The crisis we are experiencing now is different, even deeper that the one we had in 2008 and its repercussions will echo for several years, according to Corneliu Bodea, CEO Adrem and President of Romanian Energy Center.
“This year and maybe 2021 will be dedicated to the reconstruction of the economy in the context of two conflicting trends in the European community: one that bring us closer to sustainable, green energy and the other, which sees countries focusing locally on relaunching their economic and business sectors,” he told The Diplomat-Bucharest. “There will be a deeper involvement of the states into the economy and this will lead to an economy focused on big projects and a restauration on strategic objectives rather than on short-term efficiency.”
What is your company’s business approach in the current economic context?
Our number one priority, even before the beginning of the COVID-19 crisis, has been the wellbeing of our employees, our clients and their families and the communities in which we operate. At the start of the epidemic, in order to achieve this critical objective, Adrem has set up a crisis management team which main role is to overlook the activity of the company during this period and implement all the necessary precautions and measures in order to both protect our employees and clients and support business continuity. We constantly inform our employees regarding the social distancing measures and preventive conduct recommended by the authorities, we train those who are working in the field and we have equipped them with all the necessary protective gear, including masks and gloves.
Further, we have consistently narrowed down the activities that involve access on private property and direct contact with consumers. As a result, together with our partner, Distribuție Oltenia, we are currently implementing a new way to read the meters in the region of Oltenia in which we are offering support to clients who are giving us their energy consumption index by phone. In addition, all our employees who can work remote are doing so from the safety of their homes. Safety and business continuity are the keywords, because it is also our responsibility to make sure that after the crisis ends our employees can return to their jobs.
We believe that the business environment will have to adapt first to the medical crisis and the risk of infection on medium term. Thus, there is a need for immediate adaptation of the management and operational processes, and secondly to the economic crisis that will follow on long term, affecting on investment volumes, unemployment, also, by business process re-engineering all activities.
What are the market tendencies in 2020?
I believe that the crisis we are experiencing now is different, even deeper that the one we had in 2008 and I expect it to have repercussions that will echo for several years.
In a nutshell, as a result of this pandemic, the market is facing three main challenges:
1. The sanitary crisis, with its direct economic effects on businesses which are experiencing a diminished productivity, effects extending probably towards the end of the year.
2. The economic crisis – consumption is already on a downward trend and there is a lack of cash in the market; people, with less and less financial resources, especially the elder generation, which is also the largest one numerically, will be more reluctant towards spending.
3. A socio-political crisis, which worries me the most, because one could expect that unemployment, the uncertainty and the social distancing measures will lead to political instability. The Energy industry, in particular, is currently the third largest sector affected by the Coronavirus pandemic, after Hospitality and Transportation.
This year and maybe 2021 will be dedicated to the reconstruction of the economy in the context of two conflicting trends in the European community: one that bring us closer to sustainable, green energy and the other, which sees countries focusing locally on relaunching their economic and business sectors.
There will be a deeper involvement of the states into the economy and this will lead to an economy focused on big projects and a restauration on strategic objectives rather than on short-term efficiency. This is not bad, but it might lead to a bigger problem into the small and medium businesses and a trend towards consolidation. The sovereign debt crisis will boom and probably will reset in a way that the recovery will be long term in exchange to a less aggressive depression.
How would you describe the latest developments regarding the local energy market?
In comparison to the same period last year, we can notice a decrease of around 10% in energy consumption and I believe this trend will continue. It’s also true that the domestic energy consumption has gone up, but there is a limited impact to that – the industrial consumers are the ones making a difference in the market, quantity wise. The producers with a higher price are the first ones to be taken out of the game. The price for the transport and distribution of energy is calculated based on a certain volume of energy that the supplier expects to flow through the networks; these volumes have already been contracted – a fall in energy consumption translates in costs which the supplier cannot cover.
What worries me is that 2020 looks like a difficult year due to the drought and the missing capacities for generation and delay into other investments like Iernut and exploitation of the Black Sea gas reserves. This market conditions will deepen the crisis of the not efficient generation capacities and will generate a growing import when consume will start to build back.
