May 2006
In the following years, smaller credit institutions will be taken over by international banks that want to enter the Romanian market and will be forced to give up their activity, according to the leaders of several Romanian banks.
"There are 29 extra players (of the total of 39 banks). Competition will increase in the future. We are talking about the survival of the strongest. The disappearance of such banks will not endanger the banking sector," said Bogdan Baltazar, the president of the consulting firm Baltazar, Bloom & Parvulescu.
Nicolae Danila, the executive president of BCR, said that five credit institutions currently dominate the Romanian banking sector.
"As the retail activity develops costs will increase. In the meantime, the increase of competition will boost the bank's marketing expenditures," said the general director of Raiffeisen Bank, Steven von Groningen.
Andreas Maragkoudakis, the general director of the Romanian Bank, said that the advance of the retail sector would lead to an increase of breaches in credit contracts.
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The loan has a ten-year maturity, according to representatives of the banks.
Magnolia Center, located in the southeastern part of Brasov, will offer about 7,500 square meters for lease.
The estimated cost of the project is 9.5 million euros.
The shopping center will be opened in November and will include an Artima supermarket, a Domo store, restaurants, a bank and many shops.
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Over 316 million shares were made available from April 6 to May 5, the nominal value per share being 0.028 euros. The shares were offered for subscription for 0.126 euros per share.
The company's board of directors decided to use the total value resulted from the share subscription, around 32 million euros, for increasing the share capital (7.4 million euros) and for creating reserves (24.6 million euros).
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The state holds a 53.1 percent share in Antibiotice.
"Antibiotice is our privatization highlight for this year," said the president of AVAS, Razvan Orasanu. The official disagreed with a 19 percent salary raise for Antibiotice employees and believes that wage increases should be determined in accordance with each employee's contribution to company turnover.
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"All these trends prove that the population starts to believe in making savings, that it is beginning to have a savings culture. Moreover, we already have the first clients who chose our product specifically for its savings aspect. They did not wish to contract the credit related to the saving period as well," added RBL's president. He continued that the subsidies received by the bank's clients from the state budget (representing 30 percent of the value deposited annually, but not more than the value of the average salary) for contracts concluded in 2005 amounted to approximately six million euros. In 2006, the annual premium will represent 15 percent of the value deposited annually, according to the legislation changes adopted in 2005, mentioned Costea. He also said that the company intends to invest over six million euros in the distribution and promotion of the saving-crediting product and in IT. New branches will be opened in Iasi, Cluj-Napoca, Timisoara and Sibiu. Raiffeisen Housing Bank is the first bank set up in 2004 according to the law 541/2002 regarding the saving and crediting in collective system for buying, building or refurbishing dwellings.
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In the current agreement, Panos Germanos, the founder and main shareholder of the company, will take over the battery production division, including German and Serb subsidiaries and activities in Romania and Bulgaria. In addition, the founder of the company will buy Germanos operations in Poland, Ukraine and Cyprus. He will keep his position as president of the company and will reinvest 10 percent of the equivalent of the Cosmote stake in Germanos. The total value of the transaction will be about 1.58 billion euros, while the net cost, taking into account the yielding of assets to Panos Germanos and his future investment have been valued at 1.3 billion euros.
The transaction will be completely financed through loans. Following the purchase of the Germanos shares, Cosmote is to benefit from important growth opportunities in countries where the two companies are present. Germanos holds a telecom distribution network of 537 shops in Greece, Bulgaria, Romania and Macedonia. The company has been present in Romania since 1996 and presently has 100 shops. Last year turnover of Germanos and the Sunlight Industrial battery production division totaled 98 million euros. Mobile operator Cosmote Romania launched last December and has managed to reach a five percent market share. Greek group OTE, through RomTelecom (30 percent) and Cosmote Greece (70 percent), own the company.
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Moreover, if the tensions related to the Iran nuclear program become less intense, the evolution of the oil price can register a decline, according to the international brokerage company PVM Oil. "I think that the oil price will diminish in the next 18 months," said yesterday PVM Oil Director Johannes Benigni, in Bangkok. The refining capacity was the most important factor which determined the oil price increase from 55 dollars per barrel to about 65 dollars per barrel, added Benigni.
The crude oil reference price on the American market remained below 70 dollars per barrel yesterday even if the US rejected Iran suggestions regarding the uranium program. The oil price is considerably below the record level of 75.35 dollars per barrel registered last month. Benigni's point of view is based on the investment plans of the refineries around the globe announced in 2004, which will lead to the growing of the oil production capacity by 15 million barrels per day in the period 2008-2010. "If the situation in Iran is aggravated, an oil price of 100 dollars per barrel will be considered cheap," concluded Benigni.
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The shipyard management explained that working 100% for export is due to the fact that there are very few local ship owners left, because they are discouraged by the impossibility to rise funding at affordable prices for the purchase of new ships.
?The share of domestic customers is dropping.
There is no internal new shipbuilding market probably because of the fact that Romanian banks do not extend loans at the required level for a minimum of ten years at a feasible interest rate?, said Rusen.
However, the shipyard in Constanta does have a few domestic customers, but mainly for repairs.
80-90 per cent of the customers seek repairing services with the shipyard are foreigners.
The activity accounted for 30 per cent last year in the total revenue of the shipyard - over EUR 73 M, according to the company official.
The Constanta Shipyard mainly builds vessels for customers in South Africa, Belgium, Italy and Germany, and does repair work for companies from Greece, Germany, The Netherlands, and the US.
The company was privatized in 2002.
Rusen said that from 2003 until 2005, the majority shareholder invested approximately $26M, with a 2006 investment plan of $3M ? new equipment, refurbishment, infrastructure and IT.
"The unanimous vote in favor of the accession treaty's ratification is additional proof of the support Sweden gives to Romania's accession, as well as recognition of the progress made by Romania," said a release from the Foreign Affairs Ministry.
The ministry thanked the Swedish authorities for the support given for the successful finalization of the accession process, said the release.
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The company is one of the principal electricity providers on the
Romanian market and the main electricity supplier for Bucharest.
Companies CEZ (the Czech Republic), Enel (Italy), Gaz de France,
Iberdrola (Spain) and RWE Energy (Germany) submitted final offers for the
takeover of the 67.5 percent share package held by the state in Electrica
Muntenia Sud. The government is selling 67.5 percent of the company's stock
through the privatization process of Electrica Muntenia Sud, following the
pattern of previous sales that have proven successful. "Taking into account
the high competitiveness and the quality of the submitted offers, we expect
the transaction for 67.5 percent of the company to soar past 750 million
euros," states a release from the power distributor, issued in March.
Electrica Muntenia Sud has a social capital of 55.1 million euros and
recorded at the end of 2004 a turnover of 316.9 million euros, according to
audited financial results developed in accordance with Romanian accounting
standards.
The local power distributor attracted the interest of eight companies -
from countries including the U.S.A., Austria, Spain, and Germany. CEZ
already holds 51 percent of Electrica Oltenia, while Enel owns the Electrica
Dobrogea and Banat branches.
The privatization strategy stipulates that the winner of the tender will
acquire without delay fifty percent of the stock, subsequently increasing
Electrica's social capital to boost its stake to 67.5 percent. "The
competition is strong, and investors' aggressiveness has increased so we
have to adapt," said Vladimir Schmalz, the mergers and acquisitions director
for the energy producer CEZ. After losing several tenders, CEZ intends to
offer higher prices for future acquisitions, in contrast to the company's
strategy applied until now.
CEZ is interested in buying the Romanian power plants of Rovinari, Turceni
and Craiova as part of the strategy to obtain independence from suppliers,
said in April the director of CEZ Romania, Jan Veskrna. The group has had
excellent cash flows in recent years, allowing it to allocate about three
billion euros for acquisitions and development in the Balkan region,
explained the Czech official. "We want that company very much, but we will
not buy it at any cost. Our policy is to get the fairest deal we can," said
Veskrna.
The CEZ representative said that one of the most important projects of the
whole local energy sector in view of EU accession was going to be the
"unbundling" of the market - restructuring utilities into component
operations: generation, transmission and distribution.
The privatization of the power distributor raised protests from
authorities in Bucharest. "Electrica Sud is being privatized, but it is not
normal for us to lose the power distribution network," said the city's
General Mayor Adriean Videanu in February.
The official argued that the municipality is a "captive user," depending on
suppliers of utilities such as Electrica and Distrigaz. This situation is
caused by an anomaly: distribution networks belong to the suppliers despite
being a part of the public domain, he said. According to the mayor, the sale
of the distributors "as a whole" is not in the interest of the city's
inhabitants, who will have to buy electricity at exaggerated prices. "An
important part of the price of power is distribution. If things would be as
they should be, that is, if we controlled the networks, prices could be
controlled," said Videanu.
Thus, the municipality of Bucharest will demand of the national government
permission to take over the Bucharest power distribution network, said
Videanu. The mayor threatened to go to the courts if the privatization
process continues in this form.
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| Mittal Steel Co. said Tuesday that it would be willing to revise its 19 billion euro takeover bid for Arcelor SA and significantly change its corporate governance. |
Mittal Steel Co. said Tuesday that it would be willing to revise its
19 billion euro takeover bid for Arcelor SA and significantly change its
corporate governance if its rival recommends the offer to its
board.
Arcelor has rebuffed the cash-and-stock offer Mittal launched last January
that would combine the world's top steelmakers into a titan with nearly a
10 percent share of global steel production and a market capitalization
close to 33 billion euros. Mittal Chairman and CEO Lakshmi Mittal said he
was disappointed that Arcelor was not willing to enter into "meaningful
discussions" to win its support for his bid. "We ... have indicated that,
in the event of a recommended deal, we would be willing to revise our offer
and make significant changes to our corporate governance," he said. "This
move does not signify any belief that the underlying value of Arcelor has
changed, but rather that additional value would be attached to a
recommended offer." The company said the extent of the revision "would
depend on the nature and extent of other changes to Mittal Steel's overall
proposal and, hence, on Mittal Steel's ability to enter into discussions
with representatives of the Board of Directors of Arcelor." Mittal did not
specify a new value, and it was not immediately clear whether a revision of
the bid would mean a higher offer or a larger cash component.
Arcelor CEO Guy Dolle has said that the company would consider Mittal's
offer if the bid was large enough and made in cash, in order to eliminate
uncertainty. As is, the offer is one-quarter cash and three-quarters Mittal
stock. Dolle has also claimed that Mittal lacks the transparency
shareholders expect. Lakshmi Mittal is both chairman and CEO, and his
family controls 88 percent of the company's capital. In an apparent move to
ease criticism of its governance, Mittal appointed French businessman
Francois Pinault as a new independent non-executive director to its board.
It has also offered to enlarge its board of directors to include six from
Mittal, six from Arcelor, including representatives for steelworkers and
the Luxembourg government, and two independent directors of "European
industrial background."
The management board would number six, it said, with three from each
company. Mittal said the new company would reward long-term shareholders
with enhanced voting power, suggesting a structure where shares would
double their voting rights if held beyond a certain period of time. Only 12
percent of Mittal is in free float. This would rise to 43 percent if the
company combines with Arcelor, whose equity is held by a large number of
small shareholders. Mittal Chief Financial Officer Aditya Mittal told a
news conference in London that there were no plans to reduce the family's
stake in the new company below a controlling 51 percent share. The company
said it wanted to pursue a tie-up between the world's two largest
steelmakers "in an agreed and amicable way" once the offer was formally
opened, saying this would provide the best value for shareholders.
Arcelor's fate will be determined by its shareholders, who last month
backed the current board despite anger from some minority groups after it
failed to consult them over defensive measures. Arcelor said late Monday
that its chairman, Joseph Kinsch, was ready to meet with Lakshmi Mittal if
the company would give it enough information to make its intentions
clear.
