Exclusive: The government"s plan to rescue the coal company from its debts

• The first stage would be to declare the company insolvent, and then have "Hidroenergetica" acquire its assets for 150 million Euros

The government"s plan to restructure Romania"s energy production involves incorporating the "National Coal Company" (CNH) into "Hidroenergetica", together with "Hidroelectrica" and the thermoelectric powert plants of Paroşeni and Deva. The plan would help the CNH pay off the almost 1 billion Euros it owes the state.

Government sources say that in order to save the company, it needs to have it file for insolvency. However, the process involves rather complicated legal procedures. According to the same sources, prior to filing for insolvency, the CNH will have paid off all its suppliers. After the CNH files for insolvency, "Hidroenergetica" will acquire its assets for approximately 150 million Euros, our sources said. As a result, the functional mines of the CNH and its current employees would become part of the new energy conglomerate, and the state budget would actually get something from its largest debtor. The CNH that would enter bankruptcy after being having been stripped clean, being nothing more than an empty shell.

The only way for "Hidroenergetica" to take over the National Coal Company is for the latter to pay off all of its debts first, as the European Commission prohibits the cancellation of its debts.

However, Constantin Jujan, the general manager of the mining company, says that no definitive decision has been made yet: "The Ministry of the Economy and the Government have not yet made a decision on the method for incorporating CNH into < Hidroenergetica >. At any rate, things need to be clarified within the coming months because the CNH needs to be incorporated into < Hidroenergetica > by the end of the year".

However, the Ministry of the Economy is rushing to clarify the status of the CNH. According to a decision of the General Meeting of Shareholders, the officials of the Ministry warn that the state of the company"s finances (major short-term debt) make its insolvency imminent.

The decision of the General Meeting of Shareholders of the CNH also states that any person concerned can request the dissolution of the company, given the fact that the company"s net assets on December 31st 2009 were less than half of its paid-in share capital.

As a result, the representatives of the Ministry of the Economy which attended the General Shareholders" meeting have requested comprehensive explanations from the company"s Board of Directors and its executives on the losses incurred by the company and on the reason that caused those losses to increase in 2009. The officials of the Ministry of the Economy also requested a study and measures for the recouping of these losses.

When asked for comments on these decisions of the shareholders, Constantin Jujan made the following statement: "The company"s net assets are lower than its share capital. This could cause the state - which is the owner of the company to apply for its insolvency. But this state of things is not specific to the year 2009, it has been a fact for several years and it is caused by the company"s historic debts, which climbed to 1 billion Euros this year, on the back of interests and penalties. Operating losses are lower because we implemented programs to cuts costs and restructure personnel. As you know, the CNH has been under receivership for a long time, and so far, the state has not seen fit to request the insolvency of the company".

Mr. Jujan said that at the moment, none of the suppliers or contractors of the CNH have any reason to request that the company be declared insolvent.

According to Jujan, the CNH regularly pays off its debts to third parties: "Right now, the commercial debts of the CNH amount to approximately 50 million lei. I doubt you can name one private company that went bankrupt because of us".

The general manager of the CNH added that almost one month ago, the members of the Parliament passed a law by which several companies (including the CNH) would be exempted from having to pay penalties on their outstanding debts.