under 10% IPO
4.4.5 NUCLEAR POWER PROJECT IN LIMBO: Enel and ArcelorMittal pull out of nuclear project
4.4.6 Romania’s Hidroelectrica exits insolvency…
4.4.7 … and reports H1 profit margin of 28.5%
4.4.8 Hidroelectrica commissions 31.5MW power plant
4.4.9 Hidroelectrica to sell another 14 small hydropower plants for some EUR 10mn
4.4.10 Hidroelectrica in talks on EUR 400mn loan deal
4.4.11 Energy trader EFT to build EUR 50mn power plant in Romania
4.4.12 Translectrica to issue EUR 200mn bond by 2017
4.4.13 Filasa International confirms plans for 519MW wind farm in Suceava…
4.4.14 … while Iberdrola on the opposite abandons 1.2GW wind farm plans
4.4.15 Enel Green Power completes 36MW PV capacity – diversifies from major wind farm projects
4.4.16 Energreen Investment Europe invests EUR 37mn in two solar parks – which were up on investors’ agendas in 2013
4.4.17 Chinese investor to build 85MW solar power farm
4.4.18 Italy's Saras group puts on hold plans for EUR 200mn wind farm
4.4.19 GDF Suez completes 50MW wind farm
4.4.20 Renewable energy portfolio of telecom operator RCS&RDS hits EUR 36mn

Number of pages: 50
Release Date: Tue, 07 Jan 2014