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Interview for HotNews – Minister for Energy Constantin Nita


Minister Delegate for Energy Constantin Nita is determined to ask the verification of all tariffs for the energy sector, even if they are set by ANRE, an independent institution. “I plan to seriously check all the tariffs currently paid”, Constantin Nita stated in an interview for HotNews. Nita also warned that as of May Secretary of State Maricel Popa would have to take care about all that means energy distribution. “There are certain profits that I call hidden profits, which are not seen on the surface”, Nita claims. He is convinced that distributers will not leave from Romania, even if he starts a “war” with them. Nita also criticized very harshly OPCOM – the energy exchange. “We have a surrogate exchange”, Nita said. About Hidroelectrica split in 2-3 companies, the minister stated he planned to do it “regardless whether it bothers some or others”.

See in the interview other statements on gas exports, investments in the energy sector, Transelectrica transfer to the Ministry of Finance etc.

  • [cleeng_content id=”609445532″ description=”Buy this translation today. This article has 20605 characters with spaces. ” price=”24.95″ t=”article”]About splitting Hidroelectrica in 2-3 dcompanies: “I want to do it regardless whether it bothers some persons or others”

Rep: You said you wanted to split Hidroelectrica in 2-3 companies. How will these companies be established?

Constantin Nita? There was a discussion, we are working on a study in this regard, because I don’t give up the idea to create 2-3 powerful companies operating on a mix of energy resources.

Rep: When is the study ready?

Constantin Nita: First we need to see from a legal point of view what the consequences are. We are in the stage when we verify the legislation to see how we can do it, because in these companies we also have minority stakes, either from the Property Fund or from other shareholders. That’s why we need to see what the influence is. After that, the second step will be to conduct the study and merge them as to have a positive thing.

Rep: When the establishment of such energy companies, Electra and Hidroenergetica, was under discussion, the European Commission, the World Bank and from our country the Competition Council opposed. How will you handle potential critics?

Constantin Nita: Maybe those opposing are saying to us how can a company producing energy only based on coal to be competitive in a market where hydro and nuclear also operate. If someone can answer this question, then I will agree.

Rep: Let’s imagine the following situation. Two hydropower stations going to Oltenia…

Constantin Nita: Some companies can be associated in a holding system that can be very operational on profit centers, so there are solutions. I want to do it regardless whether it bothers some persons or others. These companies are very necessary for the country. Who wants to understand fine; who doesn’t should read and study and then come to discuss with me.

Rep: If this initiative hits from opposition of the European Commission, as a legal form, of triggering the infringement procedure, will you try as before to act, to have a discussion with Brussels, so that all the actions are compliant with the European legislation?

Constantin Nita: As long as no EU country operates on the system we have, I don’t see the EU would oppose to this matter. Moreover, I have met with Commissioner Oettinger and explained my medium-term objectives and this week I will meet with him again and I will repeat it. It’s not possible to put on equal footing, from January 1st 2014, on competitive prices, companies with resources that have nothing in common: coal, water, nuclear, renewable.

Rep: In the other EU states, companies such as CEZ have operated like that since the very beginning…

Constantin Nita: Well and why have we split them? It’s a question that should be asked to those coming on TV and giving us lessons about how the energy system should be managed. I understand very well how the system works abroad and I want it to work like in the EU. I will not make any change. We will do it the same as CEZ operates in the Czech Republic. As RWE operates in Germany, the same way. We wouldn’t do something special, spectacular.

Rep: When do you expect Hidroelectrica to exit from insolvency?

Constantin Nita: On July 1st the insolvency should cease.

Rep: What are the conditions from exiting from insolvency?

Constantin Nita: It should operate on profit and have the possibility in the following period to pay its debts from the profit obtained.

Rep: It the sale of micro hydropower stations a condition? Do you agree with it?

Constantin Nita: It can be a condition. Of course, if they are inefficient and there is private capital to make them efficient, why not?

Rep: Is there a real demand for those micro hydropower plants?

Constantin Nita: I did not intervene in the company’s management. There is the creditors’ committee deciding, we have only one representative there who can oppose or agree.

Rep: And if the official receiver says in June that it’s not a good time for exit from insolvency?

Constantin Nita: We will see. We will discuss in the Government this issue, see what the causes are, why the insolvency state must be extended. I mean, credible arguments should be brought to be understood by the Government.

