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Monday, September 28, 2009
David Surtees: “The regional energy demand has stabilised”

Published in Bursa Financial daily, Bucharest 

The consumption of electricity in this country will stabilize in 2010 on the same level as this year, said Group Marketing Director David Surtrees of Energy Finacing Team (EFT), a major European supplier of energy, present in Romania since as early as 2005. He told BURSA in an interview: “If the Romanian energy sector wants to be competitive again, the price charged by producers will have to decrease in 2010. This primarily will have to be done by thermal power plant producers.” 

Due to the economic crisis we have seen the biggest ever correction in the price of energy not just on the free market in Romania, but on all the European markets. David Surtees said that unexpected surpluses of energy have appeared in the region and the price fell from over 80 Euro per Megawatt hour in October 2008 to below 40 Euro per Megawatt hour in March 2009. “At present, the price is around the 45 Euro per Megawatt mark,” he said. 

The EFT Marketing Director said: “In the last couple of months we are seeing signs of stabilizing demand for energy in the region, as well as in Romania. This has come about from various government interventions and subsidies in the energy intensive industries, such as Aluminum and metals processing. I thus expect that there will be no further drops in the price of energy in 2010 either in Romania or in the region. I also expect that the price will not substantially rise either and that it will hover between 40 and 50 Euro per Megawatt hour. 

In terms of energy delivered In the first six months of 2009, EFT Romania has achieved roughly the same results as in the previous year. David Surtees said: “ We expect that this trend will continue and that the EFT Romania results in 2009 will be much the same as in 2008. In 2008 EFT Romania delivered MWh 2 462 300 of energy and achieved a turnover of RON 499 450 779. In terms of value, this presented 11% of all EFT Group deliveries in 2008. Considering that the first half of 2009 has seen a sharp drop in demand and price of energy, and that there are considerable energy surpluses in Romania and the region, we are certainly pleased with the result.” 

The price of Romanian energy, not competitive abroad

“The fall in the market price of energy in 2009 made Romanian energy non competitive in 2009.” Said David Surtees. He explained: “This is the primary reason behind a substantial drop in export of Romanian energy during the year. It is important both for the Romanian producers to make their prices more competitive in 2010, but also for other steps to be taken to improve the competitiveness of energy produced in Romania. We are seeking some positive developments on that front in recent weeks, mainly through the reduction of transmission taxes. While this is a positive step, we feel that total abolition of transmission taxes would make sense in the present circumstances. It would be a move certainly in the spirit of the EU competition fostering.” 

“In the last two years, our portfolio was structured in such a way that Romania was both an important source of energy, but also a liquid market and therefore an effective balancing platform. The EFT official said: “Romania was the source of 20% of all energy purchased by the EFT Group in 2008. At EFT we actively seek to diversify our portfolio as much as possible. That is why no single country in our territory accounts for more than 25% as a source of energy we buy, or 15% as a market in which we sell our energy. We sell energy in 19 countries and achieve 65% of our sales in EU markets.” 

* A 4-6% fall in energy demand in South-East Europe 

According to EFT Group estimates, demand for energy in south east Europe has dropped by between 4% and 6% in the first half of 2009 versus the same interval in 2008. The worse affected have been the energy intensive industries, above all Aluminum smelters, steel mills and other metals processing industries. David Surtees said: “We have also seen falling demand from our clients in the chemicals, automotive and construction industries. Some state power utilities have also notably reduced their demand, primarily as a knock on effect from decreasing industrial activity.” He pointed out that in recent months we are seeing sign of stabilizing demand, which has come about from state intervention and subsidies in affected industries. In normal economic circumstances, south east Europe has a considerable energy deficit. All countries except Bulgaria, Romania and Bosnia and Herzegovina do not produce enough energy to meet domestic demand. The EFT official added: “Prior to the onset of the current crisis this deficit stood at some 10 Terrawatt hours. Due to the economic slowdown we now have a regional surplus, which stands at around 5 Terrawatt hours”. 

* EFT did not manage to invest in production in Romania, but has not abandoned this plan

Approximately two years ago, EFT announced plans to invest approximately 100 million euro in energy production capacity in this country. David Surtees explained: “We intended to invest in Romania and we analyzed and looked into this possibility. Unfortunately, we did not manage to materialize it and we looked for and found more attractive investment projects outside Romania. This does not mean our interest in Romania has disappeared. EFT is actively analyzing a number of potential investments in the region, including Romania. The EUR 100 million budget which you are mentioning has been allocated for the Ulog hydro power project in Bosnia and Herzegovina. This will be a 35 MW unit, which will annually produce 76 GWh of peak energy. In combination with our MW 420 unit in Stanari it will provide a solid foundation to our production portfolio, and the much needed flexibility to respond to the changing needs of our clients. The combined value of our projects in Stanari and Ulog is over 1 billion Euro. We are also interested in the project to build a MW 200 CCGT unit in Trbovlje in Slovenia, as well as a MW 70 hydro unit in Boskov Most in Macedonia. 

* OPCOM,a key exchange in the region 

EFT trades daily on seven energy exchanges. OPCOM is one of these. As a trading platform, OPCOM has made considerable advance, said the EFT official. With time OPCOM has become more liquid and is now with Germany’s EEX a key exchange in the region, said David Surtees. He added: “ I would say that apart from the energy surplus which exists in Romania, the key to OPCOM’s success has been the obligation of energy producers to trade part of their production portfolio’s on the OPCOM platform. If you look at exchanges in the region which have failed, it appears that this has been the main reason. The Romanian authorities deserve credit for this.” 

Alina Toma Vereha 

INSERT 

EFT sells electricity in 19 countries. The EFT client portfolio is comprised of state power utilities that make up the Group’s biggest clients, then industrial consumers and system operators. To the latter, EFT provides the so called tertiary power reserve. This is the energy with which normal functioning of a country’s electricity system is guaranteed in cases of unexpected failures. At present, EFT provides such guarantee to Slovenia, Hungary and Macedonia. Overall, we have EFT serves the energy needs of more than 100 clients and trades daily on seven international energy exchanges.

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