The Luxembourg-based steelmaker said it wanted to see "sufficient information to assess the intentions of Mittal Steel, its industrial, social and business plans, and the value of its shares as well as elements justifying the strategic logic of a combination of the two groups and his (Mittal's) views with respect to corporate governance." Documents Mittal has already supplied "did not contain all the essential information requested," it said, because the papers did not allow Arcelor to assess Mittal's "intrinsic value." Arcelor executives have criticized Mittal's offer as hostile, but said they would reconsider if an all-cash bid was on the table and if Mittal would make a "friendly approach." "Arcelor's chairman reiterates that the board of directors will examine all options and proposals based on a strong and coherent industrial model and which maximizes shareholder value," the company said Monday.
"We believe that in the coming five years the market value will reach twice the level attained in 2005, which - according to Cegedim estimations - currently stands at almost 1.3 billion euros expressed in wholesale prices," said LaborMed Pharma marketing and development director Gabriel Cernica, adding that the market is expected to exceed the threshold of 2.5 billion euros in 2010. According to the data supplied by market research company Cegedim, in 2005, drugs consumption in Romania attained 1.27 billion euros, up by 18 percent against 2004, whereas consumption through drug stores attained some 950 million euros. Now, that the premises for sales growth are set in place, the Romanian pharmaceuticals market gets increasingly attractive to foreign investors. In 2005, the Czech company Zentiva acquired Sicomed in a deal worth some 85 million euros. Zentiva announced for this year estimate sales worth over 100 million euros for the entire group. Iceland's pharmaceuticals company Actavis acquired recently drugs producer Sindan for about 150 million euros, whereas India's Ranbaxy took over Terapia Cluj for 324 million US dollars (about 270 million euros).
Terapia posted in 2005 a turnover of over 80 million US dollars.
The company exports 30 percent of its products portfolio to 15 European countries.
With sales worth over 100 million euros, GlaxoSmithKline was last year the company with the most substantial sales on the Romanian market.
With sales worth 74 million euros, the Swiss from Hoffmann La Roche rank second in this classification worked out by Cegedim. "At present, there are more than 50 active players on the Romanian market but no more than 10 will remain active in the coming five years.
This is currently the most segmented market and the trend should be towards the consolidation of distributing companies," says A&D Pharma CEO Dragos Dinu.
The most important drugs distributing companies in Romania are Mediplus - a member of the A&D Pharma Group, Montero, Relad, Fildas Trading, Medimfarm, Farmexim, Farmexpert.
In 2005, Romania had about 4,500 drug stores, many of which operate in the networks of important names like Sensiblu, Help Net, Catena, Remedio and Dona.
Sensiblu posted in 2005 a turnover of 63.7 million euros.
From January to April 2005, the direct investment (FDI) in excess of $1 M amounted to $281 mn.
Most of the investment ? over $70 M, was allocated for greenfield projects, the difference being covered from money meant for brownfield project development.
Among the companies that have announced investment projects larger than USD 1 M, are the mobile telephony operator Mobifon (currently Vodafone), with USD 30 M for the improvement of the transmission capacity, voice and data processing and billing.
Porsche Romania is investing nearly USD 8 M in a compound in Chiajna, Ilfov County, and Ana Holding has announced a project of around USD 5 M in the field of constructions and installations for office buildings.
From October 2001 ? the date when the law on FDI with significant impact entered into effect ?until April 2006, 480 investment projects larger than USD 1 M were registered, with a committed value of USD 5.5 bln.
The direct investment made by foreign companies represents almost 70 per cent of the total ? USD 3.9 bln.
Of that, 302 investment projects worth over USD 2.4 bln had been completed by the end of April 2006.
New investors on ARIS list
Foreign investment in Romania grows by another EUR 50 M, two other companies being interested to enter the Romanian market, Marquardt and Monsanto.
The German company Marquardt is investing over USD 23 M to build a factory of electro-mechanical and electrical systems for the car industry, in Sibiu, ARIS officials stated.
The company ahs already bought the first plot ? about 53,000 square metres, in January this year.
The goods manufactured there will be exported for customers like Audi, BMW, DaimlerChrysler, Volkswagen and Porsche. The first part of the investment ? the production facility, the administrative building and the fixed assets ? is almost ready, and the operations will start at the end of May.
ARIS stated that next year the company will allocate USD 5 M for the expansion of the production capacity, the investment programme continuing with the relocation of part of the production in Germany to Sibiu.
The US Company Monsanto, with activities in the domain of agriculture, will invest $27 M in Romania for the construction of an entity for the picking up and drying of seeds, at Sinesti, Ialomita County, declared officials of the Romanian Agency for Foreign Investments (ARIS).
The unit will be built on a surface of land of 15 ha, and will include equipment for the picking up, drying and husking of the corn seeds supplied by farmers.
The activity at the Sinesti entity is estimated to begin in November. According to the presentation of the project, the investment will include also administration offices, while the development of the infrastructure will consider a possible expansion of the construction.
The activity is estimated to begin next November. After finalisation of the initial investment, the company will assure 17 permanent jobs, and 80 to 100 temporary jobs.
Monsanto, which is one of the most important suppliers of agricultural products and solutions, has two divisions, for seeds and for agricultural production.
The company is present in over 50 countries.
The new unit, called Cordial MV will process the fish brought by the 15 fishing ships of the Dutch company. The products are to be sold under the Nordika brand. Cordial MV also operates a 1,000 tonnes warehouse, while the processing and freezing departments will give a production of 50 tonnes per week. According to general manager Otilia Mitrofan, the products are manually processed, by following the recipes given by the Dutch partners.
Mitrofan also said that the unit was opened under a 2.5 million EUR investment, of which 1 million EUR was a non-reimbursable loan from the Dutch Government. Besides the modern production lines, the company also established a waste-water treatment station under a 150,000 EUR investment, in order to be in line with European environment regulations.
The new company employs 100 people, most of which were selected from the unemployed individuals based in Valea Lupului locality. The unit became functional a few months ago but its management thought they should wait a while until the official opening to give employees time to adjust to the new job. Therefore, the company's products are already available in supermarkets from Iasi and Bucharest, with prospective to find them in four more retail chains.
"We plan to make a force entry on the Moldovan market. For the future, in parallel with the increase of our production facilities we plan to cover more areas in Romania and expand to other countries as well," Otilia Mitrofan added.
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Winkler also told the audience that by 2010 the furniture export and production will increase by more than 5 percent a year. "This sector is a viable one and has to be supported in order to overrun difficulties, which derive from the strengthening of the Romanian currency and hikes in the tariffs for raw materials and utilities," Iuliu Winkler told Rompres.
In 2005, volume of furniture exports went up by 9.3 percent compared to 2004 and went up to 895 million EUR, which is 5 percent in the overall exports of Romania. Our country mainly exports furniture with high added value, namely living rooms and classic bedrooms made of precious wood essences. In 2005, the main markets for Romanian products were countries in the European Union, with 80 percent from the overall exports.
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The expansion was needed because the company has contracts with 50 apparel production units from Romania, Germany and Ukraine. Bock & Partners operates three other more production units in Covasna, two production units for pants at Estelnic and Sfintu Gheorghe and a men's jacket production unit at Baraolt. The facilities were opened under total investments of 20 million EUR and employ 2,000 people.
Herman Rosner, head of the Covasna Chamber of Trade and Industry, said that the Bock & Partners group businesses, headed by Dietrich Bock, are among the most impressive success stories. The company this year would post a turnover of 25 million EUR and will grow to some 40-50 million EUR over the next years, according to Herman Rosner.
He added that the investments Germans complete in Covasna come to contradict rumors saying that after the European Union accession they would pack their production units and move eastwards, where the manpower is cheaper.\
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This is the second operations site Siemens VDO Automotive opens in Romania, after the one at Timisoara in 2000. According to the company's representatives, the center in Timisoara functioned with 10 of staff at the beginning and at present employs 1,200 people. Iasi was chosen for the opening of the second center because of the high training people get there in this field.
"Iasi is known for its tradition universities, that give good education to the students. However, the opening of local authorities in such a matter pondered a lot in our decision, as well as the infrastructure which is needed to develop such activities as ours," said Wolfgang Dehen, CEO Siemens VDO Automotive.
The center in Iasi employs 60 people, most of which graduated the local IT university. By the year end the staff will increase to 100.
The German-based company is known as supplier of electronic systems for the automotive industry. The center in Iasi will be active in three departments: software development, hardware development and mechanical design.
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Monetary investment funds, which invest in low-risk fixed-income monetary
instruments, such as bank deposits or government securities, have started to
lose ground fast, Ziarul Financiar writes.
"This is due to dwindling yields, which failed to cover the inflationary
rate and are no longer attractive to investors. Such mutual funds have lost
more than five percent of their market share in the first quarter to those
investing in shares, which have been the focal point of investor
interest.
Even the fund managers admit they are having problems but hope things will
work out in the end. The assets of the monetary funds, a type of fund that
was once dominating the market, have come to account for some 40 percent of
the fund market at the end of March.
Most of the monetary funds witnessed yields of 3.9 percent to 6.9 percent
over the last 12 months, according to the latest report of the National
Union of Collective Placement Bodies (UNOPC). A banking deposit made a year
ago yielded an interest of nine to 11 percent, while the inflationary rate
stood at 8.4 percent over the past 12 months.
The exception among monetary funds was BCR Clasic (over nine percent yield),
but this was the result of a decision to invest on the Bucharest Stock
Exchange to boost its yields. Equity funds registered yields of up to 40
percent over the last 12 months.
Simfonia 1, the largest fund on the market managed by SG Asset Management,
the specialist company of BRD-SocGen lost 3.3 million euros of its asset
value in the first three months, with the market share dropping from 26
percent in late March to nearly 16 percent. Simfonia 1 remains the largest
fund on the market, however.
"We mainly target small and medium-sized enterprises, which can thus manage their cash, and they have payments to the budget to make, which is one of the causes why we had repurchases outstrip subscription. In addition, investors have changed their option and chose the Stock Exchange lately," says Dan Nicu, head of SG Asset Management. The assets of the eight funds investing in monetary instruments amounted to 158 million RON (43 million euros) at the end of last year. Their assets fell to 147 million RON (42 million euros) at the end of March."
sourceJanuary 2007." The presence of the Prime Minister at the FIC is a sign that the Romanian government seeks comments from foreign investors when drafting legislation and regulations. The 105 members of the FIC account for 80 percent of Romania's total foreign direct investment since 1990. Regarding legislation, the report suggested the number of emergency ordinances should be drastically reduced, that legislation should be republished whenever it is substantially amended and that there should be prior consultation for all proposed legislation. In the field of taxation, the Council suggested that tax deductions should be allowed for inventory/assets write-offs, and the profit tax law should be aligned with the value-added tax law in this regard. Suggestions regarding the banking system targeted NBR monetary policy: reducing the interest rate gap between ROL and foreign currencies should be a priority, investors believe. Moreover, the training of NBR inspectors should be improved, as should communication between the NBR and the banks. The FIC recommends the NBR issue its regulations in close coordination with the banks in order to avoid any distortion with the present practices of international banks. IFRS regulations should be extended to the corporate sector to improve the soundness of the business environment. Consolidated financial statements should be made compulsory. The use of audit forms should be encouraged to allow rigorous control of the quality of the audit. Regarding the Environmental Fund, incentives ought to be offered for achieving waste recovery and recycling targets; funds should be used to develop infrastructure, improve waste recovery and recycling processes, and create separate waste collection systems. Uniform training of environmental specialists should be provided to ensure proper supervision and correct application of environmental standards.
