While Razvan Nicolescu, delegate minister of energy, has stated that Romania needs EUR 50 billion of fresh energy investments to strike sufficiency around 2020, experts say European financiers’ appetite to back major projects has been curbed.

Nicolescu commented recently that the country will need to attract around EUR 4-5 billion in the next decade to become the second country in the EU that is energy independent, joining Denmark.

The minister added that these investments could be backed either by the state or domestic capital, which would be difficult, or by foreign capital.

“There is the possibility that this EUR 4-5 billion could take the form of financing from state-owned companies. Here we have huge potential. I am glad that the listings of Nuclearelectrica, Romgaz and Electrica have made it possible, for the first time this year, for the total investment budget of state-owned companies to exceed EUR 1 billion. State-owned energy companies’ budget for 2014 is EUR 1.3 billion,” said Nicolescu, quoted by business magazine Capital.

Investment opportunities

Experts commented that some renewable projects, interconnections and offshore oil and gas developments have strong potential to attract investments.

Robert Ghelasi, managing partner of Energie Finanzierung und Kapital (EFK), which specializes in investment banking services for the energy sector, stated that projects in the field of energy efficiency, micro generation, waste to energy, micro hydro and biogas and biomass have growth potential for the years to come.

“In addition, investments in interconnection lines with neighboring countries could increase the export capacity for energy, which at the moment is extremely limited,” Ghelasi told BR.

Romania’s renewable boom has generated over EUR 6 billion of investments over the past five years, with most projects being developed in the wind and solar sectors.

Cristian Colteanu, regional executive for Romania, Bulgaria and the Republic of Moldova at General Electric, said last month during an event organized by AmCham Romania, the business advocacy group, that the windows of opportunity for wind and solar projects have closed. He mentioned, however, that biogas and biomass could be new growth avenues.

The installed capacities in biomass and biogas had reached 91MW and 9.6MW, respectively, by the end of August. Experts say investors have held back from developing such projects due to additional requirements in securing the right raw materials to power them.

Most of them have flocked to the wind and solar sectors, where the installed capacities have reached 2.8GWh and 1.2GWh, respectively.

The government’s intervention to cut the incentives for the renewable sector has dramatically reduced the pipeline of new projects.

Martin Zmelik, country manager of CEZ Romania, part of the Czech utility firm, told BR in an interview this September that the era of major projects in the renewable sector was over. The company has a 600MW wind farm in the Dobrogea region, which required an investment of EUR 1 billion. He said that CEZ was not seeking to sell it.

According to experts, wind projects are currently losing money and investors are worried they will not be able to recover their funds.

Falling consumption

One of the key features taken into consideration by potential investors is the forecast of energy consumption in the coming years. Domestic consumption fell by 5 percent last year against the previous year to 56.65 TWh, according to a report by the energy regulator ANRE.

Gas consumption also fell by 8.1 percent to around 12.4 million cbm year-on-year in 2013, according to the energy watchdog.

“The reduction of consumption is for a short period; on the long term it will grow in line with GDP. At present, investors are waiting. Most of those that have invested in the renewable capacities are disappointed,” said Ghelasi.

He added that European financiers do not have any appetite for backing energy projects due to the unpredictable legal framework.

“They have the appetite only for corporate finance where the appeal is based on the creditworthiness of the parent company and not the merits of the project itself,” added the managing partner.

Colteanu of GE said the new gas discovery off the Romanian coast is an opportunity because it is a resource on EU territory and will be a new gas pipeline crossing European soil.

According to energy experts, gas in the Black Sea and shale gas could help Romania become energy sufficient by the end of this decade. US oil major ExxonMobil and Austrian energy company OMV Petrom are currently seeking gas in the Black Sea, while US Chevron is looking for shale gas in eastern Romania.

In the meantime, the government is working to redesign the royalties mechanism for the oil and gas sector, which, according to media reports, will have lower rates for offshore developments, because the investments are bigger.

Looking east for financing

For the past two years, the government has been trying to woo Chinese companies with enough financial clout and know-how to build large-scale generation projects in the electricity sector.

State-owned nuclear producer Nuclearelectrica is among the key energy companies looking to attract Chinese capital.

The producer has organized a tender to take place later this year for the construction of two nuclear reactors at Cernavoda, which require an investment of around EUR 6.5 billion. China General Nuclear Power Corporation (CGN) has qualified for the first stage of the selection process for the investor. The Chinese company was the only one interested in the project. According to Nuclearelectrica, the start of negotiations regarding the setting up of the project company should take place at the end of November.

A consortium comprising Europe-based utilities that was supposed to build the two reactors disintegrated at the end of 2013. Executives said the deal collapsed because nothing was happening on the part of the state, which was also involved in the project company.

Authorities are looking to the Chinese to modernize some electricity generation capacities and to build the pumped-storage electricity plant at Tarnita, which requires an investment of around EUR 1.3 billion.

Ovidiu Posirca