E.ON reduced its investments in Romania by 40%

German company E.ON lowered its investments in the Romanian gas and electricity industry by 40% this year. Frank Hajdinjak, general manager of "E.ON. Romania", said: "The crisis, but most of all the issues that we are facing due to the incorrect application of the tariff setting methodology by the market regulator have caused us to lower our investment expenses by around 40%, to a total of 255 million lei. The crisis has affected us by lowering the sales of energy and natural gas, and implicitly by lowering the volume of gas and electricity distributed through our grid".

He explained that the biggest issues that E.ON is facing in Romania are the refusal by ANRE (the energy market watchdog) to acknowledge some of the costs of the company, by including them in the regulated tariffs for natural gas and energy. What"s more, the major state owned companies - CFR (Romanian Railways) and CET (Electrothermal Power Plants) - are some of the largest debtors of the distribution and supply divisions of the E.ON group. As German officials see no signs of improvement in the political environment or in the country"s economy, and no near-future solution of the issue of the unpaid debts of public companies, for now, the investments for 2010 will remain below the initially planned amounts.

Frank Hajdinjak said: "I expect that our profit for 2009 will be far below our shareholders" estimates. Our cash-flow is currently under enormous strain, and we will continue to restructure and streamline costs across the group. We will eventually resort to layoffs, but this year the number of employees was reduced through voluntary departures, under which employees will receive compensatory packages". From the beginning of 2009 until now, approximately 1,100 employees have voluntarily left the E.ON companies of Romania, and another 400 will leave until the end of the year.

Shareholders of German group E.ON are unhappy with the returns of their investments in the Romanian energy sector. Frank Hajdinjak has repeatedly said that if the shareholders had simply put in the bank the funds they have invested between 2005 and 2009 in Romania, they would have made more than they did by investing in distribution and supplying gas and electricity. He wasn"t however referring to the money paid for Electrica Moldova and Distrigaz Nord, but rather to the amounts invested after their acquisition, in the development and modernization of the grids. When asked why doesn"t E.ON withdraw from the Romanian market if they are unhappy with the returns of their investments, Mr. Hajdinjak said: "We are facing issues with the ever changing legislation, with the unpaid debts of public companies to ours, with taxes that appear virtually over night and with the costs which aren"t included in the tariffs. This does not mean that E.ON would withdraw from Romania. We are here for the long term. We are constantly discussing with the regulators the issues that affect our profits. We have confidence in the companies we acquired. It"s just that the German group will be very careful when spending on making new investments in Romania, because there will be a lot of wariness in launching new projects".

In the beginning of this year, the management of E.ON announced that the company would invest in Romania, by 2010, almost 2 billion lei in expanding and modernizing the distribution grid for natural gas and electricity. Between the takeover of Distrigaz Nord and Electrica Moldova and the end of 2008, E.ON invested around 1 billion lei in the networks for the distribution of gas and electricity.