EXCLUSIVE Remus Vulpescu: "I have opposed three times the liquidation of the stake the Romanian state had in Petrom "

• "At < Transelectrica >, I would like to go in with a scalpel"

• "It is hard to fail when what you're doing is attempting not to implement private management"

Reporter: Mr. Remus Vulpescu, are you still the head of the OPSPI or not? You recently said that you don't know whether the minister of the Economy, Daniel Chiţoiu, has accepted your resignation.

Remus Vulpescu: I am no longer the head of the OPSPI. I resigned, and the news of the resignation was published in the press.

Recently, in a rather heated televised debate I have announced that I was not officially told whether the minister has accepted my resignation or not.

The resignation is a unilateral act of will. But the resignation which leads to the exemption from any kind of responsibilities, even if it is not mandatory to be accepted before it starts creating legal effects, is done through an agreement, based on a discussion, so that those responsibilities can be taken over by someone else.

Reporter: Don't you go there every morning to work?

Remus Vulpescu: I go to work at the Ministry of the Economy.

Reporter: On what position?

Remus Vulpescu: I am an advisor to the Minister of the Economy.

Reporter: Were you offered a position at the AVAS or did you ask for one?

Remus Vulpescu: Nobody who would be in a position to make me such an offer made me such a proposal, to occupy a position at the AVAS, and it is not currently under discussion.

Reporter: How exactly are you advising Minister Chiţoiu? What are the issues you work on?

Remus Vulpescu: I am trying to prioritize between the multiple issues I have found in the area of competence of the Ministry of the Economy. I advise the minister when he wants me to, on issues he points out to me and when I feel my opinion would be useful. These issues concern the management of companies, and by that I mean the activity of the ministry in its role of majority or sole shareholder in state owned companies, and that also concerns various ways to achieve effects which would benefit the Romanian economy in the long term, through specific measures such as professional management. Professional management is by far the preferable method for the state not to lose or to profit more from its own companies.

Reporter: What performance criteria exist for these private managers?

Remus Vulpescu: The form in which the state managed its companies over the last 20 years is perverse, meaning that the statement "company X was profitable" could be correct, and true, the profit which it made was only a small fraction of the one it could and should have made.

The question is who is going to tell us what the potential is. The auditor can't make a decision. The solution is to have a professional management. The state must assume the normal behavior of a majority shareholder, which means to earn dividends as high as possible. So far, the state intervened in every possible way in the companies' activity.

Reporter: Private management means that the state is going to give directors a list of performance criteria and if they don't meet it, he is going to replace them.

Remus Vulpescu: Yes.

Reporter: But it can also do this with the managers who are currently in place.

Remus Vulpescu: No. Because there are few managers in office who are capable to come up with a correct business plan for the company. The business plan must always be negotiated between the manager and shareholder because the shareholder demands better performance and the management offers what the company can achieve.

As far as the Ministry of the Economy is concerned, the manager must have interlocutors that need to know what the maximum that a company can achieve is and where it is fair to draw the line for the performance criteria, so that the manager can realistically have the chance to make a bonus.

Reporter: How big is the difference between theory and practice?

Remus Vulpescu: They have no connection to each other.

Reporter: The Ministry of the Economy has selected the head-hunting firms and the still, the appointments of private managers are still lying in wait. Why is that?

Remus Vulpescu: Personally, I am not sure that the decision has been made on a political level to implement professional management in all state owned companies, not in just those of the Ministry of the Economy.

The agenda of the Ministry of the Economy and of the head of the OPSPI was extremely busy over the last eight months. Hence the delays in the implementation of the private management. The decision to implement this process must be made together, but not in equal parts, by the Minister of the Economy, who obviously has the biggest responsibility, and by the head of the OPSPI, who has a smaller contribution. Absolutely all of the documentation has been prepared since the last visit in Romania of the International Monetary Fund. But the day only has 24 hours, and the agenda of the Minister and of the head of the OPSPI have been public. Between the beginning of August and October 1st, we worked on the edge, in every sense of the word, especially for Oltchim, without neglecting other issues. On the other hand, the minister has a much more complex and far busier schedule.

I was speaking earlier about the difference between theory and practice in the process of implementing private management. The most important is that this process has begun. I think it's critical for Romania, especially in this period, for this process to be seen through to completion in all of the state-owned companies. I don't think the implementation of professional management can fail in all of the state-owned companies and do not even think that the predominant result will be a failure. I think the result will be success. Let's define this success correctly.

We shouldn't imagine that starting in 2013, we will no longer have a budget deficit, because the state will earn some big dividends and it will all of a sudden have a lot of money in its coffers it won't have what to do with.

