THE ENERGY EXCHANGE Austrians offering to help Romania create an energy market

• The privatization of OPCOM and the creation of an energy market from scratch, among the proposals submitted by the Austrians to the Government

The Romanian energy sector seems to be drawing increasing attention from the international financial institutions, such as the International Monetary Fund, which recently announced, the sale of minority stakes in "Hidroelectrica" and "Nuclearelectrica", as well as of the Bucharest representatives of some of the countries that have political and economic interests in Romania.

Michael Schwarzinger, the US ambassador in Bucharest, yesterday expressed his support for the need to create a Romanian energy exchange, starting from the premise that such an institution would allow the transparent formation of prices for various energy products. According to the Austrian ambassador this would be a preliminary requirement for private investors to enter the energy sector.

Austria has invested about 9 billion Euros in Romania. Austrian investors are present in key sectors, such as energy, where OMV holds 51% of "Petrom", and in the banking sector, where "Erste" controls about 60% of the Romanian Commercial Bank (BCR).

"One characteristic of the Romanian market for natural gas is the fact that three quarters of the gas that is used comes from local sources. Gas produced in Romania is sold at price that differs highly from that of imported natural gas. Therefore, mechanisms should be implemented which would allow transparent and indiscriminate access to cheap natural gas. Aside from that, there is also the need to implement the internal legislation of the European Union which is waiting to be transposed into the Romanian laws", the Austrian ambassador said yesterday, at the opening of the trading session of the Bucharest Stock Exchange.

Yesterday, he also supported the need to privatize state owned companies which are still "under political influence", reiterating some of the parts of American ambassador in Bucharest, Mark Gittenstein, also at the BSE, who said that the creation of the two energy giants, Electra and Hdroenergetica, instead of their total or partial sale, would be the equivalent of "rearranging chairs on the deck of the Titanic".

"The efficiency of the Romanian energy industry needs to be strengthened through liberalization and privatization", added Michael Schwarzinger, who added: "Who would want to invest in a sector that is politically influenced? We should provide shareholders and those who want to become shareholders the chance of going on an energy exchange, we need the privatization of state owned entities, we need new capital inflows for the Romanian energy production and new distribution facilities".

In order to back his statements, Schwarzinger mentioned an Austrian initiative to create a Romanian energy exchange, based on the Austrian expertise. This initiative was presented to the government, some of the proposals submitted by Austrians including the privatization of the energy market operator OPCOM (held by "Transelectrica") and the creation of an energy exchange from scratch.

"We are talking about who controls the energy exchanges ...the state or two- -three entities...An exchange needs to treat everyone equally, it needs to be independent", the Austrian ambassador said.

He said that the debate on the increase in gas prices for consumers, following the liberalization of the energy market ignores economic reality. Ambassador Schwarzinger said: "The implementation of a social policy at the expense of companies, weakens the companies in question, discourages investment, leads to job losses and thwarts economic dynamism. Both the European Union and the International Monetary Fund know very well the why they are so insistent in their recommendations made to Romanian politicians. Yes, subsidies need to be used during transitions to market-set prices. The idea is however that these subsidies need to be financed according to the political redistribution system specific to successful economies".

• Tengg, the president of the Austrian energy exchange: "We want to create an independent exchange in Romania"

Hans Jorg Tengg, the president of the Austrian Energy Exchange - EXXA, yesterday said, also at the Bucharest Stock Exchange, that de intends to lay the foundation for an independent energy exchange in Romania, depending on the answer of the Romanian authorities to the proposals sent on this topic.

"An energy exchange should be independent from all the interested parties", said Mr. Tengg, without mentioning the reasons why he viewed the OPCOM as not independent.

"I am not criticizing OPCOM...but several of my friends in Romania complained that this market is not independent...my economic interest in creating a new exchange is very low. I think that the liberalization of the energy market will bring benefits. In Austria, the liberalization of the energy prices was made gradually, and at first, prices actually went down, because energy producers started competing with each other".

Mr. Tengg also said that he has plans to create an energy exchange in Bulgaria as well, which could eventually merge with the Romanian one.