During talks, Minister Tariceanu had to answer several issues on the subject of corruption. Investors suggested various long-term measures be taken to eliminate corruption in public administration, including raising salaries; eliminating excessive discretionary powers; adopting punitive actions for violations; and monitoring more closely officials' personal assets and possible conflicts of interest. The conclusion was that "surveys and assessments conducted by both national and international organisations
confirm that corruption remains a serious and widespread problem in Romania which affects almost all aspects of the society. There has been no reduction in perceived levels of corruption and the number of successful prosecutions remains low, particularly for high-level corruption."
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The rapid appreciation of the exchange rate and increasing energy prices
stimulated the restructuring of industry and redirected resources to higher
value-added sectors such as the automotive, oil and furniture
industries.
Under normal weather conditions, agricultural output should bounce back to
the long-term average growth rate of around 3 percent in 2007, while this
year it would grow by around 4.5 percent. Gross fixed capital formation
increased strongly last year, by 13 percent, due to staggeringly high
investments in the private sector, representatives of the European
Commission (EC) say in the spring economic forecasts report for 2006-2007
released yesterday. It outpaced private consumption, which gradually
decelerated its growth from 14.2 percent in 2004 to 9.7 percent in 2005. At
the same time, the consumption of household staples was gradually replaced
by the acquisition of new goods. The pattern of the vigorous increase of
gross fixed capital formation and the deceleration of private consumption is
expected to continue into 2006 and 2007, forecast the EC experts. Private
consumption growth is likely to continue to an average of 7.5 percent in
2006 and 6.5 percent in 2007 as the effect of the fiscal reform would be
fully implemented by then and the reignited credit growth will be controlled
by the National Bank of Romania's measures to restrict lending and tighten
monetary policy. Public consumption is expected to expand faster in 2006 and
2007, driven mainly by the increase of salaries in the public sector.
Moderate optimism on inflation and GDP
Consumer price inflation declined from 11.9 percent in 2004 to nine
percent last year. The increase of administered, transportation, energy and
food prices held back the disinflation process, despite a fall in import
prices due to the rapid appreciation of the currency, comment the EC
specialists. They estimate, however, that the average annual consumer price
inflation would lower to around 5.7 percent in 2007, but only if the
recently started tight monetary policy is maintained. European experts do
not exclude the possibility that ongoing adjustment of administered prices
and wage growth pressures have a negative influence on the outcome.
As for the gross domestic product after a record growth of 8.4 percent in
2004, its growth slowed to 4.1 percent last year, mainly due to the negative
impact of the floods and the acceleration of structural reforms that
affected the industrial activity. In 2006 and 2007, real GDP growth is
expected to return to a growth trend to 5.5 percent and 5.1 percent
respectively.
Poor perspectives for the trade and budget deficits
The increase of exports accompanied by a progressive decline of the
growth of imports would not prevent a widening of the trade deficit from 9.8
percent of the GDP in 2005 to 13.1 percent of the GDP in 2007. The progress
in the terms of trade recorded last year is not expected to continue in 2006
and 2007. Despite a predictable increase in the number of remittances and EU
transfers, European experts expect the current account deficit to widen to
around 10.4 percent of the GDP in 2006 and 12 percent of the GDP in
2007.
The general government deficit declined from 1.3 percent of the GDP in 2004
to 0.4 percent of the GDP in 2005, against the background of strong
collection of indirect taxes and a decline in capital spending, estimate the
European officials. They criticized the application of the 16 percent flat
tax, saying it had a negative impact on revenue from direct taxes of about
one percent of the GDP in 2005.
The general government deficit is projected to reach 2.3 percent of the GDP
in 2006 and 5.4 percent of the GDP in 2007.
The EC found two reasons for this trend, first, the difficulty of limiting
expenditures and secondly the creation of the Proprietatea Fund to which the
state transferred shares in a large number of enterprises. The fund would
compensate citizens for the non-return of property abusively confiscated
during the communist period by distributing fund shares to claimants. Under
European accounting rules, the adopted scheme could to have a budgetary
impact of 0.9 percent of GDP in 2006 and 3.1 percent in 2007.
The main reasons are the massive fishing of these species and the risk that they will disappear.
The ship sturgeon, the sterlet, the Black Sea sturgeon, the beluga and the stor sturgeon are the species endangered by the heavy fishing or are considered vulnerable species.
The new rule forbids commercial fishing, the usage of fishing equipments and the sale of products obtained from wild sturgeon coming from Romania.
Sturgeon that is captured accidentally must be released back into the water.
The lengthy timeframe for which the restrictions are imposed is based on the long lifecycle of these types of fish, the maximum age fluctuating between 24 and 100 years.
The central authorities will launch repopulation programs that will help maintain the sturgeon population and genetic diversity.
Fishermen illegally sell a kilogram of caviar for 70 dollars, while companies active in this sector sell a kilo for sums ranging from 300 to 450 dollars.
The institution in charge of such programs will be the Monitoring Station for the Migrating Fish in the Danube, located in Isaccea.
This institution obtained for the first time, in 2004, the first sturgeon through in vitro fertilization.
"Since 1900, approximately 1,400 tons of sturgeon have been fished each year. After that the stocks lowered and, at the moment, we are fishing approximately 40-50 tons of sturgeon yearly," said the director of the Research and Development Institute for Aquatic Ecology Galati, Nicolae Dimulescu.
The export margins for each country are established annually according to CITES, a convention signed by 161 countries.
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The company is active in the agriculture sector and will build the unit in Sinesti, Ialomita County. The constructions are scheduled to begin in autumn this year. Approximately 20 permanent jobs should be created together with 100 temporary jobs. Monsanto is one of the chief suppliers of agricultural products. The company's activities are two-fold: seeds and agricultural production.
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The international phone operator wants to collaborate with other similar companies with the intention of lowering the costs of calls within the EU area to 45 eurocents.
The European Commission expressed its concern several times regarding the high tariffs used for the roaming services.
The average price of a four minutes roaming call within the EU area costs from 20 eurocents to 13 euros.
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Significant FDI totaled 281 million dollars between January and April 2005.
Statistics show that investments totaled in April 103 million dollars, marking an 85 percent increase compared with the same period in 2005.
The largest part of the investments - more than 70 million dollars - was directed to greenfield investments. The sum represents an 85 percent increase compared with the same period in 2005. Mobile phone operator Vodafone invested 30 million dollars in improving its transmission services, while Porsche Romania invested eight million dollars in a unit located in Chiajna, Ilfov County. Additionally, Ana Holding invested five million dollars in the constructions sector. A total of 480 investment projects were reported, between October 2001, when the significant investments law entered into force and April 2006.
Total foreign direct investment reached one billion euros in the first two months of the year, a 94 percent increase from the same period last year. The largest share of the foreign capital - 43 percent of the total - came in the form of loans granted by parent companies to Romanian subsidiaries. In the first two months of last year, foreign investments amounted to 515 million euros, according to a press release from the Romanian Agency for Foreign Investment based on NBR provisional data. Loans from parent companies amounted to 430 million euros while the value of reinvested profit was 365 million euros, accounting for 35.6 percent of the total.
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According to company data, Cetelem Romania, formerly known as Credisson International, granted loans amounting to 100 million euros in 2005.
The company is owned by Cetelem France, member of the BNP Paribas Group.
Cetelem Romania is specialized in granting consumption credits and activates on the distribution networks of electronics and home appliances, IT, furniture and interior design products.
The company has concluded partnerships with over 200 retail companies.
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The official was present at the opening of the event titled Communications Day.
The minister showed that Romania must promote high speed Internet and develop the broadband infrastructure.
"Communications represents one of the most dynamic sectors of the national economy and one of the most attractive investment domains for foreign investors," said Nagy.
The official said that more than 53 million broadband connections currently exist in the EU.
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Bucharest Mayor Adriean Videanu recently announced a new airport might be
built in the south of the city, in view of the considerable increase Romania
will see in the number of passengers. In the meantime, modernization works
at the Henri Coanda airport should cover the air traffic increase.
Authorities intend to build an airport with a capacity three times greater
than that of Romania's main airport, Henri Coanda. The new airport could be
built in the southern area of Bucharest, near the town of Popesti-Leordeni.
In view of developing the Bucharest metropolitan area, Mayor Adriean Videanu
announced that the project is based on predictions, according to which the
number of passengers to and from Romania could reach 18-20 million per year.
Moreover, the airport would be the first in the southern part of Bucharest.
Henri Coanda International Airport currently has a maximum capacity of 4.5
million passengers annually and is undergoing modernization works. According
to data released by the Ministry of Transportation in 2005, the number of
passengers to and from Romanian airports was 4.3 million, a 15 percent
increase from 2004. A similar rise is expected for this year and a
significant 30 percent increase in air traffic is estimated for 2007. The
ministry has established strategies for the modernization of the Henri
Coanda, Baneasa, Constanta and Timisoara airports. The development of Henri
Coanda Airport, which began in 1999, is currently in its second stage. The
second and third stages will result in the modernization and extension of
international arrivals and internal arrival and departure terminals, the
modernization of the control tower and internal and external roads. At the
end of 2006, the total cost of the project is estimated at 111 million
euros, accounting for all the investment done since 1999. The strategic plan
for the modernization of the airport requires investments estimated at 450
million euros, according to hotnews.ro. Contacted by the Bucharest Daily
News, Alexandros Galiatatos, a state secretary in the Ministry of
Transportation, said that Mayor Videanu's proposal is not a project being
considered by the ministry at the moment, but rather something that will be
contemplated after the number of passengers reaches 18-20 million. The
efforts of the ministry currently target the modernization of Henri Coanda
Airport. The director of international relations at Henri Coanda, Iordache
Valentin, said that taking into consideration EU accession, Romania will see
a significant increase in the number of passengers. In this respect, the
development of the airport will result in an increase in capacity from the
current 4.5 million passengers to six million.
The modernization of Henri Coanda Airport will create a total of 80 boarding
gates, 70 parking platforms for airplanes, five kilometers of runway,
parking spaces for 20,000 cars and a high-tech technological park, four
kilometers of highway connecting to the Bucuresti- Ploiesti road, four
kilometers of railway, and four kilometers of subway tracks, connecting the
airport to the city subway system. A 200-room hotel and 5,000 square meter
office building are also to be built. Authorities have to solve the issue of
purchasing the land around the airport needed for development. Land from the
built-up area of the city of Otopeni is to be expropriated for public
utility, provided Parliament passes a law in this respect. However, analysts
are doubtful about the success of the plan. "The Otopeni airport was
initially created outside of the town, as is the custom in all civilized
countries. In the case of Romania, the airport has become a part of the town
and strangely, authorities plan a massive extension. From a city planning
perspective, this solution does not validate," real estate analyst Artur
Silvestri said for hotnews.ro. In the problem of compensation for the
properties the state might nationalize, Minister of Transportation Gheorghe
Dobre announced that financial compensation would be offered, and under no
circumstances, landowners are to receive properties in exchange. Businessmen
Ion Tiriac, Gigi Becvali, Fathi Taher and Genica Boerica own properties in
the area.
The pattern of robust increase of gross fixed capital formation and deceleration of private consumption is expected to extend into 2006 and 2007. Investment will continue to be strong on the back of considerable FDI inflows, further flood repairs in 2006 and acceleration of public investment projects.
Private consumption growth is likely to ease further to an average of 7.5% in 2006 and 6.5% in 2007 as the effect of the fiscal reform on disposable incomes will by then be fully phased in and the reignited credit growth will be subdued by the central bank's measures to restrict lending and tighten monetary policy.
Public consumption is expected to expand faster in 2006 and 2007, mainly driven by the increase in the public sector wage bill. Annual average consumer price inflation is expected to decelerate to around 5.7% in 2007 assuming that the recently started course of tight monetary policy is maintained. The ongoing adjustment of administered prices and wage growth pressures may negatively impact the outcome.
