Romanian privatizations

BUCHAREST (Reuters) – Romania sold two power firms to Italy’s Enel yesterday and said it would sign the sale of top oil company SNP Petrom to Austrian OMV on Friday, boosting its credibility abroad. Long-delayed privatizations in the energy sector are seen as crucial for the ex-communist country’s efforts to reform its economy to join the European Union in 2007 and have been key conditions in Romania’s accords with international lenders. Under the deal signed yesterday, Italy’s utility company Enel would pay 112 million euros ($139.4 million) to get majority stakes in two Romanian power distributors, seen as the beginning of restructuring the debt-laden energy sector. «I’m very pleased and honored to be here and sign this important transaction,» Enel’s Chief Operating Officer Vincenzo Cannatelli said during the signing ceremony. Romanian Economy Minister Dan Popescu sent OMV’s shares to an all-time high with the announcement that Petrom’s privatization, agreed last month and estimated by analysts at around $1.4 billion, would be signed on Friday. Analysts welcomed the news, saying it boded well for the country’s economic progress ahead of joining the EU and for structural reforms demanded by Romania’s main economic mentors, the International Monetary Fund and the World Bank. «It’s a very positive, very encouraging sign,» said Matthew Vogel, director at Barclays Capital. «It may lead to a credit rating upgrade.» The sale of Petrom, which holds around 50 percent of the domestic fuel market, was delayed several times, sparking investors’ fears the process might be derailed by a government afraid of alienating voters with rising prices and layoffs. Romania holds parliamentary and presidential elections on November 28. Officials said that in the sale of the two distributors, the price per customer, an indicator which allows comparison of utilities sell-offs in different countries, was 230 euros, a good price and about the same as that obtained by neighboring Bulgaria in the recent sale of its seven power firms. Consultant BNP Paribas, which advised Romania on the sell-off, said the price per customer included the fact that there were limitations on tariff increases and that Enel also took over the two firms’ debts of around 98 million euros. Cannatelli said Enel plans to invest around 1.0 billion euros in upgrading and restructuring the distributors over 15-20 years, adding that for the time being there will be no major layoffs among the two companies’ 3,500-strong work force. Analysts said the privatization would bring much-needed financial discipline to the sector and would also help make profitable Electrica Dobrogea and Electrica Banat, which had combined losses of around $33,000 last year. «The energy sector has always had trouble in recouping the money it is owed, especially by industrial companies,» independent analyst Constantin Rudnitchi said. «The future owner will probably simply turn the bad payers’ light off.» Together, Electrica Banat and Electrica Dobrogea serve around 1.4 million customers and account for about 20 percent of electricity distribution in the Balkan country of 22 million. Romania plans to privatize two more power distribution units of state-owned Electrica by the end of the year.