FOCUS: Ahead of his show at Bucharest’s Odeon Theatre this week, Lucian Ban told BR about the genesis of his latest album, Transylvania Concert, produced by the famous label ECM Records »page 14
ROMANIA’S PREMIER BUSINESS WEEKLY
MAY 13 - 19, 2013 / VOLUME 17, NUMBER 15
BR finds out what lies ahead for the local renewables sector after the proposed cut in the green certificate support scheme comes into effect in July »page 8
RENEWABLE CONUNDRUM LINKS
CONSTRUCTION
CITY
Emerging jobs
Going public
Black Celebration
The local labor market is rapidly adopting international trends, with new jobs reflecting technological changes starting to appear
Public infrastructure projects could buttress the local construction market, which is looking at modest growth this year after recent stagnation
Iconic band Depeche Mode are set to reach out and touch Bucharest for a second time, part of the European leg of their Delta Machine tour
» page 6
» page 12
» page 13
NEWS 3
www.business-review.ro Business Review | May 13 - 19, 2013
NEWS in brief
3Q Gyorgy Abran CCO Wizz Air
RETAIL Volume of retail trade down 0.6 pct in March
Photo: Silviu Pal
IMAGE of the week
Happy birthday to EU! On May 9, several institutions from Bucharest celebrated Europe Day. Above, a manifestation held by the District 2 City Hall, presenting a gigantic Romanian flag, also commemorating Romanian Independence Day (1877) and Armistice Day.
BANKING BRD Q1 profit falls to EUR 3 mln on weak demand The net profit of BRD-Groupe Societe Generale dipped 84 percent year-onyear to RON 13 million (EUR 3 million) in the first quarter, as the demand for banking products and services failed to pick up due to the struggling economy. BRD’s net banking income shrank by 10.5 percent to RON 687 million (EUR 156 million), mainly due to a 17.1 percent reduction of the net interest margin to RON 433 million (EUR 99 million). Net commission income fell by 1.9 percent to RON 181 million (EUR 41 million) and the lender was able to increase the revenue from other sources by 20.2 percent to RON 72 million (EUR 16 million). It reduced operational expenses by 6.3 percent to RON 314 million (EUR 71 million), which lowered the cost-to-income ratio to 45.7 percent.
INFRASTRUCTURE EC approves subway expansion from structural funds The European Commission has agreed to include the construction of the M4
(Parc Bazilescu- Straulesti) and M5 (Drumul Taberei- Universitate) subway extensions, as well as the construction of the Sebes-Turda highway among the projects to be financed via the Sectoral Operational Programme on Transport. The investments, which will reach EUR 2 billion, should be completed by the end of 2015, according to Ministry of Transportation officials. The ministry will thus be able to recover approximately 85 percent of the invested sums from European Union budget structural funds.
LEGAL Schoenherr & Asociatii launches tax arm Law firm Schoenherr & Asociatii has expanded its current practice to include tax advisory services by launching Schoenherr Tax Bucharest, which will operate as a separate legal entity affiliated to the law firm. Sebastian Gutiu will head the tax arm as managing partner. He is joined by Theodor Artenie, Oana Manuceanu and Mihaela Cristiana Popescu as managing directors. Schoenherr Tax Bucharest covers various fields ranging from international tax structuring to reviews of tax coding and tax processes.
The volume of retail trade fell by 0.1 percent in the euro area and by 0.2 percent in the EU 27 in March compared with February, according to estimates by Eurostat, the statistical office of the European Union. In February, retail trade went down by 0.2 percent in the euro area, but rose by 0.1 percent in the EU27. In March, the retail sales index dropped by 2.4 percent m-o-m in the euro area and by 1.6 percent in the EU27. In Romania, the volume of retail trade fell by 0.6 percent in March 2013 (from the previous month) and by 2.5 percent in February after increasing by 4.2 percent in January. In March, the food, drinks and tobacco category rose by 0.8 percent in the euro area and by 1.0 percent in the EU27 on the month before. The nonfood sector decreased by 0.5 percent (euro area) and 0.6 percent (EU27). Total retail trade fell in nine member states, rose in eleven and remained stable in Austria. The largest decreases were registered in Portugal (-3.0 percent), Slovenia (-2.6 percent) and Ireland (1.9 percent), while the highest increases came in Estonia (+2.7 percent), Latvia (+2.1 percent) and Finland (+1.3 percent).
TELECOM UPC Romania posts stable revenues in Q1 Telecom operator UPC Romania, part of Liberty Global, posted revenues of USD 34.6 million in the first quarter of 2013, a 3.7 percent growth on the first quarter of last year, when the company notched up revenues of USD 33.4 million. At March 31, the firm had 1,169,600 clients, having gained 23,500 new ones over the period. UPC posted growth in the digital and DTH television, internet and landline telephony segments. It had 435,100 new customers after the first quarter, up 16 percent on the same quarter of 2012. In March, the company had 21 HD channels and 50,000 HD TV subscribers. Its number of satellite television clients reached 319,800 at the end of the first quarter of 2013. On March 31, UPC Romania had 343,200 internet subscribers, up 15.6 percent on the same period of 2012. On the fixed telephony side, the company had 242,800 subscribers, up 21 percent on Q1, 2012.