A modest increase in employment of about 0.2% is anticipated for both 2006 and 2007, which is somewhat lower than the economic growth rate might indicate. The job creation process in the private sector will be mitigated by the continuation of lay-offs in state-owned enterprises and the shrinkage of the labour-intensive light industry. Unemployment may rise slightly in 2006, but is projected to return to a downward trend from 2007.
Public finances
The general government deficit declined from 1.3% of GDP in 2004 to 0.4% of GDP in 2005 against the background of strong collection of cyclically-sensitive indirect taxes and a decline in capital spending. The cuts in the income and profit tax rate had a negative impact on revenue from direct taxes of about 1% of GDP in 2005, and the budget outcome was also affected by higher than budgeted increase in public sector wages, subsidies and transfers. Supported by strong appreciation of the currency, the stock of public debt declined further to around 15% of GDP.
The general government deficit is projected to expand to 2.3% of GDP in 2006 and 5.4% of GDP in 2007 for two main reasons. First, the envisaged restrain in expenditures for goods and services and the public wage bill seems difficult to attain. Secondly, a Property Fund was established in December 2005 to which the State transferred state shareholdings in a large number of enterprises.
The Fund will compensate citizens for the non-return of property confiscated during the communist period by distributing shares in the Fund to claimants. Under ESA 95 accounting rules, the adopted scheme is expected to have a significant budgetary impact of 0.9% of GDP in 2006 and 3.1% of GDP in 2007.
External balances
The increase in export volumes growth accompanied by a gradual decline in the growth of import volumes will not prevent a widening of the trade deficit from 9.8% of GDP in 2005 to 13.1% of GDP in 2007. The rise in the terms of trade recorded in 2005 is not expected to continue in 2006 and 2007. Despite a foreseen increase in the number of remittances and EU transfers, the current account deficit is anticipated to widen to around 10.4% of GDP in 2006 and 12% of GDP in 2007.
"Hurry and bring a coherent strategy before the Government for the money that was assigned for the support of SMEs, these soldiers of the national economy that bring added value, pay taxes to the state budget and create jobs," Copos told the representatives of Eximbank.
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Universal Music, the world's biggest music company, said on Monday it is first of the four music majors to set up a subsidiary in Romania. It already has licensing deals there.
Universal, owned by French media and telecoms group Vivendi, scored a major success in 2004 with O-Zone's "Dragostea Tin Dei," a Romanian-language dance single that sold a collective 2 million copies in France, Germany, Switzerland, Austria and the Czech Republic.
"The combination in Romania of rising incomes, annual economic growth estimated at 5 percent, the future containment of music piracy and improved distribution offers real opportunity for our business there," said Vico Antippas, president of Universal Music's central and eastern Europe operations.
Romanians spent about $35 million on music in 2004, the latest year for which data are available, ranking it 43rd biggest market globally between Chile and Malaysia, according to the music industry's trade group. The market was $13.7 million in 2001.
Controversial Russian pop duo Tatu, also signed to Universal Music, became international sensations in 2003, topping charts worldwide and alerting music companies to the new export possibilities from emerging markets.
In the region, Universal also has operations in Hungary, Poland, the Czech Republic and Slovakia, most of which were opened in 1994.
Romania is the first office in the region built from scratch by Universal, the company said, with the previous ones either buyouts of local companies or long-term joint ventures.
Universal is planning to open the Romanian office in Bucharest on June 1, seven months ahead of the country's scheduled admission to the European Union.
The union had suspended poultry imports from Romania in October 2005, following the first outbreak of avian flu in birds in Romania. About one and a half months latter, the EU approved the resumption of imports from 16 local counties in which the virus had not been found.
Until the discovery of the first outbreaks, Romania had exported in the first 10 months of 2005 approximately 2,500 tons of poultry meat, according to data from the Romanian Poultry Breeders Association (UCPR).
Resuming exports to the EU will not be an easy task because local producers have practically exited the market and restoring contacts is hard, said the president of Avicola Bacau, one of the chief exporters. UCPR representatives estimate the total loss the local industry suffered was approximately 48.5 million euros.
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The production will go to exports only, for clients such as Audi, BMW, DaimlerChrysler, Volkswagen and Porsche.
According to ARIS, the company will allocate next year about five million dollars for extending the production capacity.
Investment plans will continue, Marquardt intending to transfer part of the production from Germany to Sibiu.
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The main suggestion included in the report approved by the IMF Board referred to a well-balanced budget execution this year, primarily based on an improved budget revenue collection.
This recommendation is in stark contrast however with the current governmental strategy, as the Executive approved in the first budget rectification this year, operated three weeks ago an increase in the budget deficit from 0.5 to 0.9 per cent.
The increase in budgetary expenditure is intended to allow for investments in infrastructure and social projects.
On the contrary, IMF recommends a zero budget deficit, based on equal revenues and expenditure in the general aggregate budget accounting for 31.3 per cent of the GDP, i.e. revenues one per cent higher than in 2005.
At that time, the deficit of Romania?s general aggregate budget was 0.8 per cent of GDP, under the one per cent GDP official target, with revenues accounting for 30.3 per cent of GDP and expenditure for 31.1 per cent.
According to IMF experts? opinion, achievement of a budget deficit under the target value was mainly triggered by the control of expenses and by higher revenues than initially forecast.
The culprit ? the flat tax
Also referring to the results in 2005, IMF claims the tax abatement represented by introduction of the flat income and profit tax rate led to revenue losses of approx. one per cent of GDP, which otherwise would have counterbalanced the deficit.
Romania reported a share of budget revenues in the GDP a lot lower than the EU average, and IMF officials ?regret? the substantial decrease in revenues further to the introduction of the flat tax rate.
As for the recent increase in the budget deficit target, IMF officials voiced their concern, although admitted that the budget deficit is not an urgent issue for Romania.
Nonetheless, IMF urges authorities to take measures to ensure a sustainable growth in budget revenues in order to enable the country to make infrastructure projects and to co-finance projects supported by the European Union.
The Fund believes Romania needs a coherent plan for the absorption of high EU fund inflows and for saving amounts received from privatisation procedures, so as not to create excessive pressure on the demand.
Further, senior IMF officials recommended the finalisation as soon as possible of a medium term budget framework, and requested Romanian authorities to build mechanisms for efficient resource allocation and for a high EU fund absorption rate.
Also, the international financial body recommends a prudential payroll policy in the public sector, appreciating the Government?s decision to only grant pay raises once a year and to prohibit new recruitment, except for offices related to the European integration process.
6,5% inflation and zero budget deficit
According to the IMF, the inflation rate will decrease this year to 6.5 per cent, higher than official forecasts, if Romanian authorities comply with the Fund?s macroeconomic policy recommendations, including a zero budget deficit objective.
Although the National Bank of Romania (BNR) has a four-six inflation rate as a core objective, central bank governor Mugur Isarescu himself has recently stated that the parameter is likely to exceed the target and reach 6.5 per cent, consequently to rises in regulated prices.
IMF officials nonetheless expressed some concern with the slower disinflation pace as compared to last year. In 2005, the inflation was 8.6 per cent, slightly over the upper end of the variation range set by BNR after shifting to the inflation-targeting regime.
The slowdown in disinflation is seen by IMF as a consequence of the introduction of the flat tax rate and its negative impact on budget revenues, and of the salary policy acting as an incentive on domestic demand and non-governmental crediting.
In this respect, members of the IMF Board pointed out that the fiscal consolidation process was critical to controlling the increase in domestic demand, to accommodating capital inflows and to ensuring medium-term stability.
5.2 per cent economic growth
IMF estimates indicate an economic growth rate in 2006 over 5% of GDP but under the Government?s 6% target.
However, PM Calin Popescu Tariceanu recently announced that a downward revision of the economic growth target was possible if floods continued to cause substantial damages, although losses have not impacted the economic state so far.
The Bucharest authorities may thus reach common grounds with IMF in this respect, after a relatively long period of differences in opinions.
IMF forecasts a 5.2 per cent economic growth rate for Romania in 2006.
Last year, Romania?s economic growth reached 4% of GDP, as opposed to the 8.4 per cent growth rate in 2004.
Other IMF estimates refer to the decrease of the current account deficit this year from 8.7 per cent in 2005 to 8.5 per cent of GDP in 2006, and a constant foreign debt accounting for 32.4 per cent of GDP.
As for the domestic currency, the exchange rate forecast for late this year is RON 3.48 for the EUR and RON 2.94 for the USD, i.e. a strengthening of the domestic currency.
Net average salary up 8% in March
In March 2006, the whole-economy net average salary increased by eight per cent as compared to the previous month, while the year to year increase reached approx. 17 per cent, according to data released by the National Statistics Institute (INS).
Thus, the net average salary reached RON 828 in March, while gross salaries picked up 8.3 per cent to RON 1,101.
The annual increase in the gross average salary in March 2005 to March 2006 was 19.6 per cent.
The highest increases were reported for the hydrocarbon extraction sector, the crude processing sector, nuclear fuel treatment, as well as in the financial sector.
The latter continues to top the charts in terms of salary levels, with average net earnings of RON 3,158.
FIC president Gilbert Wood pointed out that the Romanian government has taken into account the recommendations made by the Council last year stating that the enforcement of the new suggestions will result in a surplus of foreign investments to Romania.
Attending the meeting, Premier Calin Popescu-Tariceanu encouraged the foreign investors place more resources in Romania, assuring them of the government?s full support.
Some of the steps whereby the government plans to ensure economic macrostability are the curbing of inflation, prudent wage and tax policies and the introduction of efficiency indicators for the increase of budget revenues, in order not to rise the main taxes, said Tariceanu.
The Premier assured the foreign investors that both the flat tax and the VAT will be kept at the same level in 2006.
In the same context, the head of the Executive announced that apart from the modernization of the Bucharest motorway and railway belt, a bid will also be organized this year for the award of the contract for the construction of the Bucharest-Brasov highway, that should kick off in 2006.
The privatisation commission selected this March CEZ (the Czech Republic), Enel (Italy), Gaz de France, Iberdrola (Spain) and RWE Energy (Germany) to take part in the last privatisation stage, involving submission of improved binding tenders for the acquisition of Electrica Muntenia Sud.
?Given the high competitiveness level and the quality of the tenders we received (?) we expect the transaction value involving the 67.5 per cent stake to exceed EUR 750 M,? Electrica Muntenia Sud announced at the time.
The State will sell 67.5 per cent of the Electrica Muntenia Sud stock, through a procedure similar to the one applied in previous privatisation processes.
The investor will buy a stake accounting for 50 per cent of the stock directly, and will allot funds for a capital increase through which it will increase its stake to 67.5 per cent.
However, experts in the sector believe that, after the Petrom privatisation, the sale of Electrica Muntenia Sud will be another losing transaction for Romanians unless the Government manages to bind the future owner to invest in networks.
More precisely, just like in the Petrom ? OMV case, privatisation contracts signed by the previous PSD government favour the investors and disadvantage the Romanian State.
According to the tariff calculation methodology, regulation authorities allow investors to include all investments in the tariffs charged, without being able to check whether the respective investments were actually made, claim persons involved in the privatisation process in electricity utilities.
?Owners of electricity utilities should make public their network development plans, for Romanians to know why they are paying 30 per cent more in distribution tariffs,? experts claimed.
The same sources also appreciate that the Romgaz privatisation plans were given up, considering that the company is a useful resource for Romania in case Gazprom supplies less gas.
Electrica Muntenia Sud, dubbed ?the jewel? of the Electrica crown, reported for 2005 EUR 24.7 M in net profits, after having concluded the previous year with EUR 8.3 M in losses.
In fact, Electrica SA reported for 2005 total net profits of EUR 197 M, a record-high level for a State-owned company in Romania.
The results are mainly owing to the increase in Electrica profit rates thanks to tariff increases, but also to the revenues the company made from selling the four branches.
