CMS Cameron McKenna: Crisis Hinders Energy Investments

The global financial crisis has also affected the energy market because of price volatility and the limitations on investment lending. Ben Holland, a Partner with CMS Cameron McKenna - London told a seminar organized in partnership with the Associated Energy Suppliers in Romania (AFEER) that the European energy market had already had problems because of the crisis. Companies are no longer sure of the banks" capacity to ensure financing of investments in production capacity planned for the following years. Investments in the energy business are highly expensive, require substantial implementation time and can be recovered over even greater period. The volatility of the international price of oil has impacted also the natural gas market, the electricity market and the coal market, rendering producers incapable of calculating their profit rates.

Also, the supply of specific equipment to the energy sector has caused fierce competition amng investments. According to CMS Cameron McKenna, the number of litigations between energy companies has increased significantly over the past few months because of the international crisis. The expectation is that further litigations will take palce because of the liquidity crisis affecting investments and banks. AFEER President Ion Lungu said that the international financial crisis would also affect the Romanian energy crisis. Suppliers believe that the cap on lending may prevent some major customers from timely paying their bills, while a general regress of consumption will affect the energy companies" intake. Moreover, a reduction of the consumption could even lead to a slight decrease in the price of energy traded on the unregulated market.