By how much did the load factor of Wizz Air aircrafts increase during this recent holiday? Our average load factor is already very high in general at more than 85 percent all year. During this particular period it went beyond 90 percent, which is always the case in peak summer season or peak occasions such as Christmas and Easter. What were the most popular destinations for Romanians this Easter? We have been seeing increased demand for flights to London, Paris and Rome but also to other places such as Catania in Sicily and Valencia in Spain. There have been increases of more than double-digits for these routes this summer season in general.There was obviously very strong demand during this holiday period but there is a strong demand in general on these routes and this is why we are increasing the frequency of flights. For this summer season I think London will be one of the key destinations in terms of total traffic and Milan and Rome will be close behind. What are your targets in Romania this year? The total traffic expectation for Romania is around 3.3 million passengers – for Bucharest alone it is 1.8 million passengers – with total annual increases of around 600,000 passengers compared to 2012. Obviously we are seeing a lot of changes, a lot of competitive dynamics and a lot of movement on the market and we are here to react to these changes. Therefore I do not rule out further news or developments over the coming weeks and months. We would be the first to react in terms of deploying more capacity if needed and if there is demand, as we have seen. I think that we would be the best positioned to respond to market changes as they take place. At this stage it is still uncertain. simona.bazavan@business-review.ro
4 NEWS
www.business-review.ro Business Review | May 13 - 19, 2013
FINANCE
EU funds to prop up local growth this year
Ioana Gheorghiade, BCR
T
he absorption of EU funds along with an improved agricultural output and the increase of exports outside the EU bloc are set to supports economic growth this year, said representatives of BCR, the largest lender in Romania, last week. BCR recently revised its forecast of Romanian GDP growth in 2013 from 1.1 to 1.8. Florin Eugen Sinca, macro and fixed income analyst at BCR, said, “One of the reasons for the revision are the promising perspectives for good agricultural production, above the 2012 level, as a 10 percent gain in output is predicted. Another reason is the aboveexpectation performance of Romanian exports outside the EU, where we saw double-digit growth.” Romania and the Baltic nations have the best chance of exiting the excessive deficit procedure this year and this should trigger larger influxes of foreign direct investments (FDI) and EU funds, according to Sinca. “We don’t rule out a higher GDP growth of 2.5 percent, if we see improvements in the absorption of EU funds in the second half of the year and an exceptional agricultural output.” According to BCR, the economy could grow by 0.3 percent in the short term for every EUR 1 billion the country attracts in structural and cohesion funds.
Banks to support absorption Romania’s absorption of structural funds reached 13.3 percent in April.
Around EUR 2.6 billion has been used in an attempt to bring the local economy in line with EU standards. Regional Development and Administrative Capacity saw close to a quarter of the available funding used. Transport, the domestic economy’s sore spot, had an absorption rate of 6.7 percent. This is set to improve as major infrastructure projects that relied almost exclusively on EU funding are close to completion. Rural development is by far the sector with the highest absorption rate at 60 percent, while in fisheries close to a quarter of the funding has been used. Ioana Gheorghiade, executive director of the public sector and infrastructure financing division at BCR, says that infrastructure and agriculture are the main growth drivers that should be sustained by EU funds. She says that an improved cooperation between lenders and the public authorities should improve absorption in the next EU budget, in which Romania’s allocation has increased to around EUR 40 billion.
40 bln euros - Romania’s allocation in the next EU budget
“In the upcoming budget, we sense the authorities are open to consulting the banking sector and creating a cooperation to enhance the efficiency of absorption. This has also been seen in other countries, where over time the absorption rate has increased,” Gheorghiade told BR. BCR’s co-financing of projects developed with EU grants has reached EUR 1 billion. The lender has evaluated over 3,000 projects and financed around 1,000. Gheorghiade said that most of the rejected projects had flaws in the business plans or had an insufficient contribution of their own to the project. “In principle, in other countries, the bank can have a larger role in the evaluation of projects,” commented Gheorghiade on the benefits arising from the greater involvement of banks in absorption. She added that this could reduce project analysis deadlines. ∫ Ovidiu Posirca
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www.business-review.ro Business Review | May 13 - 19, 2013
TOURISM
Romanians spend EUR 22 mln on May 1 and Easter holidays
Green green grass of home: more Romanians holidayed locally this Easter
M
ore Romanians chose to travel for this year’s May 1 and Easter holidays than last year, spending a total of more than EUR 22 million, according to figures from the Romanian Federation of Tourism Employers (FPTR). The number of those who journeyed abroad was 12,000, two and a half times more than the previous year, according to the same source. They spent some EUR 2.3 million on their holiday and most – over 7,000 tourists – chose to go to Bulgaria where their expenses amounted to some EUR 630,000. Other popular destinations were Hungary and
Turkey, each attracting some 600 Romanian tourists. The number of holidaymakers who spent their vacation locally also went up this year, increasing by 52 percent yo-y, according to FPTR. They spent RON 51 million (approximately EUR 11 million) on package holidays alone and about RON 35 million (approximately EUR 8.1 million) on entertainment, according to the same source. Most of the tourists who spent their Easter holiday in the country – about 65,000 – chose rural guesthouses. ∫ Simona Bazavan
BUSINESS AGENDA May 13 ∫EVENT
09:00 Business Review organizes Focus on Energy, an event that gauges trends in the domestic energy market, at Howard Johnson Grand Plaza Hotel.
May 14
15:00 Prysmian Cabluri si Sisteme Slatina organizes a press conference to mark the launch of its first local unit, which manufactures fiber optic cables, at its HQ in Slatina. By invitation only.
Hagivreta, executive manager of Dent Estet, will attend the event. By invitation only.
May 22
09:00 HART Consulting organizes the sixth edition of the HART HR Strategic Conference, entitled CEOs and Organizational Culture: What Makes it or Breaks it? Participation is fee based. For registration, e-mail consulting@hart.ro
May 24
19:00 The Meet the Woman conference series hosts an event on the topic Strategy: Tool or Weapon, at the Capital Plaza Hotel. Aliz Kosza, business strategist & mentor, will be guest speaker. The event is fee-based. For registration, e-mail inscrieri@femei-in-afaceri.ro
09:00 ICAP Romania and CYCLE European organize the fourth edition of the Credit Risk Conference at Radisson Blu Hotel. Prof. Edward Altman of Stern Business School within the New York University, a renowned specialist in credit risk, will attend. By invitation only.
May 15
May 27 ∫EVENT
11:00 Dent Estet organizes a press conference to mark the launch of a financial program for dental implants at the company’s clinic in Bucharest. Oana Taban, CEO & Founder Dent Estet, and Catrinel
09:00 Business Review organizes the third edition of Focus on Agriculture, an event that outlines the most pressing matters for the sector, at Ramada Plaza. Registration is open.