The Fund will invest in Central and Eastern European states which joined the EU in 2004 and in countries in south-eastern Europe such as Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia ? Herzegovina and Fyrom.
EBRD may contribute some 20% of the capital, i.e. up to EUR 50 M.
The Fund manager will be Royalton Capital Investors General Partner II.
Both companies suspended listings on the Athens stock exchange and will make an official announcement on May 8.
Panos Germanos owned 34.3 percent of the Germanos shares at the end of 2005, while 39.2 percent were the property of foreign investors.
Germanos is a telecommunications services provider with subsidiaries in Romania, Bulgaria, Poland, Macedonia, Cypress and Ukraine.
The company reported a 1.02 billion euro turnover and a 63 million euro profit in 2005.
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The international legal consultant will issue the task book for the fund's manager that will be approved by the government.
A total of 14 letters of interest were submitted last week, from companies such as Goldman Sachs, Erste Sparinvest, Union Bancaire Privee, HBSC, PIMCO Europe Ltd, Richmond Asset Management, Clariden Bank, UBS AG or Julius Baer Investment Management LLC.
Ivan said that the fund's manager would have the possibility to participate together with the Proprietatea Fund in the financing of different investments.
"It is an attractive solution that offers a high degree of safety," said Ivan.
The official believes that the main advantage is that large investments can be made but with a low degree of risk.
The fund was created in 2005 as a solution for compensating former owners dispossessed by the communist regime who cannot receive their actual properties.
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The negotiations started in October 2005.
The AVAS head, Razvan Orasanu, said in April that the state does not have much to offer for negotiations with Mahindra & Mahindra because the financial situation of the Romanian company is very precarious.
The official said that the Romanian state might take into account the possibility that the agreement with the Indian company might not be closed.
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Therefore, the selection was not correct in terms of competitiveness, Electrica being disadvantaged. Moreover, Turceni sold in the first quarter of 2006 electricity at sums 25 percent under the market price, thus losing about 4.3 million euros in potential profits. Another irregularity found by the investigation was that Turceni had sold electricity to Electrica at prices of 10 lei per MWh, 2.9 euros higher than regulated and 33 percent higher than those used in contracts with private companies. In this way, eligible consumers that purchase electricity from Electrica paid tariffs that were computed based on higher acquisition costs.
The ministry's inquiry found irregularities at Rovinari and Hidroelectrica as well. Upon further investigation, the MEC could decide to change the management of the companies found in the wrong. Minister of Economy Codrut Seres asked Internal Affairs Minister Vasile Blaga to delegate two investigators that could assist in the MEC inquiry on the energy market. Minister Seres will issue a decision based on which the boards of directors in electric energy production companies will establish procedures on the buying and delivery of electricity on the free market, exclusively through the Romanian Electricity Market Operator.
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If the quantity of carbon dioxide produced is under the level approved by the Ministry of the Environment (MMGAP), companies will be able to sell the certificates for the remaining quantity on the securities markets.
The maximum gas emission quota that each company can produce will be established based on emissions history from 2000 to 2004, said representatives of the institution at a seminar on Friday organized by Petroleum Club of Romania. Large polluting economic operators have already received forms for the report on emissions history, based on which the authorities will make a projection for 2012.
Each company will receive a number of certificates corresponding to the amount of carbon dioxide it estimates to produce.
Starting in 2007, at the end of each year, companies will be verified by an independent institution to see if the emissions produced were within the limits of the quota. Should a company produce less carbon dioxide than the estimate, it would be able to sell the certificates for the unused quota to other companies which pollute more.
Unused greenhouse effect gas certificates could be traded on a specially created platform, which would be operated by the company that currently administrates the electricity market, OPCOM.
In the member states of the European Union the greenhouse gas emission trading system was implemented in 2005.
"For each ton of carbon dioxide produced above the approved limit, companies will receive a 40 euro fine in 2007 and a 100 euro fine starting some time between 2008 and 2012," said Dumitra Mereuta, an official in the Ministry of Environment.
In the short term, the National Agency for the Protection of the Environment will make an inventory of all the carbon dioxide generating installations in the country. Moreover, the ministry will establish the total number of certificates to be issued and the methodology for their allocation to each eligible company. MMGAP is currently working on a National Allocation Plan of emission certificates. A first draft will be published on the institution's Web site on June 30, before being sent for endorsement to the European Commission.
The achievement of the greenhouse gas certificates trading system is part of Romania's pledges taken in the EU accession treaty. The mechanism was conceived as an instrument for the implementation of the Kyoto Protocol, signed by Romania in 2001. According to the protocol, Romania must elaborate a plan to downsize carbon dioxide emissions by 2012. MMGAP representative Ionut Purica said that Romania would try to do so by eight percent. "We produce 40 percent less emissions than we would be allowed, which means that certificates corresponding to 40 million to 50 million tons of carbon dioxide could be available for sale," Purica said. The ministry's official specified that the greenhouse gas certificates market was very volatile so that a certificate that sold for 25 euros in 2005 was now worth only 12 euros. He added that starting next year every operator of polluting equipment must obtain an authorization to produce greenhouse gas emissions.
The main greenhouse gas producer in Romania is the energy sector, mainly the companies extracting and processing minerals and coal, companies exploiting and extracting hydrocarbons, companies with refining activities, electricity and thermal energy production and those producing chemical fertilizers.
In another effort to reduce pollution, Calin Doica from the Ministry of Public Finance announced on Thursday that the institution has made an analysis of the excises applied to non-polluting fuels and a drastic reduction would become effective January 1, 2007.
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Minister Winkler added that Romania's EU accession would also mean its adhesion to a new legal framework for external commercial relations.
"Romania has completed, in addition to the European Agreement and the Central European Free Trade Agreement (CEFTA), free trade agreements with the Republic of Moldova, Turkey, Israel, Serbia-Montenegro, Albania, Bosnia and Herzegovina, and the European Free Trade Association (EFTA). When Romania joins the EU, we will withdraw from these agreements," said Iuliu Winkler. According to the official, Romania's trade exchanges are mostly operated within the free trade agreements.
"Approximately 84 percent of Romanian exports and 70.56 percent of imports in 2005 were operated under this juridical framework. As to the weight of the Romanian commercial exchanges within these agreements in 2005, the first-ranked partner is the EU (67.6 percent of exports and 62.2 percent of imports), followed by Turkey (with 7.92 percent of exports and 4.86 percent of imports)," according to Winkler.
Following EU accession, Romania will implement the EU juridical framework.
Therefore, Romania will conclude agreements with Mediterranean countries, Mexico, Chile, South Africa, sign the stabilization and association agreements with western Balkan states and the non-preferential agreements with third parties.
The Central European Free Trade Agreement was signed on December 21, 1992 in Krakow, Poland. All the parties had previously signed association agreements with the EU, which is why CEFTA functions as a preparation for full EU membership. CEFTA's members are Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Romania and Bulgaria. The European Free Trade Association (EFTA) is an intergovernmental organization promoting free trade and strengthening economic relations. EFTA's member states are Iceland, Liechtenstein, Norway and Switzerland. The EFTA Secretariat is headquartered in Geneva, with an office in Brussels, and a statistical office in Luxembourg.
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Romania's general consolidated budget deficit in 2005 was 0.8 percent of the GDP, under the 1 percent official target. Revenues accounted for 30.3 percent of the GDP, while expenditures accounted for 31.1 percent.
This year's target for the budgetary deficit was 0.5 percent of the GDP, but the government increased the figure to 0.9 percent in order to finance investments and social projects. The National Bank of Romania (BNR) wants to keep the inflation level between four and six percent but BNR Governor Mugur Isarescu said that inflation could reach 6.5 percent.
Prime Minister Calin Popescu Tariceanu recently said that the GDP increase target could be lowered if the floods continued to produce large-scale damage.
The present target is 6 percent. "At the moment, the floods will not have a significant impact on the economic situation and the 2006 economic growth will not be affected if the floods stop. If floods continue, the economic increase will depend on the extent of the damage," said Tariceanu.
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The company expects 3.6 million euros in profit this year, up around 11 percent from the year ago. Much of the profit of 2005 could be used for raising the share capital. Biofarm Co. budgeted 2.8 million euros for investment in 2006. The company will launch 14 new products this year.
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"Taking into account the 2005 tendency, we are able to estimate that we will exceed one billion euros, maybe more," Stamov explained.
In the above-mentioned period, Romania's exports to Bulgaria amounted to 547 million euros, while the imports to 356 million euros.
The Bulgarian official considers that the European Union's report in May that refers to Romania and Bulgaria will have yellow flags, but it will be a positive and optimistic one with regard to the two countries' accession to European Union on January 1, 2007.
He also considered that the social impact of the integration would be harder to tolerate, on short-term, taking into account that the wages policies would be restrictive, with a tendency to increase, but not at the same pace with the growth of the prices, which would almost reach the same level with the ones in the European Union (the prices for utilities and fuel are close to the price for these service in European Union).
The long-term impact will be a positive one, with efforts that have to be made now, the Bulgarian official added.
Stamov considers that an important part of the small and medium-sized enterprises of the two countries (10-20 percent) will have difficulties after the integration, due to the competition and the fact that they lack the wish to be competitive.
"Almost all the countries had problems with the SMEs, some of them big ones, other ones, smaller.
But they have to make some efforts now, in order to reach a competitive level to allow them to survive after the integration," he added.
Within this context, the Ministry for Public Finances announced the third state bond bid this year.
Although it may sound encouraging, these results may indicate only one positive aspect, namely an improvement in State Budget revenue collection.
The Ministry confirmed that receipts to the budget are indeed a lot higher than forecast for Q1 ? a 24.25 per cent increase in nominal terms, as compared to the corresponding period last year.
When budget revenues are broken down by source, the VAT collection is found to account for the larger share of the revenues, increasing by 34.8 per cent, followed by customs duties (up 32.37 per cent) and the income tax (up 25.11 per cent).
But the same budget surplus may signify a poorer collection tied to budgetary spending restrictions, which would suggest weakness in funding investments ? in other words, ministries? incapacity to submit viable and well drawn up projects for financing by the FinMin.
Although a surplus was reported in Q1 for most budget expenditure chapters, one of the few deficits (and also the highest one ? EUR 9.6 M) was reported for the National Motorway Company budget.
Although past experience generally indicates that in the first quarters of the year expenditures are lower than in the rest of the year, financing needs were rather high in Q1, 2006, including at a local community level.
Nonetheless, local budgets reported the highest surplus ? over EUR 300 M ? which reflects a poor management of available funds.
On the other hand, two weeks ago the Government announced, along with the first Budget rectification this year, that the 2006 budget deficit target was raised from 0.5 per cent GDP to 0.9 per cent, in order to cover additional expenses in the infrastructure sector and in co-funding European projects.
In April, the Ministry for Public Finances announced that the value of State bond issues in Q2 would be RON 200 M, although in late 2005 the same Ministry had announced that RON 4.15 bln (EUR 1.15 bln) worth of State bonds would be issued this year, in the domestic market exclusively.
According to Premier Calin Popescu Tariceanu, the agreement "is due to allow connecting this region to the rail transport network in the European Union."
The agreement was signed by the ministers of transport from SEECP members states and stipulates the creation of a high speed rail network in the Balkans region that is to be connected to the European network and constructed in line with the EU technical norms and at the highest EU standards.
According to State Secretary in the Romanian Ministry of Transports Septimiu Buzasu, the trains that will use this type of railway are to attain a speed of 160 kilometers per hour and in Romania the railway track will follow Pan European Corridor IV and Corridor IX.
As Buzasu said, the finalization deadline of the high-speed regional network is set by this agreement in 2020.
The privatization commission selected in March companies CEZ (the Czech Republic), Enel (Gaz de France), Iberdrola (Spain) and RWE Energy (Germany) for the final stage of the privatization process. The Romanian state currently holds a 67.5 percent share of Electrica Muntenia Sud and expects the deal to add 750 million euros to the state budget.
