The losses and subsidies in the Romanian energy system are estimated at $1.56bn this year, accounting for 2.9% of GDP, according to the latest agreement between the Romanian authorities and the International Monetary Fund.
Low utilities prices, which fail to cover even the companies’ production costs, combined with the uncollected bills will make things worse than last year, when losses and subsidies accounted for only 2.5% of GDP, namely $1.13bn.
The energy sector, where restructuring has been very slow in the past few years, is still held by the State and privatisation has been often postponed.
Most losses and subsidies are concentrated in the sector of natural gases, where the low prices are expected to trigger losses worth $1.23 billion, and another $37m from uncollected bills. The price of natural gas for the population went up from 82.5 USD/1,000 cubic metres early this year to 125 USD/1,000 cubic metres in November, which is still little as compared to the neighbouring countries and, especially with the Western prices, which range between 350-400 USD/1,000 cubic metres.
The World Bank and the IMF have repeatedly warned that utilities prices must cover production costs and secure resources for the growth of the respective companies.
“The price must cover both losses and the investments that must be made by a company operating in this sector,” Ziad Alahdad said this spring, before the end of his mandate as World Bank representative to Bucharest.
Termoelectrica, Romania’s largest producer of electrical power and heating, last year posted $84m losses in the heating segment and $58m for power.
For this year, the forecasts included in the latest agreement with the IMF suggest that Termoelectrica will lose $45m from its heating operations and $90m on the electric power segment.
Given this summer’s drought-induced energy crisis, the company’s sales almost doubled as compared to the year-ago period, but it had to start operating reserve facilities and spend more on the acquisition of imported fuels, which directly impacted upon profitability.