6 LINKS
www.business-review.ro Business Review | May 13 - 19, 2013
Futuristic jobs prepare to enter mainstream In a not too distant future, jobs like body-part maker, waste-data handler or climate controller, which today sound like science fiction, may be commonplace. As demand for new positions rises, labor markets will have to adjust to the new reality and in this Romania is no exception. Some new jobs have recently appeared while other existing ones will grow in importance, pundits tell BR. ∫ OTILIA HARAGA Children born today may one day tell you that they have found a job as an omnipotence delimiter or personal medical apothecary. Do many people even know what these job titles mean? Not really, but the article “Top ten wellpaid jobs of the future” in The Telegraph suggests that we should learn what they are about, because they will be highly sought after on the labor market as soon as 2030. An omnipotence delimiter, for instance, reins in our belief that anything is possible and we are all-powerful, while a personal medical apothecary provides a custom range of alternative therapies. How about a child designer who designs offspring that fit parental requirements, or a waste data handler, who disposes of your data waste in a responsible way? Or, on a more traditional note, a vertical farmer, who creates space-saving vertical crops? An aging population poses the challenge of caring for and assisting the elderly. This is why The Telegraph argues that existing jobs like home carer, a person who looks after the elderly in their own homes, or elderly wellbeing consultant, who specializes in holistic and personalized care for this age category, will become increasingly important. In this area, emerging professionals such as a memory augmentation surgeon, who helps preserve and improve memory in the aging population, and a nano-medic, who creates implants for self-monitoring and self-medication, may also make an important contribution. If you harbor doubts about some of the suggestions, it is worth bearing in mind that a lot of the jobs that are hot property today did not even exist 5-10 years ago. “Global trends are leading to the automatization/efficiency of certain activ-
Cloud cover: new technologies are reshaping the labor market
ities and this impacts all domains, which is why certain jobs have or will disappear from the labor market. But at the same time, others will appear, especially in fields that have developed over recent years and continue their growing trend: IT, green energy, biotechnology, pharma and healthcare,” says Bogdan Badea, business development manager at Accace. He explains that to a greater or lesser extent, changes are taking place even at the level of existing jobs. “Responsibilities change, everything is moving online, people must learn to work in various applications/systems, and certain activities that in the past were done offline will shift to digital,” says Badea. Ariana Badin, director marketing, communication & PR at UPC Romania, says that Richard Riley, education state secretary in the USA, has since 2010 reached two essential conclusions on the new global labor market. The first
refers to a ranking that indicates that the most in-demand jobs of 2010 did not exist as such in title and specific description in 2005. The second relates to the statistical prediction that 80 percent of the jobs of the future will be based on aptitudes in the STEM area (science, technology, engineering and math). “Since the international appearance of social media jobs four-five years ago, the position of chief listening officer has emerged, meaning a professional responsible for understanding and making business decisions depending on reactions in the social media. The Romanian market has adjusted extremely fast, generating a range of jobs synchronized with these CRM necessities, from social media specialist to digital consultant,” says Badin. Badea gives another example: developer of online applications for smartphones, a market which is set to reach
revenues of USD 46 billion at global level. Other professions he cites are SEO specialist, social media specialist, green energy/alternative energy specialist and 3D graphics and print expert. Criteria for assessing the abilities and qualifications for these job titles are not very different from what is now used for any existing job, he says. “Take the social media specialist: companies will be looking for a creative person who knows how to communicate formally/informally, is passionate and has know-how about social networks. Last but not least, they will be looking for a person who yields results, is present on these networks and has managed to create a personal brand/a group of followers. So the future of this job consists in the creation of this ‘digital CV’ and traditional interviews will be replaced by concrete results,” says Badea. Some of these jobs have already appeared in Romania and are riding the wave, he adds. “We cannot predict when they will become vital. Usually, the demand for certain jobs and the entry of certain companies on the market triggers the creation of these jobs.” Data from BestJobs online recruitment site show that jobs that involve new technologies such as OS developer for various mobile platforms are very much in demand even now. Positions in marketing that use new promotional tools are also well rated. “At the moment, we have over 30 jobs available on BestJobs for search engine optimization expert or Google AdWords specialist,” says Andreea Mihaescu, PR Executive at BestJobs. IT, product development and online are the fields that will dictate most emerging jobs in the future, because “we are in a market where the progress of technology is exponential and induces in clients the need for innovating integrated services,” says Celesta Padineanu, human resources manager
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UPC Romania. Moreover, she says, “next to technology, an important differentiator is the experience of the client in the customer support areas where the need for specialists will be high.” In the internet field, Badin predicts three job areas that will be relevant: sustainability (handled by sustainability experts), data mining (handled by data mining engineers) and user experience (handled by user interface designers). The Romanian market is starting to see job titles like social media specialists, django developer, ruby developer and social game master, say Leonard Rizoiu, business unit manager at Barnett McCall/Gi Group Romania and Bogdan Sava, account manager at ePayPoint/Gi Group Romania. Prospective employees in these positions should have, as general traits, an open mind, flexibility, orientation towards results and a willingness to keep up to date with the evolution of technologies. “These jobs could have a growing importance from the second and third quarters of this year, after starting to make their presence felt in the appointments lists
in recent years,” they say.