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The official said that the financing would be granted for five programs that will be developed between 2006 and 2008. "ANT wants to promote the Romanian tourism industry more aggressively and present a much more alluring offer. We must start selling Romania as a touristic offer," said Sima. The development of skiing infrastructure will receive 130 million euros and that of health resorts 90 million euros, while the development of the Danube Delta and the Black Sea health resorts will be financed by 60 million euros.
A total of 30 million euros will be granted to the development of the mountain infrastructure and 15 million euros will be allocated to the Sibiu- European Cultural Capital program.
The ANT official said that the institution wants to introduce new stipulations in the sector for the purpose of improving services offered to tourists.
One of the most important stipulations will oblige all the tourism services providers to hire qualified personnel. Sima believes that the new stipulation will affect the personnel who do not have proper qualifications hired during the summer season.
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The company estimates a gross profit of 8.5 million euros, up 24.4 percent versus the 2005 value.
The development strategy for this year is mainly based on increasing the volume of exports, by registering and selling new products on the international market and making important investments for increasing the competitiveness of the company's products.
The 2006 investments are focused on upgrading the department of injecting products and starting a water treatment unit and a waste incinerator.
The company posted last year a turnover of 45.2 million euros, by 35 percent more versus 2004, and a gross profit of 6.5 million euros, up 51 percent.
The majority stake of Antibiotice Iasi is owned by the Authority for Privatising State's Assets and is to be put up for privatization in the coming months. Other shareholders are investment fund Broadhurst and SIF Oltenia.
Pharmaceutical group Montero, with activities in distribution and retail sale of medicines, company Phönix Laboratorium of Hungary, producer Ozone Laboratories and Canadian company Acic Pharmaceuticals have announced so far their interest in participating in the privatization of Antibiotice.
The market value of Antibiotice is estimated at 180 million euros, some 40 times more than the Aevaluation in 1998 -1999, when the variant of privatizationAC was presented for the first time.
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"We believe that in the coming five years the market value will reach twice the level attained in 2005, which - according to Cegedim estimations - currently stands at almost 1.3 billion euros expressed in wholesale prices," says LaborMed Pharma marketing and development director Gabriel Cernica, adding that the market is expected to exceed the threshold of 2.5 billion euros in 2010.
According to the data supplied by market research company Cegedim, in 2005, drugs consumption in Romania attained 1.27 billion euros, up by 18 percent against 2004, whereas consumption through drug stores attained some 950 million euros.
Now, that the premises for sales growth are set in place, the Romanian pharmaceuticals market gets increasingly attractive to foreign investors.
In 2005, the Czech company Zentiva acquired Sicomed in a deal worth some 85 million euros. Zentiva announced for this year estimate sales worth over 100 million euros for the entire group.
Iceland's pharmaceuticals company Actavis acquired recently drugs producer Sindan for about 150 million euros, whereas India's Ranbaxy took over Terapia Cluj for 324 million US dollars (about 270 million euros). Terapia posted in 2005 a turnover of over 80 million US dollars. The company exports 30 percent of its products portfolio to 15 European countries.
With sales worth over 100 million euros, GlaxoSmithKline was last year the company with the most substantial sales on the Romanian market. With sales worth 74 million euros, the Swiss from Hoffmann La Roche rank second in this classification worked out by Cegedim.
"At present, there are more than 50 active players on the Romanian market but no more than 10 will remain active in the coming five years. This is currently the most segmented market and the trend should be towards the consolidation of distributing companies," says A&D Pharma CEO Dragos Dinu.
The most important drugs distributing companies in Romania are Mediplus - a member of the A&D Pharma Group, Montero, Relad, Fildas Trading, Medimfarm, Farmexim, Farmexpert.
In 2005 Romania had about 4,500 drug stores, many of which operate in the networks of important names like Sensiblu, Help Net, Catena, Remedio and Dona. Sensiblu posted in 2005 a turnover of 63.7 million euros.
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When selecting the bank, the Romanian party deemed the international bank where the escrow account would be opened should have a Romanian subsidiary.
The state will cash in 2.2 billion euros from the BCR sale.
Erste Bank and the Romanian authorities have agreed that the transfer of the state's 61.88 percent stake in BCR should be made by June 26.
Before the actual payment for shares takes place, the Romanian part committed itself to a series of conditional ties. The main problems are obtaining the approval of the Competition Council regarding the covering of Bancorex debts to the state budget at the time of the merger and changing the status of BCR.
The Competition Council initiated the analysis regarding state aid for the former Bancorex, after receiving on Tuesday the notification from the Authority for the Recovery of State Assets (AVAS).
The privatization contract specifies that if the Competition Council's decision indicates illegality of state budget grants for covering Bancorex debts, these values are subtracted from the acquisition price paid to AVAS.
The Competition Council has already issued a non-intervention decision in the case of economic concentration resulted from Erste Bank taking over BCR, since the Austrian-based bank was not operating any kind of transactions on the Romanian market.
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Now the company is building 250 homes in Straulesti in a 13 million Euro investment, for the Ministry, to be completed around February 2007.
In Tunari, South Pacific Group is constructing a greenfield development called Sydney Residence with 112 homes aimed at the emerging middle class in a 20 million Euro investment.
This will be targeting families with an average income of around 1,000 Euro per month, says the firm?s CEO, Construction and Development, Andrew Prelea.
The prices for properties start at around 135,000 Euro for a three bedroom and two bathrooms residence over 142 sqm. Following this will be Melbourne, an 83-townhouse development 600 metres from Sydney Residence, which should start construction in July, in a 14 million Euro investment.
There is also Adelaide, an 11 million Euro investment, consisting of 106 duplexes which Prelea predicts will start development in February 2007 and Brisbane, a further townhouse development with 153 properties in Tunari-Dimieni, which will start in April 2007. Invetsment here will be in the region of 20 million Euro.
To support these projects, the company will also build a warehouse in a 15 million Euro investment and a commercial centre for shops and cafes near Sydney Residence worth between 20 and 30 million Euro. In total, these investments are in the region of 160 million Euro.
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Procedures for the tender and the conditions for the grant of licenses will be set by order of the IGCTI president. The license would be obtained as soon as the winner has paid a first installment from the tariff for the clearing of the frequency band. The price is similar to the one paid at the last tender, namely 35 million dollars and is to be paid in six installments. The first one would be worth 10.5 million dollars and would have to be disbursed within 120 days from the time the license is granted. The following installments, amounting to 4.9 million dollars each, would be paid annually starting in 2007. The money obtained from the sale of 3G licenses would be directed to the state budget. The only companies holding such licenses on the local market are Vodafone Romania and Orange Romania. Vodafone has launched its 3G services in April 2005 and managed to attract over 97,000 3G clients since that time.
Orange Romania officials have announced that 3G services would be included in the company's offer by June 2006. Orange also plans to launch the HSDPA (High Speed Downlink Packet Access) technology that allows the company to provide 3.5G high-speed communications, according to the company's Commercial Director Thierry Millet.
The Orange official announced that a partnership was to be concluded with the police for the installation of surveillance equipment to monitor traffic on the national road DN1.
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Antibiotice Iasi reported a 45.2 million euros turnover for 2005, 20 percent more than in 2004, and a net profit of 5.4 million euros, a 58 percent hike. The company will contract a 2.5 million euro loan for the financing of investment. Antibiotice targets a 22 percent advance in turnover for this year and a 0.3 percent increase in its market share, up to 3.5 percent. The majority stake in Antibiotice is held by the Authority for the Recovery of State Assets (AVAS) and will be up for privatization in the following months. The privatization process is expected to be complete by fall this year. Pharmaceuticals group Montero, Ozone Laboratories, Canadian Acic Pharmaceuticals and Hungarian company Phonix Laboratorium have announced their interest in taking over Antibiotice. The market value of the company is assessed at 180 million euros.
Paints and lacquer producer Policolor Bucuresti estimates a net profit of about 1.6 million euros for 2006, three times less than in 2005. The company targets a turnover of 31 million euros and investment worth 1.5 million euros. Policolor is controlled by three investment funds which together hold over 82 percent of shares. Citibank Romania also holds a 7.3 percent stake. Policolor is listed at the Bucharest Stock Exchange and has a market value of about 37 million euros.
SIF Oltenia shareholders have approved the separating of administrative and executive management in the General Shareholders Meeting last week. SIF Oltenia is the first of the five investment companies to approve such a decision. SIF expects a net profit of 20.3 million euros, 28.8 percent more than last year.
Romgaz Medias estimates a 34 percent revenue increase this year, up to 927 million euros, after a 14 percent increase in 2005. The state owned company targets a 15 percent increase in profit for this year, to 156 million euros. The natural gas producer had a 637.3 million euros turnover in 2005, up 22 percent from 2004 and expects a 37 percent hike this year. The 239 million euros allocated for investment this year will target 30 new drills and equipment purchase. Part of the funds will be used for research and exploration of new natural gas reserves. Romgaz provides half of the natural gas production in Romania and holds the most important gas reserves. The government announced its intention to privatize Romgaz by the sale of at least 51 percent of the shares held by the Ministry of Economy and Commerce. According to a government decision, the privatization will not be negotiated with a strategic investor, but in a fashion determined by the selected privatization consultant, the consortium formed by Credit Suisse First Boston, Linklaters and FRAI. Mol, Gaz de France, Lukoil, Ruhrgas and Wintershall have expressed their interest in taking over Romgaz.
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According to the preliminary data presented by the president of the National Regulatory Authority for Communications (ANRC), Dan Cristian Georgescu, landline network operators operated traffic of 8.32 billion minutes.
The ANRC president added that in the years 2004 and 2005 voice traffic in the mobile networks rose by 43 percent, while traffic in landline networks registered a downfall. As for alternative operators of landline networks, all operators excluding Romtelecom, Georgescu said that from July-December 2005, their market share increased 2.5 times, reaching 9.9 percent and 462,000 clients.
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Allianz-Tiriac estimates a 20 percent increase in the volume of subscribed gross premiums for the general insurance segment for 2006, compared to the 232 million euros registered in 2005. Last year Allianz-Tiriac subscribed premiums for general and life insurance activities reached over 250 million euros, 20 percent higher than in 2004, according to the audited financial reports of the company. The company reported a 10 million euro net profit last year, establishing the company as the leader on the Romanian insurance market with a 20 percent market share, according to company representatives.
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| The areas around the Kiseleff and Aviatorilor Boulevards have high real estate prices due to great landscapes and security, as many institutions are located in the vicinity. |
The most expensive residential area in Bucharest is
Aviatorilor-Primaverii, with an average sale price of 2,150 euros per square
meter in 2005. The priciest rents are in the Kiseleff area, at an average
price of 4,200 euros per month, shows a study by real estate agency
Eurisko.
Prices of homes in the Aviatorilor-Primaverii area increased last year from
an average of 1,580 euros per square meter, to 2,150 euros, before taxes,
shows a Eurisko study. Representatives of the real estate company have
mentioned that the area is preferred, both for sale and for lease, because
of the high quality of buildings, great landscaping, luxury clubs and
restaurants and the high level of security offered, as most official and
diplomatic residences are located in the area. At 4,200 euros per property,
a 125 euro increase from 2004, the Kiseleff area dominates the listing of
the most expensive neighborhoods for apartment rentals in Bucharest. The
most attractive areas in the capital, on the residential segment, are those
close to the center, situated nearby the Primaverii, Aviatorilor, Floreasca
and Kiseleff boulevards, where the level of rental and sale prices usually
register slight increases, due to a lower real estate offer. The Eurisko
analysis took into account the evolution of prices for 2002-2005. Prices of
homes in the Primaverii and Aviatorilor areas have increased each year, from
1,100 euros in 2002, while in the Dorobanti-Floreasca areas prices have
reached 1,550 euros per square meter, from 830 euros per square meter in
2002. The Kiseleff area, neighbored by Herastrau Park and Arcul de Triumf,
was no exception to the upward trend of prices, which increased from 1,325
euros per square meter in 2002 to 1,875 euros in 2005. As for rents, the
Kiseleff area is followed by the Primaverii and Aviatorilor areas, with an
average price of 3,812 euros per villa in 2005. In Dorobanti and Floreasca,
rents have reached a level of 3,150 euros per property. The level of rents
has been computed as an average of tariffs and size of properties, including
apartments with one to four bedrooms and villas. The rents presented do not
include value-added taxes.
