Exclusive: A flurry of stakes in energy companies to be sold on the Bucharest Stock Exchange

• How and when will the state"s holdings in energy companies be sold on the capital market

• Major interest for new projects in the metallurgic industry

• The government will review the way the stake of the Romanian state in the gold project of Roşia Montană was reduced and the possible transfer of the gold exploitation license

• The Ministry of the Economy wants to take over the place of Minvest in the Gold Corporation business

Reporter: Minister, how far along is the project for the sale of 11.84% of the state"s holding in "Petrom"? Same question for the sale on the Stock Exchange of the minority stakes in "Transelectrica", "Transgaz" and "Romgaz"?

Adriean Videanu: The Draft Government Decree concerning the sale of 11.84% of its stake in "Petrom" has currently received all the necessary permits and has already been read and discussed once in a government meeting. We have also drawn up the drafts bills concerning the sale on the stock exchange of stakes of 15% each in "Transelectrica" and "Transgaz", as well as the project to sell 15% of "Romgaz" as well. These drafts have been presented to the Executive for the first time as well and most likely on Wednesday they will be submitted for approval in the Government session.

We want to be an active player on the stock market, in order to make it more attractive. In doing so we are raising funds from portfolio investors, because energy companies are extremely attractive, while at the same time we are raising the financial resources that the state budget needs for investments.

Reporter: Is it true that the EBRD wants to increase its stake in "Petrom", either by equity contribution, or by lending more money to the company?

Adriean Videanu: All I can tell you is this: "Petrom" shares are drawing a huge interest. It is a good time to sell a significant part of the state"s stake in this company. It is not only the European Bank for Reconstruction and Development that is interested in the company, but major investment funds as well.

Reporter: When do you expect the sale of the stake the Romanian state holds in "Petrom" will be completed?

Adriean Videanu: I estimate it would take from 3 to 4 months after the passing of the Government bill. "Petrom" is already listed, so all that is left to do is to hold a call for tenders to select the brokerage firm that will intermediate the transaction and to launch the IPO. I hope that we will succeed in selling these stakes by the end of the year, but it all depends on when the Government bill will be enacted.

Reporter: What will the state do with the proceeds from the sale of its minority stakes in the energy companies? What projects will be financed?

Adriean Videanu: These funds will go mostly towards infrastructure investments. We have a serious shortage of resources which are needed for public investments. We need to stimulate domestic demand, and public investments are one of the few tools by which the state can act directly for this purpose. These financial resources will go mostly towards public investments in infrastructure. Of course, in the end it will be up to the prime-minister to decide which projects will receive the proceeds from the sale of the shares, based on the proposals submitted by the ministries.

Reporter: Will some of these funds be allocated for the investment projects of the energy companies?

Adriean Videanu: No, because almost all of the energy companies are solid enough to finance the investments they need from the sources they have drawn. There are banks that are very eager to finance the projects of those companies. For instance, in the energy sector, we have the possibility of using bank loans to finance the investment programs, and in such a difficult period, it is a normal thing to have the liquidity surplus of these companies go to the state budget. If you have this possibility of financing investments using bank loans, it is only fair that they contribute part of their profit to the state budget.

Reporter: How did the state end up holding only 19% of the Roşia Montană affair and how did the gold exploration and exploitation license become the property of the private partner in the company?

Adriean Videanu: I have asked for a review of these issues. My goal is to analyze the opportunity of transferring the shares held by "Minvest Deva" in "Roşia Montană Gold Corporation", the company that handles the project, directly to the Ministry of the Economy, so we can do a better management job. I will discuss the license issue with the private partner in the firm, as well as the shrinking of the state"s stake in this project over time. Through these negotiations, we are trying to increase the state"s profit from this project.

Reporter: When do you estimate that the two major national energy companies will be incorporated, considering that the Trade Registry has received many petitions against their creation?

Adriean Videanu: We need to honor the right to go to court that every individual or corporate entity has, in this case. I am confident that these lawsuits will be tried quickly. We do not have any legal issues in the process of restructuring of the energy sector. For now, these lawsuits are preventing the creation of those companies.