New jobs bring new challenges As some jobs become a thing of the past and other new ones emerge, the labor market has to face the changes. “Generally, the labor market should be constantly adjusting and oriented towards future jobs. One example is the decision of certain hypermarket chains in Western Europe and the United States to eliminate cashiers, so customers scan their own products and pay at the end. If this is adopted in Romania, many cashier jobs will disappear,” says Badea. From the legal viewpoint, he explains that these positions would have to be created in the Classification of Occupations in Romania. Also, responsibilities and performance criteria should be outlined for those jobs. “The labor legislation is changing to legally encompass these new professions. One example is tele-work – defined in the labor contract as IT activities taking place either at the headquarters of the employer or out-
side it. This new concept takes into consideration the evolution of work relations, technological changes and the acceleration of work processes that require a high degree of mobility and flexibility,” the two Gi Group representatives explain. As far as the way the school curricula should be shaped to encourage the take-up of these new jobs, they encourage schools to take into consideration the current needs of the economy, while the education system should reflect changes to the labor market. However, some pundits do not believe change to the curriculum would help. “Since the school curriculum is not adjusted to the needs of the market right now, I do not believe that a change in it would have a major impact on the labor market. The most important thing is that after graduating from high school, young people have more options than the existing universities, or in parallel there should be alternative schools/classes to help them adjust to their future jobs” says Badea. Adaptation is key. To give one exam-
ple, Gi Group representatives quote opinion leaders who believe that if IT specialists do not adjust their skills to changes brought about by cloud technology in the infrastructure of companies, their jobs will be in danger. In Romania, specialists are calling for regulations/facilities for taxes paid by employers as well as regulations governing the work program. “At macro level, I believe it is useful to facilitate access to EU funds to stimulate the development of internship programs, the development of technical and managerial skills as well as facilitating employees’ access to international programs and the exchange of experience,” says Padineanu. She also urges for a reverse of the brain drain. “Companies should increasingly find solutions to attract and retain personnel, and offer both financial and development advantages to the young people who are currently choosing to evolve on other markets,” she says. otilia.haraga@business-review.ro
8 ENERGY TRENDS
www.business-review.ro Business Review | May 13 - 19, 2013
Seeking rays of light in Romania’s renewable sector With the government planning to cut the green certificate support scheme for some renewable technologies from July, Business Review takes a look at the specifics of photovoltaic and biomass projects, in which investors’ interest has accelerated in the past two years. ∫ OVIDIU POSIRCA Constantin Nita, delegate-minister for energy, said the cuts to be borne by renewable producers are being made in a key move designed to rein in electricity prices for households and big industrial consumers. Industry players have made known in the past few months that they run the risk of having to close local operations due to footing the bill for green producers. Nita warned that leaving the support scheme unchanged would cost Romanian consumers around EUR 1 billion in 2014. Under the proposed reduction, photovoltaic projects will receive three certificates, out of which one will be recovered from 2017 from a special basket of the energy regulator ANRE. Solar was previously granted six certificates, which has triggered an influx of investments from European and Asian companies. Meanwhile, investments in biomass projects are expected to pick up, as this technology has not been impacted by the cuts and is still granted between two and three certificates. Wind remains king in Romania with over 2,000MW of incentivized installation, accounting for more than EUR 3.5 billion in direct investments, while hydroelectric plants have reached 430MW.
Industry reflections: energy players have different views on renewables support
stalled capacities. The company has four wood-processing sites in Romania. Bio investments have registered lower growth rates as they involve the setting up of real factories, requiring more time for planning and execution, according to Ilias Papageorgiadis, CEO of More Group of Companies and president of the Romanian Association of Biomass and Biogas (ARBIO). “Because until recently the sector was not well organized, only random investors had proceeded in the implementation of their projects and the installed capacity in Romania has just exceeded 40 MW,” Papageorgiadis told BR. “We estimate that this figure will increase by 50 percent this year, but the real explosion will take place over 2014-2016, assuming the investment conditions do not deteriorate.” This spring, Romania’s Adrem Invest, a technical engineering firm, kicked off building works on a EUR 90 million biomass-fueled cogeneration plant in the north-eastern Romanian city of Suceva. The plant is the first of its kind in Romania and will provide cheaper heating for people still con-
Cloudy days for solar The proposed reduction of solar incentives by half has brought the photovoltaic sector close to a standstill, says Doru Voicu, president of the administration board of the Romanian Photovoltaic Industry Association (RPIA). “I think that until it’s clear what will be modified, we will not see a relaunch of investment, and this will happen only if the changes are balanced, clear, and offer predictability,”
Romania’s renewable energy mix Wind Hydro Photovoltaic Biomass
2,088MW 430MW 118MW 41MW
Source: Transelectrica
Ramona Volciuc-Ionescu, counsel at the law firm DLA Piper, said that biomass power plants present operational risks similar to conventional plants. She cited the difficult access to financing and the regulatory risks as factors that have made the sector less attractive. Capricious biomass The main challenges raised by the According to consultants, biomass projects are more complex and bear biomass sector include the insuffihigher risk, which may have deterred cient incentives for producers of energy crops, along with the poor large investments in this sector. Bogdan Belciu, partner, manage- organization of the agricultural waste ment consulting services, at the pro- collection system and the underdevelfessional services firm PwC Romania, oped legislation to promote the obreckons the support scheme has so far taining of forest waste, according to encouraged investments in solar and Cosmin Stavaru, partner at the law firm Bulboaca & Asociatii. wind energy. “There is also a long-term sustain“Biomass renewable energy capacities require vegetal fuel, which is after ability assessment that biomass all a commodity and comes at a price, should trigger, which is the environwhereas wind and sunlight come free mental impact of large-scale biomass of charge. Therefore it is more cost ef- production and the competition with fective for investors to pursue projects other agricultural outputs such as that have lower operational costs,” food products,” Stavaru told BR. Romania has a little over 42MW of Belciu told BR. He added that most biomass energy plants have incorpo- biomass plants, most of them using rated cogeneration technology that agricultural or forestry waste. The produces both electricity and heat, to largest player is Austria’s Holzindustrie Schwieghofer, with 21MW in inmake them more effective.
nected to the centralized system. Corneliu Bodea, vice-president of Adrem Invest, explained that finding the right location with biomass nearby is critical for this investment. In addition, the producer needs to secure clients for its electricity and heating output. “One of the biggest errors in Romania has been the disconnection of household consumers from the centralized heating system, which makes this technology less attractive. Nevertheless, I think that in the coming years, the cogeneration biomass sector will grow significantly,” Bodea told BR. Belciu of PwC Romania suggested that the vast surfaces of unused agricultural land could be used to grow plants with high caloric potential, suitable for biomass. “Taking into consideration the current intricate land-ownership structure in Romania, turning unused land plots into biomass cultures will not be easy,” warned Belciu. ARBIO aims to reach 500 small projects under 0.5 MW and 100 projects over 0.5MW, which will create around 20 to 40 jobs each. The organization’s president says the biggest advantage of biomass is the Feed in Tariff that applies for installations below 2 MW. Small producers therefore have the option to choose between green certificates and a fixed price.