In an interview for online news site Hotnews.ro, Ion Radu Zilisteanu, director of the Intermedias group and former president of the Romanian Real Estate Agencies Association, estimates that within two years prices on the real estate market will go down. Zilisteanu sees a five to eight percent average increase in prices for apartments in the next two years. As for properties within the built-up areas of Bucharest, their prices could go up 25 to 30 percent this year, while agricultural plots could be 35 to 40 percent more expensive. Overall, owners should expect a decrease in prices, which will begin in two years' time, depending on the rate of investment in new buildings. The real estate expert believes the south of the capital has a large growth potential, as prices in this area have become the smallest in Bucharest.
"A developed infrastructure will play a key role in the economic development capacity, increasing of trade and our target: economic development, which will be reflected in a rise in the prosperity of citizens," Prime Minister Calin Popescu Tariceanu said. The Romanian official was also present in Salonic, Greece for the high level Summit of the Southeast Europe Cooperation Process (SEECP). The treaty was also signed by countries taking part in SEECP, namely Albania, Bulgaria, Greece, the Republic of Macedonia, Serbia, Montenegro, Turkey, Bosnia Herzegovina and Croatia.
Countries present at the conference considered that reaching a free trade agreement in this region, which could replace the bilateral agreements of the states in the area, will accelerate the economic development and constitute a support in the pre-accession period, according to Reuters.
The free trade area plan was approved by the interested countries during a meeting held in April in Romania and is sustained by the EU.
The details regarding the date and the implementation conditions of this plan are still to be discussed.
Trade exchanges among the ten countries of the region, Albania, Bosnia, Bulgaria, Croatia, Greece, Macedonia, Romania, Serbia, Turkey and Republic of Moldova registered an increase of 33 percent during the 2001-2004 interval, reaching 3.5 billion euros.
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This transaction's value is some three million euros, the cited sources maintain.
Monopoly Media developed in the last two years the store advertising system consisting in broadcasting spots on the monitors installed in big commercial chains, business predicted to grow at a fast pace in the upcoming years. Liviu Luca is PAS Petrom President, one of the most powerful trade union leaders in Romania.
The association holds significant funds and places them in various businesses - Realitatea TV, Ziua daily (media), Romexterra (banks), Delta Insurance or Petromservice (oil equipment and services). The monitoring network installed and operated by Monopoly Media comprises hypermarkets such as Cora, Carrefour, Metro, Billa, Sensiblu chains or Plaza Romania and City Malls.
Moreover, the company has installed and is operating BRD TV, a closed circuit television that broadcasts inside this bank's subsidiaries - BRD being the second ranking bank in Romania.
Among Monopoly's clients, there are also Agip petrol station operator, La Fourmi supermarkets or McDonald's restaurants. Monopoly Media Co. posted a turnover of approximately one million euros in 2005 and for this year this is estimated as some 3 - 3.5 million euros worth.
PAS Petrom has acquired the majority package of the investment vehicle that integrally controls the firm, the remainder of the stock (about 20 percent) being owned by the company's founder, businessman Gabriel Faflei, Ziarul Financiar also writes.
Gabriel Faflei previously held 60 percent of Monpoly Media stock, the rest of 40 percent representing the American investment fund Scimitar's participation, controlled by Dubai investors.
Monopoly Media has been set up in 1991 and gradually positioned itself as one of the biggest outdoor publicity operators.
"This year we plan to achieve our goals by expanding the range of products that we distribute in Romania and increase the number of regional dealers in the small cities that are not targeted by the large international chains," said Baltac.
The company in 2005 had 200 distribution points, including commercial centers and hypermarkets such as Metro Cash&Carry, Praktiker, Bricostore, Selgros, Real, Cora, Carrefour, Plus, Minimax ACOM, Interhome and Global.
"In 2006, Einhell Romania will boost its businesses once new players on the retail and DYI markets enter Romania, thus the growth target that we set is realistic," said the company's representative. This year the company could increase to 300 the number of distribution points.
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The company also managed to better position itself by implementing a new sales system and to increase the contribution of services to the turnover as well as to increase the clients' database and expand the product range.
Among the most important projects the company completed are the IP infrastructures at Bancpost, the Cisco LAN/WAN infrastructure that was implemented at Romtelecom, the IP infrastructure for the internal network at Cosmote, the IP phone solutions for Unicredit and Credisson's Contact Center.
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The initial analysis made the client opt for the implementing of the Financial, Controlling, Sales & Distribution and Supplies Management modules. The project was completed during the past five months and was developed and implemented by a team of 15 experts from the SAP competence center in Greece, Germanos Group and S&T Romania.The Romanian team adapted the template which was created for the Germanos Group.
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SIVADOC, the system provided by SIVECO Romania offers a common platform that unifies people, processes and information in order to ease the document circuit, the access to information and protect against unauthorized users.
The benefits of this program will be equally shared by the organization, which will experience an increase in operational efficiency and drop in paper processing cost, and the clients, who will be better serviced, have an improved and more transparent communication with the company.
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If the selected company revokes the offer or refuses to sign the sale and purchase contract, the state will start negotiations of contractual clauses with the company ranked second- if the latter agrees to improve its offer to the level of the one proposed by the winner. Negotiations begin even if the selling offer and/or the final buying offer of the runner up exceed the deadline. The same procedure will also be implemented if the privatization contracts are terminated for not paying the entire amounts representing the down payment, the price or the installments in due time, or as a result of a definitive and irrevocable court decision. In the above mentioned situations, the state will require the runner up to provide an answer (either accepting or refusing to make a better offer) within 60 days of the date of winning company's refusal or the contract termination date.
The runner up will be able to express its intention to buy within 15 days of the date of receiving the response notification. If there are two or more companies ranked second which express their intention to buy, the state will organize a public sale. All these stipulations will be applied for any share selling method, except methods specific to capital markets.
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Some of the companies to be listed on the stock exchange in the first stage of the privatization are the National Company for Railroad Assets Administration, Metrorex (the subway company), international airports Henri Coanda and Baneasa-Aurel Vlaicu in Bucharest, international airports in Constanta and Timisoara, the Administration of Navigable Channels Constanta, and administrations of Danube ports in Galati and Giurgiu.
Additionally, the Authority for the Recovery of State Assets (AVAS) will take over the administration of seven companies subordinated to the Ministry of Culture in order to privatize them as soon as possible, said yesterday AVAS President Razvan Orasanu.
The seven companies are Coresi National Printing Company, RomaniaFilm Film Distribution Public Company, film studios Rofilm, Sahia Film and Animafilm, and publishing houses Scrisul Romanesc and Meridiane.
The Romanian state will initiate negotiations during privatizations of state-owned companies with groups placing second after the analysis of offers, in case the winning company withdraws or does not pay the entire down payment or the agreed upon installments. This stipulation will be included in a decision draft which completes the application norms of government ordinance 88/1997 regarding company privatizations.
If the selected company revokes the offer or refuses to sign the sale and purchase contract, the state will start negotiations of contractual clauses with the company ranked second- if the latter agrees to improve its offer to the level of the one proposed by the winner. Negotiations begin even if the selling offer and/or the final buying offer of the runner up exceed the deadline.
The same procedure will also be implemented if the privatization contracts are terminated for not paying the entire amounts representing the down payment, the price or the installments in due time, or as a result of a definitive and irrevocable court decision. If there are two or more companies ranked second which express an intention to buy, the state will organize a public sale.
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Moreover, Impact announced that the Construdava office building, evaluated at 19 million euros, would be taken over by an investment fund until June.
"The Greenfield residential complex peeked foreign investors' interests in buying the entire real estate portfolio. It is more profitable to sell this way," said yesterday at a press conference the general manager of Impact, Dan Ioan Popp.
The Greenfield complex is being built in the northern area of Bucharest over an area of 50 hectares. Works for the first part of the project, consisting of 46 dwellings, started in October 2005. The second part will be spread over 13 hectares and consist of 296 dwellings.
The third stage of the project, to begin in 2008, will extend over 36 hectares and consist of 540 houses and more than 2,300 apartments.
According to company representatives, the project is estimated at 193 million euros.
As for Construdava, Popp said that the building is almost completed and ready to be transferred to the new owner.
The Construdava office building was imagined as a business center, having a total area of about 13,240 square meters.
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The Ministry of Public Finance and the Ministry of Justice will approve the operation.
The shares will also be listed on an international stock exchange.
The consulting contract for the listing on the stock exchange of RomTelecom shares owned by the state will be referred to the government for approval as soon as possible.
The RomTelecom listing is expected in September or October, said yesterday Minister of Communications Zsolt Nagy. "We reached an agreement with Credit Suisse First Boston regarding the contract clauses. According to the document, within six months, at most, the consultant will present the conclusions. I think that in September-October 2006 we will list a first series of RomTelecom shares on the Bucharest Stock Exchange and, probably, on an international stock market," added Nagy.
The minister mentioned in March that the Ministry of Communications and Information Technology estimates the value of the RomTelecom shares owned by the state to approximately one billion dollars. MCTI selected in January the investment bank Credit Suisse First Boston for financial consulting services related to the stock exchange listing operation. Currently, the Ministry of Communications controls 44.99 percent of RomTelecom's share capital, of which 20 percent will be transferred to the Proprietatea Fund.
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The input amounted to 557.7 million euros, while output reached 410.3 million euros. Following the international gold price evolution, the gold reserve remained constant at 104.8 tons, its value going up to 1.712 billion euros.
Thus, international reserves, meaning hard currencies plus gold, exceeded 20 billion euros. By the end of 2006, the payments due for the external public debt account add up to 946 million euros, concludes BNR.
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Distribution activities carried out by Elgeka Ferfelis account for the highest volume in the group's turnover, 57 million euros, with the remainder of turnover contributed by the Cera Villa Design construction materials firm, in which Elgeka Ferfelis holds a majority stake (70 percent).
''Investment plans for 2006 support the goals, set for this year,'' Ziarul financiar daily quoted Ioannis Ferfelis, chairman and CEO of Elgeka Ferfelis Romania, a branch of Greek company Elgeka SA.
Elgeka Ferfelis has drawn up investments projects worth 5 million euros for this year.
Investments will go to the acquisition of modern warehouses, the renewal of the car fleet and are also aimed at specializing personnel. ''According to our strategy for the future, all spaces Elgeka Ferfelis uses for operations, will be held by the company,'' Ferfelis said. The company also plans to expand to the Bulgarian market by taking over 70- percent in a Bulgarian distribution company.
The company's intention is to operate 5 strategically located warehouses in Bulgaria's major cities, including Sofia and Ruse.
This month, the company will expand the portfolio of products it distributes by taking over the distribution of Antrefrig pates, after having started working with Pan Group Craiova, one of the most important companies in Romania in the milling and bakery market, earlier this year.
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The company plans to increase its chain of fuel stations by 6 new units.
The units will be completed after greenfield investments worth some ¤8 million.
In 2007, the company will assign some ¤12 million to expand and improve its network.
"Presently, the strategy for Romania is focused on distribution units -on gas stations and how to increase their efficiency.