That can't happen. After 20 years of executive management of the state-owned companies by the political authorities of the state, we can't imagine that in just 6-9 months we will change our approach by 180 degrees and from now on we will only have those "mercenary" managers which every majority shareholder hires over the very short term, 2-3 years, during which time the company in question undergoes a radical transformation and becomes unrecognizable, and the effect is "a lot more money in the pockets of the majority shareholder".

The state also has other functions: a country which it needs to take care of. The country and the nation are not perfect. The nation has needs it can't fulfill on its own and that is why the state can't turn into a majority shareholder who is only interested in dividends. In the end, the leaders of the state are those people who are elected by the nation, which has its own needs, aspirations, dissatisfactions and doubts.

The notion of "private management" is accurate, because the hired executive needs to act just like he would in a private company. The notion doesn't mean that the management is someone's property, but rather that the focus, the quality, the results of this management need to be similar to those in the private sector.

The doctrine which we haven't metabolized yet and we aren't applying yet, is very correct: the state will be evaluated by comparing it with a very prudent private investor.

The private investor behavior of the state must result in finding that area of compromise between non-economic issues, which require expenses, and economic performance.

Reporter: Why does the Ministry want the major energy companies to have a dual management?

Remus Vulpescu: The correct interests of the shareholders are better represented in the dual management system. When there are three executives, not just one, it is easier to maintain a certain balance between the correct interests of the shareholders, between bribe and dividend, if you will, between profitability and excuses, made using the stiff language that everyone knows. The dual management system is known all over the world as the German management system. I think that says it all. It is not a Romanian invention.

The volume of activity and the number of decisions made by the executive management in major companies are so big that sometimes, the executives will sign the documents "mayor-style", just relying on signatures from the "middle" management. That is why it would be a good thing to have a dual management.

On the other hand, however, we can't expect the politicians to abruptly and completely stop the pressure on the economic environment. Therefore, it is not a good thing to appoint just one man as the manager of a big state-owned company, because I don't know whether there is even one person capable of withstanding temptation, or rather, let's say hold their own in the communication with the authorities of the state.

Reporter: I take it that means we will still have to wait until we see the implementation of the professional management in state owned companies. But the state is now in a hurry to sell minority or majority stakes in major energy companies.

Remus Vulpescu: When you sell a company, you invariably sell its potential. But its potential not only stems from analyses for the future, but from the results over the last 3-5 years. When you have a company with an extraordinary potential and you theoretically own a hen that lays golden eggs, but it's been sick over the last five years, you can't expect to get what it's worth for it. The money from the sale only goes into the state budget once. The state can then remain a minority shareholder and continue earning dividends, as is the case of Petrom. I have opposed three times the plans to liquidate the minority stake the government holds in Petrom. I felt that it wasn't opportune to sell our stake in Petrom now, because we would be getting a far smaller amount than what that stake would be worth over the long term and because it would be a good thing for the state to have it in its portfolio and to keep earning dividends.

Reporter: Can we make a calculation, to see whether the state made a profit by selling the majority stake in Petrom?

Remus Vulpescu: It can be done, it is very easy to do and the answer is definitely yes. The question is whether the state could have earned more, eventually.

But yes, the state did earn much by selling Petrom.

Reporter: Who were the three bidders for the minority stake in Petrom?

Remus Vulpescu: I would only say that there have been three initiatives, because there is a strong investment environment in Europe. Through the efforts made by the delegated minister for the business environment, Lucian Isar, pursued further by the other representatives of the state, it is known that Roma-nia has a unique potential for growth in the European Union, at this moment.

I think that Romania hasn't yet tapped its growth potential enough.

Reporter: We have sources which claim that Gazprom offered the state an important amount of money for stakes in the Romanian energy companies, including the stake in Petrom...

Remus Vulpescu: I don't know what you are talking about. On the other hand, I can tell you that a successful sale of the shares of the state can take place after the implementation of the professional management.

Negotiations with Russian oligarch Vitali Matsitski for the energy of "Alro"

Reporter: "Alro" Slatina has grown a lot of after privatization.

Remus Vulpescu: Yes. "Alro" is the pride of the Romanian industry. The ownership structure isn't that important and it is a very good thing that it still has the option to buy energy from Hidroelectrica SA (ed. note: in the summer, Alro negotiated the price it would pay for energy with the officials of Hidroelectrica, after the company entered insolvency).

We have negotiated for nights on end with Vitali Matsitski, the owner of Alro. I doubt the negotiations would have been successful if he hadn't gotten involved personally. It is one of his merits and it is exactly the behavior of the prudent private investor. If necessary, the owner of the business comes in, gets involved and negotiates.