I want to warn that we are running a huge risk in terms of national energy security by delaying the creation of these two major companies. The strategy for the reorganization of our energy production under the banner of the two major companies has been validated by all of the structures of the state: the Government, the specialized commissions of the Parliament, the Supreme Defense Council, and even by all the political parties. We need to incorporate the two companies - "Electra" and "Hidroenergetica" - in order to restructure Romania"s energy production. Meaning, we can"t keep producing energy at huge costs in certain units, because this cost is then borne by each and every one of us through the price we pay for energy. Out of the current output of 17,000 MW, we will need to keep 10-11,000 MW which are produced at a competitive cost and to leave room for private investments and competition. We also need to urgently solve the environmental issues of the energy sector. We have environmental compliance requirements which haven"t been met and not much has been done in this respect. Through the two energy companies, we will have the resources and the creditworthiness to finance these costly investments.

I also want to mention that I have discussed with all the representatives of the energy market and I have tried to reassure them on the matter of competition in the energy sector after the incorporation of the two companies. We want to privatize the management of "Electra" and "Hidroenergetica" and to get them listed after they meet all the necessary requirements.

Reporter: The Proprietatea Fund has filed a lawsuit opposing the creation of "Electra", since the management of the Fund considers that the stake of the Fund in "Nuclearelectrica" has been unfairly reduced. Did you discuss this issue with the officials of the Fund?

Adriean Videanu: We have discussed and settled this matter. It was partly our fault for taking a conservative stance. We wanted the ministry to keep a majority stake in the company. We have solved the problem using the mediation of the Ministry of Justice and we will very soon pass a government decision on this matter. I hope that after that, the Proprietatea Fund will withdraw its complaint from the Trade Registry.

Reporter: What are you going to do about "Termoelectrica""s projects to associate with strategic investors for the construction of new plants? There are negative signals in this period. "CEZ" has decided not to invest in the plant of Galaţi. "Complexul Energetic Craiova" hasn"t been able to find a partner for the creation of a new unit. What is the position of other investors?

Adriean Videanu: In Galaţi, there was an issue with the evaluation of the assets that "Termoelectrica" was supposed to contribute to the project. Unfortunately, the management of "Termoelectrica" could not make its own decision to negotiate its stake in the project by going beyond the opinion of the appraiser. In my opinion, these projects have been abandoned because of the crisis, since it is not simply a matter of funding, but of the outlook on the increase of the energy consumption. At this time, it is impossible to make long term forecasts on this matter. But the outlook for "Electrocentrale Galaţi" by itself is good. Furthermore, we had the project of "Arcelor Mittal" Galaţi to build a unit which would use furnace gases combined with natural gas to generate energy. Such a unit could prove quite efficient.

But despite the crisis, there are still private investors that are building new units. "Petrom" is building the gas-based unit of Brazi, "CEZ" has an ongoing windfarm in Dobrogea, as does "Iberdrola" and a major Portuguese company. One month ago, "GDF" confirmed again its willingness to invest together with "Termoelectrica" in Borzeşti, and negotiations are still ongoing with "E.ON" and "Enel" for the thermal power plant of Brăila. The projects of the nuclear Units 3 and 4 of Cernavodă, where we have private partners, are also beginning to pick up speed.

Reporter: Will the state lower its 51% stake in the Cernavodă project or not?

Adriean Videanu: From my point of view, it should, but it is up to the Government to decide. Private investments in the energy sector need to be encouraged, and the state doesn"t have the financial resources for projects of such scale at the moment.

Reporter: Why is the Ministry of the Economy, in these times of crisis, considering the privatization of "Cupru Min Abrud" and "Moldomin Moldova Nouă"? What are the names of the investors interested in these projects?

Adriean Videanu: There are several investors interested in these companies. "Cupru Min" had a spectacular evolution in 2009. It posted a profit and hired 400 people. Metal trading all over the world has surged. We will organize the privatization procedures for the two companies because many powerful groups are interested in them. We need to seize the opportunity because there is an extraordinary revolution on the mineral resources market, as the major players are getting ready for the economic recovery.

Reporter: Thank you!