March
2008

ECONOMICS

Wind energy producer Iberdrola Renewables has bought 50 wind farm development projects from Eolica Dobrogea, a company owned by Swiss engineering group NEK and Romanian Rokura for between 200 and 200 million Euro.
The plan for the first farms to operate will be in 2009 and the final price will depend on the sites the company acquires, all of which are in Dobrogea, eastern Romania.
This follows Italian power giant Enel’s purchase of Blue Line, a Romanian company that holds the rights to develop wind energy projects in the same region. These projects are due to be operational in 2010.
The Eolica Dobrogea estate includes 800 installation sites for wind farms estimated to be worth a total of 1,600 megawatts (MW). Eolica Dobrogea will continue to develop the projects, which Iberdrola Renewables will then build and operate.


Ford targeted car plant ordered to pay back state cash

Dolj-county car plant Automobile Craiova, which Ford Motor Company is buying from the state, must pay 27 million Euro back to the Romanian Government because the European Commission considers this amount illegal aid for the factory.
After a four-months investigation into the privatisation, Brussels has decided that the Government asked a much lower price for the acquisition of the car plant in Craiova – only 57 million Euro - than if the privatisation had come without such stringent conditions.
The decision shocked Prime Minister Calin Popescu Tariceanu, who added that Ford was the only company interested in the privatisation of Automobile Craiova.
“What does the European Commission want Romania to manufacture?” he said. “Buttons? To export wooden crafts? I cannot accept such a way of thinking.”
The conditions imposed by the Government included a minimum production level of 200,000 cars by 2011, the continuation of the plant’s current manufacture of car parts for four years and the maintenance of all the 3,900 employees of the former Daewoo factory.
Romanian officials have been heavily criticised by politicians and lawyers for failing to inform the European Commission prior to the deal, which could have cleared any potential breach of state aid regulations before the sale.
The botched handling of the sale has now become an embarrassment for the current Government.
“The Commission supports regional development, but this should not change the nature of competition,” the European Commissioner for Competition Neelie Kroes stated.
Ford of Europe considered EC's announcement as clearing the way for the producer to purchase the vehicle manufacturing facility.
“Nothing has changed in our exciting plans for the Craiova plant,” said Ford of Europe President and CEO John Fleming. “Our goal is now to assume full ownership of the plant as quickly as possible and turn it into a world-class manufacturing complex.”
The purchase of the plant will be finalised at the beginning of March following the approval of the special law for the privatisation of Automobile Craiova, which is now under debate and is likely to pass in the Romanian Parliament.


French insurer makes second
local purchase

French insurance group Groupama is stepping up its presence in Romania after the purchase of Hungarian bank OTP’s insurance arm and an eight per cent stake in the company for 617 million Euro.
This follows the company’s acquisition of the Romanian insurer, BT Asigurari, in October 2007.
OTP Garancia, active in Romania since 2006 as OTP Asigurari, is also present is Bulgaria, Hungary and Slovakia.
“The central and eastern Europe and CIS regions are attractive markets for Groupama which views this transaction as a unique opportunity to enhance its footprint in this promising region,” said Jean Azema, CEO of Groupama.
OTP Bank and Groupama will also begin long-term bancassurance partnerships in the future.


Romania ratings slide continues

Romania’s economic and business risk ratings continue to slide as Fitch has downgraded Romania’s outlooks from stable to negative for long-term foreign and local currency issuer default ratings (IDRs).
This is due to the risk of a slowdown in capital inflows to the country, which is a threat for much of eastern Europe following fears of a recession in the west.
“Current account deficits in the Baltic States, Bulgaria and Romania have risen to levels that look disconcertingly stretched by current global or historical standards,” says Edward Parker, Head of Emerging Europe sovereigns at Fitch. “External deficits that were easy to fund in times of abundant liquidity and risk appetite may be harder to finance following the global credit shock.”
Last year Standard and Poor’s downgraded Romania’s country rating from stable to negative following the Government’s public spending spree.