Mr. Matsitski negotiated in the most civilized and professional manner possible. I didn't expect the owner of Alro to know the industry inside and out. That is what the representatives of the state in the management of major state owned companies should be like. There is no need for them to be billionaires or Russian oligarchs, they could very well be Romanians fairly paid for their performance. This is what private management means.

Reporter: Being paid according to their performance.

Remus Vulpescu: It is amazingly simple.

Reporter: We have information that the night the receiver of Hidroelectrica was getting ready to sign the addendum to the contract with Alro, following the renegotiation of the price of the energy Alro was buying from Hidroelectrica, you showed up in the negotiations together with Grzegorz Konieczny, the representative of the Proprietatea Fund. At that moment, the owner of Alro stood up and left without signing anything. Is it true?

Remus Vulpescu: Some of the talks which took place that night were reported in the media. It is true that Mr. Konieczny and I entered the negotiations when they were nearing the end. It is also true that I have found in there some kind of agreement between the receiver and the representatives of Alro, but it couldn't be treated as final because it couldn't be signed in the absence of the majority shareholder. The right thing to do was for the endorsement in question to come from both shareholders. That is the reason Mr. Konieczny was there.

At the time, the agreement wasn't signed and the conditions negotiated that night weren't kept in the exact form they were adopted that night in. But, shortly after, in similar conditions, an agreement endorsed by both shareholders of Hidroelectrica was reached and an addendum to the supply contract was signed.

Reporter: Are the allegations that you planned the insolvency of Hidroelectrica together with Mr. Victor Ponta, without the knowledge of Mr. Chiţoiu, true?

Remus Vulpescu: I have no idea where you got that information. An insolvency isn't planned, it is decided by the Board of Directors.

Reporter: W have information that the insolvency was decided two weeks prior to the meeting of the Board of Directors. Two members gave a proxy and three members were present. How did the Proprietatea Fund vote?

Remus Vulpescu: The Proprietatea Fund voted with an abstention, but supported the initiative. It is easy to understand why they abstained. The moment the insolvency procedure began, the net asset of the Fund shrank by 20%. It is huge. Abstaining was the only thing they could do. If they had 1 in a 1000 odds on the opportunity or the safety of the insolvency procedure, they obviously voted against it.

Reporter: You claim that you had a carte blanche at Hidroelectrica. On the other hand, on several occasions you said there was also political will. What is the truth actually?

Remus Vulpescu: In my opinion, there were two ways by which the contracts with "the clever boys" could be terminated: insolvency or paulian action. The paulian action involved the head of the OPSPI suing Hidroelectrica and each "clever boy" company in individual lawsuits and request the cancellation of each contract, because they were already concluded, amended and conducted in a manner which was harmful to the interests of the state. This would have been the preferable option if Hidroelectrica hadn't already been on the brink of bankruptcy due to those contracts and due to other factors.

Choosing the insolvency option was not intended to terminate the contracts with "the clever boys", instead it was necessary for the survival of the company as we know it today.

Reporter: When did you realize there were problems over there?

Remus Vulpescu: When we approved, under the pressure of time, a receivership report written by our predecessors, and which for the most part false. I said we were pressed for time, because it was already May and the balance sheet for 2011 was supposed to be submitted to the Government for approval. And here is how, under the pretense of bureaucracy, of these deadlines, I found out myself that, if I act in good faith, I can end up in one of these hornets' nests which one can find in some of the state owned companies. I was forced to sign documents which contained false statements, about the economic situation of Hidroelectrica.

That is how I became a kind of doubting Thomas, who attracted a lot of adversity, from the state owned companies and from politicians as well, and this told me that I acted right.

Reporter: Did you attract adversity from banks as well?

Remus Vulpescu: For a very short time. After Hidroelectrica entered insolvency, we explained the situation to the banks, we dealt with the issue of the lack of information, which was not only deliberate but also necessary at the beginning of the insolvency, and we built a good level of confidence with banks.

Reporter: We've seen that you also seem to enjoy a good level of confidence from Franklin Templeton, the manager of the Proprietatea Fund, because they have appointed you on the Supervisory Board of Hidroelectrica.

Remus Vulpescu: They thought I would leave the public system. When I resigned, even my mother understood that I was going back to the private sector. But that's not what it's like. I only resigned from the position of head of the OPSPI. How could the Proprietatea Fund appoint me, a shareholder of the state, to represent their interests at Hidroelectrica?

Reporter: That's what we wondered at the time as well...

Remus Vulpescu: I repeat, they thought that my resignation was the result of my pride, something like "If I'm not a boss, I'd rather be nothing at all, and I'll just pack up my stuff and leave". I came to deal with issues and there are still plenty of issues I can get involved in to solve them. I think there are still two more rat nests to be dealt with.