10 ENERGY TRENDS
www.business-review.ro Business Review | May 13 - 19, 2013
PARTNER CONTENT
Renewable Energy in Romania Current Status and Prospects by Razvan Vlad, Senior Associate Popovici Nitu & Asociatii
Romania has taken a major step forward with a view to develop its renewable energy sector in accordance with its European commitments, namely by enforcing Law no. 220/2008 and the subsidiary related legislation. Law no. 220/2008, currently provides a generous state aid scheme (i.e. 2 (two) green certificates are currently allocated for 1 MW produced by a wind farm and 6 (six) green certificates for 1 MW produced by a photovoltaic project) which, to a major extent, determined the investors to become interested in investing in renewable energy in Romania. The same law also sets forth that the state aid scheme may be reduced given the overcompensation of the technologies used by renewable producers. However, in July 2012, the Romanian legislator approved the amendment of Law no. 220/2008 whereby the overcompensation scheme would have not been subject to amendments until 1st January 2014 for photovoltaic projects and 1st January 2015 for wind projects. In other words, the investors in renewables (especially those in wind and photovoltaic) were secured under legislation against the risk of the green certificates number and/or value thereof reduction. Notwithstanding the above, at the beginning of 2013, the discussions held at the official level of ANRE and governmental authorities regarding the maintenance of the existing state aid scheme were dramatically changed, since the authorities realized the need to reduce the state aid scheme. Therefore, after various rumors concerning the amendment of Law no. 220/2008, the Government finally published the
project of the new piece of legislation likely to amend the existing Law no. 220/2008 on the website of the Ministry of Economy for public consultation. The most important amendments refer, inter alia, to the temporary reduction of the green certificates scheme starting with 1st July 2013 (1 (one) for wind until 2017 and 2(two) for PV until 2018) and the limitation of the accreditation issued by ANRE for new projects, within the limits of the renewable energy quota to be achieved by Romania in 2020 (24% out of the final energy consumed) and introduction of financial guarantees at connection to the network. Since chances of such amendments of Law no. 220/2008 being enacted are high, certain questions arise in connection with the prospects of renewables in Romania. To such extent, it remains to be seen whether such amendments shall bring the estimated corrections envisaged by the authorities, namely eliminating the speculators operating in this field and maintaining the real and reliable investors but, at the same time, keeping the investments on a high level and thus allowing Romania to reach the target of 24% in 2014. On one hand, the effect of such changes will definitely not be welcomed by the investors which made their financial and business forecasts under the assumption that the existing status quo relating to the green certificates shall not be changed, at least not in the short-term period. Moreover, while the state aid scheme diminishes its attractiveness under the current economic climate, it is questionable whether investors will be still willing to pursue their investments in renewables. On the other hand, as it was also suggested by the authorities, perhaps, given the limitation imposed on renewables, investors will take a look also at conventional energy in Romania lately shadowed by the renewables.
1. This article concerns current legislation. 2. It refers to a draft law that can undergo changes following public consultations.
Doru Voicu, board president, RPIA
Cosmin Stavaru, partner, Bulboaca & Asociatii
Ramona Volciuc-Ionescu, counsel, DLA Piper Romania
Ilias Papageorgiadis, president ARBIO, CEO MORE Group
Voicu told BR. He added that three certificates will not be attractive for solar investments, suggesting that 4.2 to 4.3 certificates could secure “a future” for the sector. Stavaru of Bulboaca & Asociatii said the proposed cuts in solar may “look dramatic”, but the baseline for the cut is very high compared to the current investment costs per MW. “Photovoltaic might be the renewable source with the largest fall in technology costs in the last few years, having dropped by approximately 5060 percent between 2010 and 2013. Also, the support for solar was or is to be reduced in many other EU countries, so Romania may still preserve a competitive advantage,” said Stavaru. The RPIA president added that solar runs a total cost of EUR 1.8 to EUR 1.9 million per MW. But Volciuc-Ionescu of DLA Piper commented that investors’ interest in photovoltaic will “decrease substantially” if the ANRE cuts go through. “There will still be some small-scale investments until the end of 2016, but this will also depend on whether the support scheme is amended this year and the changes made,” said the DLA
Piper counsel. She added that the solar industry relies heavily on the cash flow deriving from the sale of green certificates, which represent more than 80 percent of total revenues, and less on the price of electricity. Voicu of RPIA goes even further, warning that some existing projects may face bankruptcy, as the financing and contracts for selling green certificates have already been sealed.
EUR 1.8 -1.9 million – cost per MW in solar The trading price of one green certificate stood at EUR 44.8 in April, according to the electricity market operator OPCOM. The figure has decreased constantly in the past year, due to the growing number of issued certificates.
ENERGY TRENDS 11
www.business-review.ro Business Review | May 13 - 19, 2013
PARTNER CONTENT
Romanian withholding tax – a challenge for both the non-resident and the local payer of income by Otilia Bujor, Tax Manager
Corneliu Bodea, vice-president, Adrem Invest
Shifting interest Consultants told BR that biomass is not likely to serve as a safe harbor for investors, after the incentives in other sectors, mainly solar, are cut. Papageorgiadis of ARBIO says there is no competition between technologies. “Some 70 percent of the investors active in Romania do not have expertise in more than one technology, so if they leave the photovoltaic sector (which I hope will not happen) they will simply leave Romania and not switch to a different sector,” says the ARBIO president. In the past four years, wind has registered a “Chinese style” growth in Romania, as one consultant put it. Stavaru predicts we will not see wind investors turning to biomass in search of higher returns. “At least for wind the situation does not look dramatic because many investors have decided to invest in Romanian wind projects based on a business plan with one certificate conceived under the old renewable legislation prior to 2011,” stated Stavaru. He commented that investors in solar that are also specialized in biomass may switch to biomass due to its more favorable support.