How would you describe the measures taken by the Government so far regarding the energy sector?
Since the beginning of the pandemic, we have seen a series of governmental measures, on one hand, some of them good and much needed, while on the other hand, some of them lacking both coherency and consistency. The positive ones are related to covering the costs for temporary unemployment, a measure which empowers the companies and gives them predictability and builds a certain trust necessary to keep their employees. Other measures, such as blocking transactions, prices and postponing payment for consumers for a longer period, have puzzled me. There is, unfortunately, a discrepancy between what the authorities are saying and what they are doing. For example, through a regrettable error made recently by ANAF some companies received termination decisions for their debt rescheduling, a decision which was initially denied by the Ministry of Finance and later on admitted as so.
The risk of populistic measures on the account of the energy suppliers and producers is very high and we must understand that this might put in risk a critical sector where the interconnections are very strong. This is why I have asked the industry associative environment to draw on short term and long term measures to be consulted with the authorities and I am very happy that we have managed to come together and conclude on this work. That’s why since the beginning of May ANRE, the Ministry of Economy and Energy and the Prime minister have on their desk the point of view of the most important 11 associations on the energy field with respect to the measures to be taken . I believe that in spite of some inconsistent measures the energy industry is capable to overcome this difficult period.
How can digitization alleviate Romania’s economic stress after this crisis?
One valuable lesson that this pandemic had taught us is the importance of automation and digitalization. Imagine if our national energy system had SCADA solutions, Asset Management solutions, smart grids and smart metering in place throughout this crisis! I had the opportunity in the mid-90s to be among the first to bring automation solutions in the industry, with a new SCADA Solutions Department in Adrem Invest, a department that later on developed into a full-grown company: Adrem Engineering. All these tools would have offered a wonderful support for continuing the activities without fieldwork and direct contact with the clients, while following the norms of social distancing. In my opinion, after this crisis is over the state should learn from this lesson and support investment projects, continue strongly with the digitalization of the national energy system and provide the necessary funding so that the next crisis that will hit – not if it does, but when – will not find us in such a vulnerable place.
On the road to informatisation, Romania has many steps to add in order to reach the other well-developed EU member states and I believe that this is the best moment to realize that. The advantage is that the barrier of refusing change and fight against new and technology is easier after this pandemic where we all had the chance to see how useful informatized processes are. There are also other advantages as the need for co-ordinated big scale investments to move the economic process. I am optimistic that this will be understood and pushed forward.
What can Romania do to mitigate the COVID-19 impact on the producer-supplier relationship?
In my opinion, there is a need for more flexibility in the energy market, beginning with adopting and implementing new EU directive 944 and rules 943, 942; increasing the adaptability of the producer- supplier relationship and continue with certain ANRE regulations which should be suspended throughout the period of the emergency and continuing with direct bailout funds from the state.
I believe Romania can and should request external financial support and infuse cash in the market – it is maybe one of the few and greatest assets of our budgetary system the fact that we do not have a big external debt. Also, it is critical that the state improves its communication; at this point we have no official figures, unlike other countries such as Germany, regarding Romania’s financial plan for recovery and what we can expect. This poor communication forces the market players to make their own decisions. In the context of decreasing consumption, a need to insure business continuity and the anticipation of a decrease in investments, companies might make decisions that will contribute, unfortunately, to the deepening of the crisis.
What are your short and medium-term plans in Romania?
Of course, we will continue to focus on keeping our employees and clients safe and healthy; the danger doesn’t go away after the 15th of May when the emergency state will be lifted. On the short term, we are working on a plan for gradually returning to our work spaces, and we are putting in place guidelines, new office rules as well as tools that will support our activity after the 15th of May both in the office and in the field. On the business side, we are working on a recovery plan that is in tune with the new economic and social realities shaped by the pandemic, we have to be flexible, to adjust and to stabilize our business. Now comes our true resiliency test. I also believe this is a time for modesty, in which we should all do our soul-searching. In the past we took Earth’s gifts for granted and now nature is showing us full-force what it can do. We are not untouchable and we are not above.