US Ambassador To Romania Pleads For Energy Privatization

03.31.2011 By Andrei Circhelan

Romania’s plans to reorganize the bulk of its energy producers in two “national energy champions”, instead of partial or full privatization, is like “rearranging the deck chairs on the Titanic”, according to US Ambassador to Romania Mark H. Gitenstein.

Romania's plans to reorganize the bulk of its energy producers in two "national energy champions", instead of partial or full privatization, is like "rearranging the deck chairs on the Titanic", according to US Ambassador to Romania Mark H. Gitenstein.

"The on-going effort to reorganize state-owned energy companies into two 'national energy champions,' instead of exploring full or partial privatization options (…) is an effort to 'rearrange the deck chairs on the Titanic' because it does not deal with the basic problem of state owned energy companies - that they are not run like real businesses," Gitenstein said Thursday at the opening of Bucharest bourse trading.

He added, citing media reports, that more than half of state-owned Hidroelectrica's output went into preferential contracts with significantly lower prices.

"This has resulted in significant profit loss and lack of investment in the company, forcing the government to divert scarce public funding to keep the company afloat," the Ambassador said.

Furthermore, according to Gitenstein, the state's involvement in the companies means that decisions are likelier to be made using political reasons, rather than economic ones.

"The government literally used these state-owned enterprises as a 'piggy bank' to deal with short term cash flow problems. For example, this past year Romgaz was asked to make a 'donation' of EUR100 million to the government to meet its budget exigencies, and government representatives on the board were directed to approve the 'request'," Gitenstein said.

The US official added Romania needs to free the energy market and, if it wants to protect consumers below the poverty line, it needs to subsidize only narrow consumer segments and solely based on need.

Gitenstein said after his speech that he would buy stock in privatized energy companies, such as oil company OMV Petrom (SNP.RO), but his mandate as Ambassador does not allow it.