Passing the financing test At present, the financing of renewable projects has been put on hold, as both bankers and investors are expecting a final decision on cuts. “At present, we are in a situation in which we are reconsidering the strategy on renewable energy,” Ioana Gheorghiade, executive director in the public sector and infrastructure financing department at BCR, told BR. The bank, which is the largest lender in Romania, has built a portfolio of EUR 220 million worth of financing in the renewable sector. It includes wind, photovoltaic and small-hydro.
Bogdan Belciu, partner, management consulting, PwC Romania
“We have several biomass projects under review and we want to include this type of project in our portfolio. However, investor interest has not been that strong; we saw there was less interest than in other areas,” stated Gheorghiade. She commented that Erste Group, BCR’s parent, has financed extensive biomass and biogas projects in the Czech Republic, which were linked to agricultural producers. She added that this kind of cooperation is not too visible locally.
21.2MW the biomass capacity of Holzindustrie Schwieghofer – the largest in Romania So far, banks have largely financed only wind and solar projects, given the more generous support scheme and the higher degree of availability of wind and solar resources compared to biomass. “A biomass facility may be difficult to project finance for, mainly due to the specifics of the supply chain,” said Stavaru. He forecasts that biomass capacities will double to 80MW this year, while solar might exceed 150MW. Voicu of RPIA reckons solar will not surpass 250MW this year, given the planned reduction of the support scheme and the possible enforcement of anti-dumping prices for Chinese-made solar panels. The measure announced by the European Commission has already sent prices of solar panels up 15 percent since the start of the year, according to Voicu. ovidiu.posirca@business-review.ro
Starting 1st of February, 2013, the local tax rules suffered new changes throughout the modification of the Romanian Fiscal Code. Since the draft of the changes had been made public before their final publishing in the Official Gazette, the amendments were not of a surprise, but more of a disappointment, because both taxpayers and professionals hoped that, maybe, not all of them would see the ink and paper. Specifically, this was the case with two of the changes brought to the chapter in the Romanian Fiscal Code regarding the taxation of nonresidents’ income derived from Romania. Thus, the sphere of income derived by non-residents from Romania for which withholding tax is due was extended in order to include income from the provision of services outside the Romanian territory (whereas before as a general rule, services rendered on the Romanian territory were included). The Romanian standard withholding tax rate is of 16%. This rate may be reduced to nil or to a more favorable rate, provided that Romania has a double tax treaty concluded with the state of tax residency of the non-resident and the later provides the Romanian payer of income its certificate of tax residency. Also, starting 1st of February, 2013, if the income is paid by the Romanian payer into a state with which Romania has no double tax treaty or other legal instrument for exchange of information, the withholding tax raises to 50%, irrespective if the non-resident is, in fact, tax resident in a state that closed such a treaty with Romania. In other words, if a Romanian resident makes, from
Romania, a payment towards a nonresident, into a bank account opened into the British Virgin Islands, state with witch Romanian has no legal instrument to exchange information, the Romanian payer of income should withhold, declare and pay a 50% withholding tax upon payment, even if the beneficiary of income has tax residency in the Netherlands. First of all, the enlargement of the taxation sphere with income from services rendered outside Romania will imply obtaining more tax residency certificates from non-resident business partners, mission that sometimes tends to be rather difficult, if not impossible. Hence, if the non-resident does not provide its certificate in due time nor agrees with the application of the 16% standard rate, it will be the Romanian payer of income bearing the burden of the tax (resulting in additional non-deductible expense from a corporate income tax perspective). As for the second change, the new 50% withholding rate, it was said that it aimed to limit the profit shifting towards tax heavens. Even if it may serve its purpose, the enforcement as it is now, it is not in the spirit and letter of the law, as it infringes the rules stated in both the Constitution and the Romanian Tax Code. The Constitution states that any international ratified treaty is part of the local law and its obligations must be observed. Secondly, the Romanian Tax Code provides that the double tax treaty overrides the domestic rules. Hence, the application of the 50% withholding rule based only on place of payment criteria, even if the beneficiary of income is tax resident in a state with witch Romania has a double tax treaty, infringes the principles stated above. From the point of view of the Romanian taxpayer, this new rule will imply reviewing, at all time, all payments made towards non-residents, restructuring of some transactions, potential additional banking costs and also, potential non-deductible costs with withholding tax supported by the Romanian payer, if the non-resident wants the payment to be made in such tax heavens and also, made net-of-tax (i.e. 116% additional).
12 FOCUS
www.business-review.ro Business Review | May 13 - 19, 2013
Cement manufacturers hope to build 2013 growth on infrastructure projects The Romanian cement market declined 0.2 percent in 2012 owing to bad weather and an unfavorable economic context, and this year seems no better as yet. Any growth by yearend will be small, and could only come from infrastructure investments and a higher EU funds absorption rate for this sector, manufacturers say. ∫ SIMONA BAZAVAN “I don’t think the Romanian constructions market will ever again see annual increases of 7-9 percent like those posted over 2005-2008. But I am confident that a moderate yet stable and constant growth rate of about 1-2 percent per year is achievable,” Florian Aldea, general director and president of the board of directors of Carpatcement Holding, recently stated. The company is one of the main players on the local cement market alongside Holcim Romania and Lafarge Romania. However, even an annual increase of just a few percentage points seems out of reach at present. “Judging from the results so far this year, our estimations are that the market will stagnate, but we hope to see a slight increase, at least in the second half of this year. Still, it is too early to predict how the year will go overall,” he said. The first signs of growth may come in the second half of the year, but only if public investments in infrastructure projects are maintained at least at last year’s level, if not increased, Aldea added. And Carpatcement is not the only player taking a cautious approach. “In 2013 we do not expect any significant changes compared to 2012. Our group estimates a 1 to 4 percent possible growth in market volumes, but we are rather conservative after the first quarter results which were impacted by adverse weather, lower infrastructure spending and high inventories in the distribution channels,” Sonia Artinian, country CEO at Lafarge Romania, told BR. However, she added that in the cement industry the first quarter results do not reflect fullyear trends and are traditionally lower than those throughout the rest of the year. The challenges ahead for the industry include inflation and the rising cost of energy, as well as the unpredictability of potential growth, as many of Lafarge Romania’s major projects are related to infrastructure. Can the construction market once again be a growth engine for the Romanian economy as it was during the boom years? It all depends on the absorption degree of EU funds, thinks Aldea. Lafarge Romania’s CEO agrees.