New hotels bank on capital’s luxury appetite

Romanian-based Continental Hotels plans to open its first five-star residence in its existing hotel on Calea Victoriei by January 2009.
Meanwhile east Bucharest’s four-star Hotel Lebada is facing a massive revamp, which will transform the former monastic site into a six-star Corinthia Hotel, which has a two-year construction timetable.
This will raise the game in Bucharest’s luxury hotel market, which is seeing a new entrant on the market next month, the 424-room Radisson SAS on Calea Victoriei, and a rumour, still unconfirmed by the parties involved, that Starwood’s Le Meridien brand will open in the Victoria Complex on 133-135 Calea Victoriei by 2010.
Hotel Lebada’s 24 million Euro redevelopment will include 155 rooms, “state-of-the-art” conference facilities and weekend health and beauty services, open to day visitors and hotel residents, according to Antoni Kuhnen, a consultant on the project.
Kuhnen says this will become Bucharest’s first “six-star” hotel.
The development is financed by the Ratiu family and Romanian-based developers Eastcap, who have taken a long-term lease on Hotel Lebada from the owners, the Romanian Orthodox Church.
On the site of a former monastery and a regal palace, the Hotel Lebada on 3 Blvd Biruintei, east of Bucharest in Ilfov county, was constructed in the 1950s. The name ‘Lebada’, which means ‘Swan’, is also due to change.
The existing Continental will transform into a “boutique” hotel, according to Radu Enache, President and CEO of Continental Hotels. This will have 60 rooms and apartments and an international restaurant.
Called ‘Continental Grand Hotel’, the building, opposite the Novotel, needed two years for planning permission to begin refurbishment.


Homegrown and foreign chains invade mid-price hotel category

International and domestic hotel groups are planning to blitz through Romania to fill the gap in the two to four star hotel category.
Romanian Pro-Confort Group has bought a 7.5 ha land plot in Pipera where it could open a three and four star hotel boasting 3,000 rooms. This plan depends on the success of the Group’s current four-star Rin Grand Hotel, opening this month, which boasts 1,500 rooms in Bucharest’s southeast.
Romanian hotel chain Continental Hotels is entering this year the two star hotel market with a 100-room unit to be launched this spring near Gara de Nord in Bucharest.
If this proves successful, the group will plan another ten hotels in the same category in Bucharest. This two star Continental brand and the three star Ibis Hotel, together with four-star brand Continental Forum, will join together in two complexes developed this year in Arad and Iasi.
Meanwhile hotel chain Golden Tulip is targeting the west capital for the opening of a 136-room three star Tulip Inn Hotel. The French Accor Group is also looking for land plots to expand its two-star Etap brand to large Romanian cities, while the Swedish Rezidor group is also investigating large cities for further openings.
For in-depth information, see the special report.


Short News

Fertiliser plants shutdown sees
6,000 lose jobs

Romanian mixed-interest agricultural group InterAgro is closing down its fertiliser production in Romania in a move which will see 6,000 people lose their jobs. Three production units will close in Bacau, Savinesti, Neamt County and Turnu Magurele, Teleorman county. Due to the high prices of natural gas, a necessary component in fertiliser, InterAgro believes there is no long-term profitability in the operations. The group still has investments in tourism, cereals, tobacco, dairy, fruits and vegetables.

Post-privatisation drop in
foreign investment

Foreign direct investment in 2007 fell to 7.1 billion Euro from nine billion Euro in 2006, according to data from the central bank (BNR). The figure for 2006 was boosted by the sale of state bank Banca Comerciala Romana to Austria’s Erste bank. Without this exceptional purchase, data shows a level rate of investment for the pre- and post-EU accession years. For last year the current account deficit also grew to 16.9 billion Euro from 10.2 billion for 2006. This was triggered by a trade deficit which rose by 50 per cent to 17.6 billion Euro for 2007 compared to the previous year.

Daimler eyes Cluj-Napoca
for compact cars

Daimler is looking to build a plant in either Poland or Romania according to the Financial Times. The German car giant and Mercedes-owner is looking to Wroclaw in Poland or Cluj-Napoca in Romania, states the paper. The vehicle manufacturer may also be considering other sites in the two countries. No decision on a site will be taken until at least the second half of 2008, but Daimler officials told the FT that eastern Europe is a potential site for the manufacture of compact cars. Such a site would not be a relocation from its existing site in Rastatt, near Karlsruhe in Germany, but an additional factory.