  • About the energy exchange: OPCOM does not operate like an exchange, we have a surrogate exchange

Reporter: Romania has just been sued at the European Court of Justice for three reasons, at least: failure to establish measures to protect vulnerable consumers, failure to transfer Transelectrica and Transgaz to another shareholder and failure to separate Romgaz’s storage activity from the production activity.

Constantin Nita: As far as the vulnerable consumer is concerned, the problem is not in our hands. We don’t determine what the vulnerable consumer means. The Ministry of Labor is currently working on a project which will definitely be completed within a month.

Rep: Has a first draft of this project been discussed in the Government?

Constantin Nita: There have been discussions in the Government about the vulnerable consumer, but not on a first form of the project. I hope in May the Ministry of Labor will issue a regulatory document.

Rep: What will the funding sources be?

Constantin Nita: The vulnerable consumer will need a social tariff which now exists. And it will probably have the same conditions that it currently has. I would not know what the Ministry of Labor thinks, but it will definitely have to determine the affordable tariff for those who have incomes below the minimum wage.

Rep: Regarding Transgaz and Transelectrica, there is an emergency ordinance, but the actual transfer has not started yet.

Constantin Nita: We couldn’t do it, because of Transgaz’s listing. Transgaz will be transferred after May 1st, and with Transelectrica there is no problem at this time.

Rep: But what happens with Transelectrica, since OPCOM and the national energy dispatch will remain under the coordination of the Ministry of Economy? Transelectrica will be transferred to the Ministry of Finance without these two units, which are extremely important. Under these circumstances, isn’t it true that Transelectrica’s value would drop and the minority shareholders will not be entitled to ask for compensation?

Constantin Nita: I will respond with another question. Do you believe a minister of energy can make any decision in the energy system without having the dispatcher who knows what the production is, what the consumption is, what happens in the national energy system? Can he? If someone can tell me that this is fine, I will admit I’m wrong. But I don’t think I am. There we have rather a methodological coordination, we need to know what happens in the national energy system.

Rep: When they bought shares in Transelectrica, the minority shareholders knew that it included OPCOM and DEN.

Constantin Nita: At that time, nobody forced us to separate energy transmission from energy production.

Rep: At the last listing on the stock exchange, these things were known, that there is a European legislation providing a separate shareholder for the transmission operator from the producers’ shareholders. The shareholders invested in the idea that it included OPCOM – the energy exchange…

Constantin Nita: What happens now at OPCOM? Do you like how OPCOM is working?

Rep: They decreased prices a lot and in terms of trading volumes, OPCOM comes every day with a new record.

Constantin Nita: It does not operate like an exchange. I should have a broker, the contracts are made there only on prices. We have a surrogate exchange there.

Rep: What is your main reason of discontent?

Contantin Nita: There is a market of producers that don’t have an unitary policy, each of them trying to sell their product as best as possible, but like I said coal and water can never play in equal conditions. In this market, suppliers use this, make agreements and it results in a distorted market.

Rep: Do you suspect agreements between the players?

Constantin Nita: Yes.

Rep: Do you have clear elements?

Constantin Nita: I don’t have elements, but it is felt. I gave you an element, which I think it’s not quite fair.

Rep: How can you intervene on the energy exchange, which is independent?

Constantin Nita: I don’t say that the contracts with the wise guys should be maintained, but one cannot stop certain contracts on the exchange which are favorable for many years. There are exchanges, such as that in UK or in other states, where energy contracts can be concluded for three years. Here the contracts can only be concluded for one year and those with great suspicions.

Rep: OPCOM can work on an instrument allowing the conclusion of contracts for periods longer than one year. Now there is a new instrument: PCCB-NC…

Constantin Nita: This platform was implemented only this month for large consumers, but it does now work well. I mean, I don’t understand why some are bothered that a company which was actually under the same umbrella moves a little (…) the dispatcher will not be removed from the shareholding structure. The dispatcher will be subordinated only in methodological terms. I mean, it has to have a double subordination. We haven’t found yet the best formula, but we will have to find it, because it can work in this manner. In the energy sector, things cannot be played by ear. Those who believe it’s possible should lead, I cannot lead by ear.

Rep: But will the obligation from the European legislation be fulfilled in this manner?

Constantin Nita: I don’t see why not. The shareholder is separated, the owner of the majority stake is the Ministry of Finance, not the Ministry of Economy. The Ministry of Finance is entitled to appoint the executive management it wants, to take the measures it wants, we don’t interfere in the day-to-day activity of this company in economic and financial terms. I’m interested only in a technical point of view. Technically, the National Energy Dispatch has to have a tight connection with the Ministry of Energy. It’s a structure that needs a methodological subordination.