Bridging the gap: infrastructure accounted for between 8 and 9 percent of Carpatcement’s sold volumes in 2012
“Market growth could come from a higher EU funds inflow rate for the infrastructure sector. That would definitely make a major contribution to reaching the estimates I gave, as the residential construction segment has performed poorly over the past few years and, in my opinion, it will take more time for it to get back on track,” she said. Logistics parks and office space projects also fueled the construction market last year and should continue to do so in 2013. As for manufacturers pinning their hopes on infrastructure developments, there have been few positive signals from the government. The Ministry of Transports has a 40 percent higher budget this year (approximately EUR 1.6 billion) but this does not mean more money for investments. The funds necessary for the majority of this year’s road, highway, railways and subway investment projects will be, or more likely, should be, mostly EU money. This does not leave room for a lot of optimism considering that in the six years since joining the EU, Romania has managed to absorb a meager 6 percent of the over EUR 4.5 billion available from the EU for transport projects.
Talking concrete numbers Last year Carpatcement Holding reported a total turnover for all three divisions – cement, concrete and aggregates – of EUR 195 million, down 7 percent y-o-y. The main factor was unfavorable weather conditions in the first half of 2012 but, nevertheless, the local economic context did not help either. And Romania was not an exception. German HeidelbergCement, of which Carpatcement Holding is a member, reported global sales growth of just 1.4 percent, with the increase coming from outside Europe. Despite the turnover decrease in Romania, the cement producer managed to increase its net profit by 11 percent to EUR 36 million. This was achieved by restructuring costs and increasing revenues through the product mix and vertical integration. Last year’s cement production in Romania was 7.6 million tons, out of which the company delivered 2.75 million tons. By comparison, during the boom years of 2007-2008 Carpatcement provided some 3.2-3.3 million tons of cement per year. About 8-9 percent of the company’s cement deliveries went to infrastructure projects, a share which Aldea
says has remained relatively constant over the past few years. The rest was made up of private ventures such as logistics parks and office projects. Some of the infrastructure projects for which the company delivered in 2012 were the Nadlac-Sibiu highway, airport renovations and even the Redemption Cathedral in Bucharest, for which Carpatcement provided 20,000 tons of cement in 2012. In 2012, the total sales of Lafarge Group increased by 3.5 percent, to EUR 15.8 billion. In Romania, the company grew its business by 7.9 percent in terms of value on cement activity (volume +7 percent, other effects +0.9 percent, including price, product and customer mix effects). The local subsidiary of Swiss Group Holcim saw cement sales drop by 3.6 percent (in volume) in 2012 y-o-y, due to unfavorable weather conditions and a decline in private sector investment. Overall, the firm’s global cement sales increased by 2.5 percent in 2012 despite declines in its European businesses, while consolidated net sales rose by 3.9 percent. simona.bazavan@business-review.ro
CITY 13
www.business-review.ro Business Review | May 13 - 19, 2013
DON’T MISS / DEPECHE MODE BRING A BLACK CELEBRATION TO BUCHAREST
Waiting for The Mode in Bucharest
∫ OTILIA HARAGA It is now just a Question of Time until the long awaited concert by synth-rock legends Depeche Mode: the iconic act will be playing the National Arena on May 15. Bucharest is included in the European leg of the tour that Depeche Mode have embarked on to promote their latest album, Delta Machine. Fans in Romania no longer have to Dream On after years of hoping for another concert by the British trio, who skipped Bucharest during their previous Tour of the Universe in 2009 due to frontman Dave Gahan’s ill health. The Bucharest show was cancelled, along with a few other dates in the region, and the concert could not be rescheduled. Anticipation is running high as organizers Emag!c Entertainment announced last week that preparations were already in full swing. The organizers have also revealed to fans a few nuggets about the musicians’ backstage riders during their stay in Romania. Singer Gahan is meticulous about the preparation ritual and wants to relax by himself in a separate room backstage before every show. The room must be done out in dark colors and have black curtains that do not let any sunlight in as Gahan says black is his favorite color and darkness inspires him. The singer eats a diet of fresh organic food prepared by his personal chef. Catering purchases will be made on the morning before the concert in Bucharest by Depeche Mode representatives. Composer Martin Gore and keyboardist Andy Fletcher will share a spacious room painted in warm colors and decorated with natural plants, flowers and candles to give the room a cozy appearance. They will also be using another room with plasma TVs, internet, sofas, coffee tables and an open bar stocked with local beers.