Reporter: Are you referring to Transelectrica?

Remus Vulpescu: You may refer to what you want. I won't confirm or deny anything.

• Remus Vulpescu: "I'm not sure it's not actually Transelectrica that has a problem with me..."

Reporter: I've noticed that you have a problem with Transelectrica.

Remus Vulpescu: I'm not sure if it's not Transelectrica that has a problem with me....

Reporter: Our sources say that you want to go in there like a bulldozer.

Remus Vulpescu: That's not true! I'd like to go in there with a scalpel. But I no longer have the position which would allow me to do that.

Reporter: What is it that you don't like about Transelectrica?

Remus Vulpescu: You know why I never wanted to go in with a "bulldozer"? Because at Transelectrica, there is a very fragile embroidery where you can't go in with a bulldozer. It's too big. You have to go in with a scalpel.

Reporter: What happens if the implementation of the private management fails?

Remus Vulpescu: We are talking about an ordinance concerning corporate governance which is flawed. It contains stipulations which help whoever doesn't want to implement it. During the previous government, at the Ministry of the Economy, the contract for the selection of the general managers was concluded before the selection of the Board of Directors. They did it all backwards. If the Boards of Directors aren't replaced, nothing changes.

Flawed as it is, the ordinance was applied incorrectly. Its good parts were not applied correctly, and its bad parts were applied correctly. Because the government has not yet decided to appoint private managers in those companies which it owns. It could be a quick decision. With a little effort and with the involvement of some people selected a little more carefully, private management can be achieved.

Reporter: If the private management fails, whose head will Victor Ponta cut off?

Remus Vulpescu: What attempts are going to fails? If you're attempting not to implement private management, it is hard to fail.

• The privatization of Cupru Min, a worse failure than that of Oltchim

Reporter: We have a lot of resources to exploit at Remin, Cupru Min, Moldomin, Băiţa, Roşia Montană, in the Black Sea. One of them is insolvent, the other one is in the process of being liquidated. What is happening with these companies?

Remus Vulpescu: Remin is insolvent and I hope that its creditors will approve the reorganization plan that I approved, when I was the head of the OPSPI, and which will allow the company to achieve a turnaround. I noticed over a trend which I deem inappropriate. I may be wrong, but I have noticed the possibly harmful trend to sell the valuable assets before the approval of the reorganization plan. Thus, there is the risk of the company being left without any revenues and to sentence itself to bankruptcy.

At Cupru Min, it is a much worse failure of the privatization than in the case of Oltchim, at least because the state had all the time available to prepare for it adequately. In the case of Cupru Min, selective procedures were used and even if there was a call for tenders, the state was not pressed for time when it comes to this privatization. Moreover, in the case of Cupru Min there was no pressure from the mass-media, like the one I had to bear in the case of Oltchim.

At Cuprumin there was no mass-media in the room, there was no Dan Diaconescu and the privatization had fewer disadvantages and impediments than the one of Oltchim. The privatization of Cupru Min did not fail because of the state. And yet, the state finds itself in the situation where it theoretically has to pay 1 billion lei in damages, because that is what the other party estimates it is entitled to, because the privatization contracts was not concluded.

The exploitation of natural resources must be done in an economically effective manner. In other words, the state budget has to get the profit it should in exchange for those resources.

Reporter: Do you agree with starting the exploitation of Roşia Montană?

Remus Vulpescu: I agree that we need to exploit all the natural resources: first of all, this means that we need to know them and then exploit them. But the exploitation needs to happen in the manner which is the most useful to the state.

Reporter: Is the current manner of financial exploitation of the resources in Roşia Montană useful to the state or not?

Remus Vulpescu: I would rather not say.

• "I hope I won't be forced to go into politics"

Reporter: Do you intend to go into, considering that you're very good friends with Mr Ponta?

Remus Vulpescu: I hope I won't be forced to go into politics. I hope I can remain in the administration without going into politics myself. Unfortunately, in Romania politics means taking sides exclusively. We don't have a political environment which would accept there needs to invariably exist a consensus when it comes to some core problems of the country. Everyone knows that Romania should be doing better economically, the existing political parties could very well conceive an economic strategy without any problems. Except that the politicians forget to point out the issues which everyone agrees on and all they do is argue in an aberrant manner over those parts of the problem which they do not agree on. It is regrettable that there is no strategy, no visible economic vision for Romania for the next 15-20 years, concerning the major issues of the country.

Reporter: Why did you go into the public administration?

Remus Vulpescu: Because I wanted to and because the opportunity arose to come in on a position where I can actually try to implement my convictions.

Reporter: Who gave you that opportunity?

Remus Vulpescu: The current as well as the former government.

Reporter: Thank you!