Rep: Will Transgaz be entirely transferred to the Ministry of Finance?

Constantin Nita: Yes, entirely. They also have the dispatch. It’s the same situation in their case.

  • About tariffs: I plan to seriously verify all the tariffs currently paid

Rep: When will the storage activity be separated at Romgaz from the production activity?

Constantin Nita: It’s under preparation. I have been minister for only three months. I cannot do in three months what others failed in three or four years.

Rep: Is there an analysis of this separation’s impact? I refer to tariffs.

Constantin Nita: It will obviously have to be a company, belonging to the ministry. We will see how it should be done. I don’t see any impact on prices.

Rep: Being independent, the storage company will have to establish a tariff to cover its costs. Is it possible to be 10% higher than the current level?

Constantin Nita: I don’t think so, because I plan to seriously verify all these tariffs currently paid. I will give you an example: the tax on cogeneration. We will have to verify who makes cogeneration, why paying this tax? The tariff for energy transmission. Why must we pay it, how much do we have to pay? Do we need to pay so much? Transmission tariffs for export to the border. How much they cost, why we must pay.

Rep: You know that these tariffs are established by the National Energy Regulatory Authority, an independent institution.

Constantin Nita: And what’s the problem? We can’t discuss? We must show ANRE that consumer is the one paying. We must take into account both the industrial consumer and the household consumer.

Rep: For example, how will the new storage company be able to survive if it will not set the tariffs as to cover its costs?

Constantin Nita: It will have to survive, to cover the costs. That’s why we establish it, not to be in the red, but in the black.

Rep: During the last conference, you warned: I will also take care about the energy distributers!

Constantin Nita: As of May, Secretary of State Maricel Popa is tasked to handle all that means electricity and natural gas. We will see exactly what has happened in recent years, starting with the privatization contract, investments, prices.

Rep: Have you had discussions with them since you are minister? Serious talks about their activity.

Constantin Nita: No, I’m certain they will come. We will begin by handling the problem in a positive and transparent manner, cooperating with the distribution companies. I mean, they should understand that there is crisis everywhere in the EU, including in Romania, and the price policy must be a decent one. If they fail to understand it, it means they have a problem.

Rep: If you start a war with the distribution companies, do you think they will stay in Romania and make the investments that they have planned? CEZ for example.

Constantin Nita: I am convinced, the profits in Romania are very attractive. CEZ is one of the most important players in the market, but they are very aggressive here. But, for example, during a meeting somewhere in London, the Ambassador was very concerned about the fact that renewable energy created problems. (…) CEZ has made good profits in Romania, it has no reasons to complain, and even if we amended this renewable law their profits are important.

Rep: You have stated that you would check the profit margins. Where do you see the distributers’ profits?

Constantin Nita: There are some profits that I call hidden profits, which are not seen on the surface, but are masked through all sorts of works, shares, consultancy etc.

Rep: Do you have clear proof of money leaking from the profit area?

Constantin Nita: Don’t forget that I come from a private area, I know very well how things are done. It’s difficult for them to fool me.

  • About exports: I think it’s fair for Petrom not to make gas exports by late 2014

Rep: In Transgaz’s case, when will exports actually begin?

Constantin Nita: When the interconnections are ready.

Rep: There is information in the market that Petrom has committed not to make exports by late 2014…

Constantin Nita: That’s right, it’s normal to be this way. I think it’s fair for Petrom not to make gas exports.

Rep: Romgaz is in the same situation. After 2014, will Romgaz be able to export?

Constantin Nita: After we will have finalized all the interconnections, I think it will. But at market prices.

Rep: When will backhaul exports be possible? Are exports currently possible through the Arad-Szeged interconnection?

Constantin Nita: I think so, but it’s quite difficult. We will complete the interconnection only in 2014. With Bulgaria, we have completed works on our territory, we also have to cross the Danube. In terms of the interconnection with the Republic of Moldova, the tender for the Ungheni-Iasi pipeline will be published on the website on Wednesday.

  • “Negotiations with Gazprom for a new gas supply agreement haven’t even started”

Rep: Romania was one step away from being deferred to the European Court of Justice because it did not allow third parties to have access to the pipeline network, in Isaccea-Negru Voda area (the transit pipeline for Russian gas to Bulgaria). Have there been negotiations with Russia lately for a new agreement?