The two musicians also intend to visit Bucharest if they get a few hours off before rehearsals. During their stay, they will have a personal driver to ferry them around the city. The Delta Machine European tour started earlier this month with a warmup show in Nice, France, before moving onto Tel Aviv, Israel. Bucharest’s May 15 gig will come after a show in the Bulgarian capital Sofia, on May 12. Known for their doom-and-gloom anthems, Depeche Mode have been exploring themes such as loneliness, love, isolation, addiction, pain and suffering for their 30-year career. The band from Basildon have come a long way from the poppy and upbeat I Just Can’t Get Enough, when founder Vince Clarke was still onboard. After the first album Speak and Spell was released and Clarke left the group, going on to form Yazoo and Erasure, Martin Gore took over the reins and his songwriting gradually imbued the band’s music with dark overtones. New joiner Alan Wilder was in charge of putting together the songs in the studio, and made an important contribution to shaping the characteristic Depeche Mode vibe, which has been an inspiration for subsequent generations of artists. Hits such as Never Let Me Down Again, Behind the Wheel, World in My Eyes, Personal Jesus, Enjoy the Silence Walking In My Shoes and I Feel You were penned during that time. The Devotional tour, which Q magazine referred to as “the most debauched rock tour ever” was rife with problems, as the band members battled drug and alcohol addiction, nervous breakdowns, fatigue and friction, which led to Wilder’s departure in 1995. The three remaining band members eventually managed to regroup and since then have released several more commercially successful albums such as Ultra (1997), Exciter (2001), Playing the Angel (2005), Sounds of the Universe (2008) and Delta Machine (2013), due to Gore’s solid songwriting and the trio’s will to overcome their substance addictions. Currently, the songwriting credits are split between Gore and Gahan. The blues-infused Delta Machine, the latest studio effort by the British outfit, debuted with the single Heaven, released in February 2013. A video for a second song off this album, Soothe My Soul, was also released at end-March. Tickets for the concert are available only in the lawn and seated area at prices between RON 145 and RON 320. They can be acquired online at www.Myticket.ro or in the Diverta store chain, the Muzica store, the Mihai Eminescu book store and from the Palace Hall (Sala Palatului) box office. otilia.haraga@business-review.ro
14 INTERVIEW
www.business-review.ro Business Review | May 13 - 19, 2013
Transylvanian Concert Jazz pianist Lucian Ban talks to Anca Ionita about this week’s concert at Bucharest’s Odeon Theatre with the viola player, Mat Maneri. The concert is part of a tour to mark the CD release of the ECM Records album Transylvanian Concert. The two will have as special guest the famous avant-garde British saxophonist Evan Parker. ∫ ANCA IONITA
music was very good if the label decided to break its own rules. They suggested we change the title of the album and name it simply Transylvanian Concerts. I liked it a lot, because it puts Romania on the international jazz map. You suddenly get the pedigree of one of the highend labels in the world. ECM defined the sound of the second half of the 20th century, not only jazz.
How did ECM Records decide to produce the Transylvanian Concert album? Besides the Enescu project, Mat and I did two projects related to film: Tarkovsky Redux and Andy Warhol Screen Tests. Both of them were performed at TIFF (the Transylvanian International Film Festival), in Cluj. The promoter of the concert added to one of these performances a concert in Targu Mures, at the beautiful Opera House. We played modern pieces composed by both Mat and myself, a cross between European 20th-century music and jazz. It was an unusual combination, piano and viola. Mat Maneri is known as an avant-garde player. The audience greatly enjoyed the concert, which was more like a chamber duet, not mainstream jazz. There was a good piano, great acoustics and I remember both Mat and I had a very good feeling about the concert. Little did we know that the promoter had asked someone from the local radio station to record
Courtesy of Lucian Ban
How did you and Mat Maneri start to work together? The combination of piano and viola is not a very common one. When I did the Enescu Re-imagined project, which involved a large ensemble and a lot of re-orchestration, most of the musicians involved in the project, being internationally famous, had very busy schedules, so the time for rehearsals was very short. Once we wrote the music, we wanted to allow these musicians to bring their voices to the project. This can happen only during performances. We decided that the piano and the viola would do an improvised introduction for the solo of each of the musicians in the ensemble. And the music came out so good that we decided to play more together.
Why did you think of Evan Parker? Because he has been a leading figure in European jazz avant-garde since 1960s. He pioneered techniques that are used in contemporary classical music, like circular breathing, for example. Evan Parker is actually in Romania for the second time. He came in the 1980s, when he was on tour with a famous German pianist, Alexander for Schlippenbach, and a dancer, sponsored by Goethe Institute. They played in Timisoara, Sibiu and Cluj, and I was at the concert in Cluj.
it. When we listened to it, we both agreed it was a very high quality recording. And we decided to release this recording as an album, so we sent it to different labels. When ECM (Edition of Contemporary Music) Records said it was interested in releasing our album, it was kind of a surprise, because ECM releases only albums it produces, either live or studio recordings. Manfred Eicher, the founder and boss of the ECM, is a purist and the label is known for an almost draconian approach to recording. Manfred Eicher worked for Deutsche Grammophon in the 1960s, and he built ECM starting from these recording techniques, such as the one used to capture Keith Jarrett’s piano. Jarrett has exclusively recorded with
ECM almost from the very beginning of his career. During a meeting with label representatives in 2011, in Munich, we found out how they decided to produce us. A label like ECM receives around 2000 tapes a week, and they never get to listen to all of them. They only produce artists they already know or artists that are recommended by their current artists. But someone working there liked our recording and started to play it in the office. Manfred Eicher listened to it and said there was something fresh in it, and that he would like to have the original recording, not a studio one. It was an unusual approach for ECM as it doesn’t release live concerts it doesn’t plan in advance. So I think this proves the
anca.ionita@business-review.ro
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This week’s concert is part of an international CD release tour for the album. The tour starts on May 11 in Cologne and will include 20 concerts and six countries, including Romania, with a concert in Bucharest on May 14 and in Ploiesti, at the jazz festival, on May 16. I am particularly excited about the concert in Bucharest because I asked Nigel Townson, the head of the British Council in Bucharest, if it would be interested in bringing a famous British saxophonist, Evan Parker, to this concert and he said yes.
LAYOUT Beatrice Gheorghiu ART DIRECTOR Alexandru Oriean
Mat Maneri & Lucian Ban CD release concert for the ECM album, Transylvanian Concert, Odeon Theatre, May 14, 19:00