World Bank investment arm buys into local Greek bank

International Finance Corporation (IFC), the investment arm of the World Bank, has purchased 15 per cent of the shares of ATE Bank Romania. This transaction increased the share capital of ATE Bank Romania by 5.5 million Euro, reaching a total a share capital of 37.4 million Euro. Agricultural Bank of Greece is still ATE Romania’s major shareholder, with 74 per cent of the shares.

Greek holding company buys up construction leasing firm

Infrastructure, real estate and energy holding company Hellenic Technodomiki has bought, through its construction subsidiary Aktor, the leaser and merchandiser of construction equipment and vehicles Inscut Bucuresti. Hellenic Technodomiki has bought Svenon Investments, which owns 60 per cent of Inscut, for a price-tag of eight million Euro, subject to finalisation. Inscut was formerly part of Greek construction group Diekat.

Rompetrol plans 320 fill-and-go blitz for 2008

Owned by the Kazakh state company KazMunaiGaz, oil and gas group Rompetrol plans to open 320 new self-service ‘fill-and-go’ petrol stations in 2008 under the ‘Rompetrol Expres’ brand with an emphasis on rural areas, CEO Dinu Patriciu told an audience in Sibiu. Rompetrol currently has 400 petrol stations in Romania including 80 branches of Rompetrol Expres.

German DIY giant tackles Romanian market

German retailer Tengelmann, the operator of Plus Discount stores, will enter the Romanian market with DIY and garden network OBI by the end of this year. The first store openings are planned for the last quarter this year in 8,000 to 12,000 sqm-size units. The company plans to invest 20 million Euro in Romania over the next two years.

Health and beauty chain raises game

German health and beauty retailer Drogerie Markt (DM) continues its expansion in Romania, with openings in Deva and Cluj-Napoca, following its store openings last year in Timisoara, Bucharest and Galati. Milan Radin, the general manager of DM in Romania said the German brand’s strategy is to become the leader in Romanian health and beauty retailing.

Fresh capital of 100 million Euro to fund enterprise

Romanian small and medium enterprises could benefit from a European Investment Fund (EIF) loan scheme available through private banks on the Romanian market. The Jeremie initiative, which has an initial capital of 100 million Euro capital, will be managed by the EIF on behalf of the Ministry of Economy and Finance. The EIF will select the banks after open calls for expressions of interest and funds should be available in the second half of 2008.

Timisoara barracks to transform into four-star hotel

Lithuanian Europa Group has bought a Timisoara-based two-floor barracks, the Cazarma Viena, for almost 11 million Euro in an open auction. The Baltic company plans to transform the residence, on Strada General Grigorescu, into a four-star hotel. Europa Group is already reconverting a 19th Century building overlooking Piata Unirii, Bucharest into the Europa Royale Bucharest for a delivery date of Spring 2009.

Scaffolding group snapped up Poles

Polish engineering and construction firm Polimex-Mostostal has bought Italian-owned scaffolding producers the Coifer Group. Operational in Romania, the Coifer Group has been owned by Italian businessman Piero Francisci. Polimex-Mostostal has bought 75 per cent of the shares in the company for 18.75 million Euro. The Polish group intends to purchase the remaining 25 per cent at some point in the near future.

Interest rate continues hike

Romania’s central bank (BNR) last month raised the interest rate to nine per cent, this is up from seven per cent last October. The BNR also decided to maintain the minimum compulsory reserves for banks for RON and foreign currency at 40 and 20 per cent respectively.

Bucharest tax revenues double

Bucharest received twice as much revenue from taxes in 2007 compared to the previous year. The amount cashed by the General Direction of Public Finances (DGFP) Bucharest in 2007 was 6.9 billion Euro as against around 3.5 billion Euro for 2006.

BRD moves into life insurance

Second largest Romanian bank BRD- Groupe Societe Generale will launch this August a life insurance division, BRD Asigurari de Viata. This will be under the umbrella of BRD - SogeCap,together with BRD Fond de Pensii.



Source : http://www.thediplomat.ro/econ_news_0308.php