Constantin Nita: There is a difficulty in this regard. Today I had a discussion with Russia’s Ambassador. We hope to resume negotiations in the coming period.

Rep: But have the negotiations been discontinued?

Constantin Nita: They haven’t even started. They haven’t actually started, we only threw out a feeler.

Rep: Do you expect reluctance from Russia?

Constantin Nita: I wouldn’t call it reluctance, but rather a matter related to the tactics of negotiations.

Rep: Related to the negotiation tactics, I understood that there is no impetus of the Government of Romania to go to Moscow and hold talks in this regard.

Constantin Nita: I don’t think so, because I asked since February to go to Moscow and discuss this matter.

Rep: What should the new agreement provide?

Constantin Nita: The new agreement with Gazprom related to direct natural gas supply, without intermediaries.

  • About investments: All those with problems related to balancing the national energy system will have to participate in a project such as Tarnita-Lapustesti

Rep: In terms of investments necessary in the market for large projects, Tarnita, Reactors 3 and 4, AGRI, what is the stage of discussions, negotiations?

Constantin Nita: We have requests, but regardless if we have or not, I will start this project (Tarnita-Lapustesti).

Rep: How?

Constantin Nita: In a form that I will explain at the right time.

Rep: Do you consider the involvement of a state-owned company if no private investor is found?

Constantin Nita: Several state-owned companies. All those with problems in balancing the national energy system will have to participate in such a project.

Rep: When do you think it will be started?

Constantin Nita: If things go as planned, probably this autumn, in the sense of design, studies.

Rep: In terms of reactors 3 and 4, is the project still topical?

Constantin Nita: We already have two requests, we are in discussions.

Rep: It’s about those companies from China and South Korea mentioned before?

Constantin Nita: Not only.

Rep: You know that ENEL has already sent a warning signal that the project was questioned if you failed to make steps towards attracting investors…

Constantin Nita: We don’t hold anyone by force in a certain project. If there is money and ENEL wants to get involved, our availability is maximum. But we must agree that we all have to make efforts to find these partners. Including ENEL should make such efforts, because it is shareholder and it should be interested in it.

Rep: About AGRI, SOCAR Vice President stated 2-3 weeks ago that the project was stalling, that it would be delayed. What are the reasons of this delay?

Constantin Nita: This month the feasibility study had to be ready. We are waiting to see if it will be ready. I think it will probably ready in May. We are available. I will have a discussion with the relevant factors from Azerbaijan. I will go there, probably within a month or two, to see what the situation is and if they are interested to continue this project.

Rep: One of the main points of the project is the port in Constanta. Now, there is a discussion about a possible transfer of the shares from the ministry to the local authorities. Do you think this transfer is opportune?

Constantin Nita: I don’t see why not, because we are talking about companies here. The company will be the one making a decision. The public authority cannot make the decision. Of course, the public authority has an important role, but it does not actually join the respective company. Constanta will have to become an important point on the map, especially since Transgaz will have to play there an extremely important role, if natural gas from the Black Sea will have to be transported.

Rep: Another major project is Nabucco. The final decision is expected from Shah Deniz in June.

Constantin Nita: There will be a meeting in Budapest, which will be attended by Secretary of State Albulescu, representative of Nabucco Romania. I hope in June Shah Deniz will make a fair decision and take over 50% in the company and then things will be clarified. If it does not buy the 50%, we might as well consider it dead. All the signals show that there is interest.

  • About changing the Law 220/2008 on renewable energy

Rep: About renewable energy. There are inconsistencies about the draft GEO amending the Law 220/2008 on the promotion of renewable energy. For example: you said that for solar energy only 2 certificates/MWh will be granted. The project shows that 4 certificates will be granted as of July 2013. On the other hand, there is a report of ANRE on overcompensation and it recommends halving the number of green certificates as of 2014. Renewable energy producers don’t know what documents should be considered in terms of green certificates.

Constantin Nita: The situation is as follows. In the basket that ANRE will have to manage, it must be a green certificate for wind energy, one for hydro and two certificates for solar energy. The difference resulting from the overcompensation calculation goes in the market, meaning that the one who invested receives it. At that time, for the overcompensation calculation we had, it resulted somewhere around four and that’s why we said two plus two (for solar energy). Then, I saw that form ANRE’s overcompensation calculation three certificates resulted. And then, two go to the basket and one will be used by the investor.[/cleeng_content]

 Original Source in Romanian: