Remus Borza: "Oltchim will enter insolvency in January at the latest"

Oltchim will enter insolvency in January 2013, after the elections, said Remus Borza, the receiver of Hidroelectrica and head of insolvency firm Euro Insol. He thinks that Oltchim is "clinically dead" and he doesn't know whether insolvency can work wonders: "I speak from my perspective as experienced insolvency practitioner. I don't know what the government intends to do with Oltchim. I think it is being kept alive artificially, because of the elections. From my point of view, the plant can't be privatized because it has debts of over 1 billion Euros".

"Now,a in order to build a new Oltchim, with performing technology, you only need 250 million Euros. If there is a 1% chance of the plant being rescued through insolvency, I think it needs to be implemented immediately".

• Two investments will be transferred from Hidroelectrica to the ANAR

On the table of the Executive there is a draft Government decision concerning the transfer of two investments from Hidroelectrica to the "Romanian Waters National Administration" (Administraţia Naţională Apele Române - ANAR), with an indemnification from the ANAR of 40 million Euros, said Remus Borza. The project may be approved in today's government session, he said. The value of the compensations will be subtracted from the debt which Hidroelectrica owes the ANAR.

Mr. Borza said that the exit of Hidroelectrica from insolvency is subject to legal, legislative and financial issues, and that it is very unlikely that it will happen this year: "We have 74 disputes to the preliminary creditor table and three lawsuits filed against the opening of the insolvency procedure. The solution will take more than a month and a half. Hidroelectrica has promoted several draft laws by which the state will commit for those mistakes which have led to the deterioration of the financial ratios of Hidroelectrica".

The representative of Euro Insol mentioned that he is waiting for a Government Decision by which five accumulation lakes will be transferred to the "Romanian Waters National Administration" (Administraţia Naţională Apele Române - ANAR), because they are part of investment projects with an low energy component, which Hidroelectrica financed with 300 million Euros. Another draft law aims the merger of the eight "Hidroserv" companies into one. Euro Insol also wants to solve the dispute with the ANRE (the regulator of the energy market) concerning the real costs of the company with the energy it delivers to the regulated market.

For the exit of Hidroelectrica from insolvency the rescheduling of debts is also necessary, and they are greater than 1 billion Euros: "Bank loans can be rolled over, but we are talking about the payment of unsecured claims. There are 360 unsecured creditors and an agreement has to be reached with each of them concerning the rescheduling of the debts of Hidroelectrica".

• All the state-owned companies have to go through the purgatory of insolvency

Remus Borza still strongly believes that all of the state owned companies need to go through the "purgatory" of insolvency. He explained: "I know it's a harsh statement and that it is hard to reach a consensus. The rather controversial procedure of insolvency has benefits and it can create a healthy foundation for a company, specifically it can determine its reentry into the economic environment".

The head of Euro Insol mentioned that the Romanian state is not necessarily a bad manager, and the private managers can also be less than satisfying. He said that there are private companies that have arrears of hundreds of millions of Euros.

For example, Mr. Borza said, UCMR Reşiţa, a company created in 1771, entered insolvency in December 2011, with over 200 million Euros in debts and losses of 324 million lei, after posting a loss of 378 million lei in 2010. "The benefit of this company's entering insolvency is that it will conclude 2012 with a profit, regardless of how small it may be", he said. According to him, this would be the first time the company posts a profit in the last ten years.

According to him, another example is Uztel Ploiesti, the largest supplier of equipment for the oil industry in Romania, created in 1902. The company had over 5 million lei in overdue salaries in the beginning of 2011 and 2100 Euros in its accounts, according to the statements of the representative of EuroInsol, who says that, on December 31st, 2011, the company reached a capitalization of 8 million Euros and a profit of 1.7 million Euros, after the losses of 4.3 million Euros it had in 2010.

Mr. Borza also said that Servtrans, which entered insolvency in 2010, with losses of 17 million lei, has reached a profit of 12 million lei in 2011.

"It's only through the insolvency procedure that a receiver can perform miracles at any company, regardless of its line of business", Mr. Borza said, who added that there are institutions and levers specific to insolvency, such as, in the case of Hidroelectrica, for example, the termination of the bilateral contracts for cheap energy.