We plan to invest in the upgrade of all MOL gas stations and defeat competition by offering additional services and car wash facilities," said Gyorgy Mosonyi, general manager of MOL.
MOL also announced its financial results for 2005 during the same shareholders meeting.
The company achieved its targets, while the stock exchange capitalization reached 10 billion USD.
Zsolt Hernadi, CEO and executive director of MOL Group added that the company's targets continue to be ambitious.
MOL Romania is active on the market since 1995 and so far invested around ¤150 million in its gas stations chain, which now has 100 units across the country.
The Budapest-Targu Mures connection will represent Wizz Air's first market entry into Romania, the seventh country in the region the airline will operate from, following Poland, Hungary, Lithuania, Bulgaria, Croatia and Slovenia.
The flights between Targu Mures and Budapest will start on July 14, three times a week initially. Tickets are already on sale on the airline's website, wizzair.com or through the Wizz Air call centre on +36/1 470-9499 with fares starting from ¤19.98 for one-way travel, including taxes and charges.
József Váradi, Chief Executive Officer of Wizz Air said, "Our entry into Romania is a highly important step forward to reinforce our market leadership in Central and Eastern Europe.
"We aim at establishing the Wizz brand by offering unprecedented low fares and comfortable air travel to the citizens of Romania well before the country's EU accession.
"Targu Mures Airport is the perfect location for Wizz to serve the millions of inhabitants of Transylvania and those who wish to experience the unique nature and cultural life of the region. This is the first step and many more are to come."
Petru Stefan Runcan, General Manager of Targu Mures Airport and President of the Tourist Association ASTOUR commented, "We are happy to have the first international low cost carrier in Romania flying from Targu Mures to Budapest. "We expect that the low cost effect will give us a new view of development of the local public administration and will bring new business opportunities to companies.
"We do expect a big number of tourists and investors flying into Romania with the new low cost airline. We are proud that Wizz Air chose Targu Mures as its first connection in Romania."
Edita Emôke Lokodi, president of the Targu Mures County Council said, "This is an extremely important move in the development of the county's economy and tourism.
"Wizz Air targets travellers with lower income who can now benefit from a modern and quick air transportation. We believe that the new flight will contribute to the development of the county. This has a particular significance before the upcoming EU accession."
Romania hopes to join the EU, with Bulgaria, in 2007.
Since its launch in May 2004 Wizz Air says it has carried more than three million passengers.
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A study released by Coface Intercredit Romania shows the retail and agriculture sectors were most affected by bankruptcy. AVAS recently announced it would publish a list of 20,000 debtors that need to pay their contributions to the social security budget or have their bank accounts blocked.
The number of bankruptcies increased last year by 61 percent compared to 2004, up to 3,171. The sector most affected by bankruptcies was retail, according to a study conducted by Coface Romania. Director General Cristian Ionescu believes that the increase was due to positive effects induced by the simplified bankruptcy law, through the relaxing of requirements for the creditor to initiate bankruptcy procedures against a debtor and through a better alignment of the law with current debt recovery practices. Ionescu estimates that the number of bankruptcies will keep increasing in the years to come as debtors which until now managed to 'escape' due to the lack of straightforward legislation will have less and less alternatives for not paying their obligations to partners and avoid insolvency.The Authority for the Recovery of State (AVAS) Assets will post in the next three weeks on its Web site a list of 20,000 companies which have not paid their social insurance contribution for 1999-2002 and whose bank accounts will be blocked if debts are not paid, announced AVAS President Razvan Orasanu. The number of companies that opened judicial reorganization procedures was down 85 percent in 2005 compared to 2004; from 1,011 to just 156. The sector with the highest degree of risk was retail and distribution, as 811 companies went bust, accounting for over a quarter of the total insolvencies in Romania.
The Coface analysis sees this tendency as a confirmation of the evolution in 2004, as retail consolidated and is now characterized by a concentration of revenues at the large hypermarket, supermarket, cash and carry and mall retailers. The second sector in the top of bankrupt companies was agriculture, as 587 businesses closed their activity, accounting for 16.4 percent of the total, a slight decrease from 2004. According to the study, the excessive division of property, the reduced level of fixed assets and own capital available to companies in this sector and the main reasons for such a large number of bankruptcies, especially in the case of family associations. The foodstuff and drinks industry was the third most affected sector, with 11.6 percent. A high rate of insolvency, 5.4 percent, was registered for textile, clothing and footwear sectors, for which the unfavorable export exchange rate, determined by the appreciation tendency of the national currency, competition from Chinese products as well as wage increases in Romania have lead to the closing of many lohn production lines.
The real estate, financial intermediation, IT, waste management, postal services, telecommunications, health and energy sectors were least affected by bankruptcies, having a share of less than one percent of the total.
The total number of companies in different stages of the bankruptcy procedure, insolvent, dissolved, liquidated or under judicial reorganization was 6,770 last year. Bucharest had the largest share, 892 companies, accounting for 13.2 percent of the total. Brasov had the second largest number of bankrupt companies, with 7.6 percent of total. Last year Brasov was the county with the largest number of bankruptcies, with nine percent of the total while Bucharest was second, with 8.5 percent. Suceava, Calarasi and Vaslui had the least number of bankruptcies, registering only one case last year. The study made by Coface Intercredit Romania is based on information provided by the National Office of the Registry of Commerce and the National Statistics Institute.
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The respective report, made in March, divides the countries from central and Eastern Europe into three categories: emerging markets such as Romania and Bulgaria, developing markets as Hungary and Poland and mature markets like Austria.
In Romania ? with 21.6 million inhabitants and GDP of over 77 million euros (77.763) in 2005 the overall bank deposits were 46.2% of GDP, while in Bulgaria , with 7.7 million inhabitants and GDP of over 20 million euros (20.970) the total of bank deposits was 80.1% of GDP last year.
The total of loans outside the financial sector was 11.5% of GDP in Romania in 2005 and 28.3% of GDP in Bulgaria.
Last year, mortgage loans were 7.6% of GDP while in Bulgaria they reached 15.1% of GDP.
While in Romania overall deposits outside the financial sector were 26.7% of GDP in 2005, in Bulgaria they were 49.9% of GDP.
In Austria, a country with a mature banking market, with GDP of 245 million euros (246.466) and over 8 million inhabitants bank deposits amounted to 294.2% of GDP, loans outside the financil sector represented 135.6% of GDP, loans to private firms -44.2% of GDP, mortgage loans 42.6% of GDP while deposits outside the financial sector were 103.8% of GDP.
Financial Investment Companies (SIFs) and several other companies announced their yearly results for 2005, first quarter results and expected figures for this year. FIC was on an upward trend, with the exception of SIF Moldova. Zenith Romania, former Sicomed reported an impressive 1,457.7 percent sales growth for the first quarter.
Mittal Steel Roman back in the black
Mittal Steel Roman registered 21 million lei (six million euros) profit
in the first quarter, a 24.23 percent increase compared to the similar
period in 2005. First quarter turnover amounted to about 73 million euros
and the 2005 profit was 8 million euros, back in the black after the 2004
1.8 million euros loss.
Formerly known as Petrotub, the company was taken over in 2003 by Mittal
Steel, which also holds Sidex Galati, Siderurgica Hunedoara and Tepro Iasi
in Romania. All these companies changed their names into Mittal Steel plus
the name of the city where they are located.
Record growth for Zentiva Romania
Sales of the company have increased by 1,457.7 percent in the first quarter and revenues were up 403 percent to 5.8 million euros. Zentiva took over pharmaceutical company Sicomed and plans to maintain the record growth thanks to the introduction of new products by yearend, announced director general Jiri Michal. Zentiva had purchased in September of last year the investment company Venoma Holdings, which held 51% of Sicomed. Later on, the company launched a public offer for the purchase of the remaining 49 percent of the nominal capital. The parent company also expects a significant increase in sales and profit due to second semester results and the development of Romanian operations.
SIF Transilvania and Banat Crisana results
SIF Transilvania targeted for this year a net profit of about 11.5
million euros which is an increase of 5.7 percent compared to 2005 and an
investment plan of at least 17.8 million euros. The company estimates total
revenues of over 30 million euros, 28.5 percent more than in 2005, reflected
in a rise in expenses by 50 percent to over 18 million euros, according to a
company statement. SIF Banat-Crisana intends to make a 16 million euro net
profit, a 13.2 percent rise compared to 2005. The gross profit estimated for
this year is 17.5 million euros, shows a company statement. The company
planned for 2006 total revenues amounting to 35.5 million euros, 18 percent
more than last year, the value of total expenses being estimated at 18
million euros, a 20.8 percent increase compared to 2005. (IB)
SIF Moldova reported an 11.2 million euros profit, down 19.3 percent from
last year, after another 23.4 percent decrease from 2004.
Compa Sibiu results
Car components producer Compa Sibiu registered a net profit of 1.45 million euros in 2005 while total revenues amounted to 68 million euros. The net profit will be allocated for covering the deficit of financial resources and decreasing leverage. No dividends will be distributed to shareholders in 2005. Compa Sibiu, one of the main producers of car parts in Romania is controlled by the employees' association.source
The company shareholders have the right to subscribe proportionally with their participation within 30 days from the printing of the decision in the Official Gazette. Following the end of the subscription period, the payment should be made within 10 days.
The unpaid shares, subscribed or unsubscribed, can be taken over and paid for by those shareholders who participated to the capital increase.
Currently, Omniasig has a share capital of around seven million euros, of which 93.61 percent is controlled by Vienna Insurance Group (former known as Wiener Staedtische) from Austria.
According to the above mentioned statement, the capital increase was performed in order to sustain the company's development and diversification activities. These measures are essential under the conditions imposed by the Insurance Supervision Commission (CSA) for the new prudence norms regarding the liquidity margin.
In the April 21 meeting, shareholders also approved the new Board of Directors: Constantin Toma (president), Hans Peter Hagen (vice-president), Efraim Naimer, Arion Negrila, Ionut Bogdan Speteanu, Kurt Moeller and Dan Mihai Toader (members).
The company shareholders established the management of Omniasig Asigurari de Viata (the life insurance division) as well. This division will be run by Constantin Toma (president) and Hans Peter Hagen (vice-president), Efraim Naimer and Zlatka Cular.
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The company was taken over by Cetelem in 2005, this being a division of the BNP Paribas group. The value of the transaction was estimated at 400 million euros by the representatives of the consume credit market.
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The BCR loan will have an interest rate of 2.75 percent plus EURIBOR-3 months (the average interest rate on the European inter-banking market).
The credit will be used for financing Artrom's production and commercial activities.
Artrom yielded a 67 million euros export contract with Sinara Handel to BCR as collateral as well as a 16 million dollar contract with TMK Global Switzerland.
The pipe producer from Slatina reported a 2.3 million dollar net profit for last year, 35 percent less than in 2004, while the turnover increased by 50 percent.
For 2006 Artrom estimates a gross profit of about 8.5 million dollars, representing a 37 percent increase.
Company shareholders decided to allocate approximately 312,000 dollars for the creation of reserves, the rest ensuring the company financial sources.
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UPC Romania controls Astral Telecom. Together, they have 1.3 million subscribers.
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The overruling will lead to AVAS regaining the debt and partially collecting it through public auction sale of assets not involved in the production process. The remaining debt, up to 95.2 million dollars should be fully paid by the investor that acquires Oltchim. The privatization contract will also provide a commitment for the buyer, as a majority shareholder, to pay in full and on time the installments for external loans guaranteed by the state and payments phased until October 31, 2009. Debts related to external loans amount to 50.7 million dollars and are expected to increase by October 2009 to about 70 million dollars if Oltchim does not make its regular payments. Oltchim Ramnicu Valcea estimates a net profit of about 12.5 million euros for 2006, almost double the 2005 figure, and a turnover of approximately 500 million, up 23 percent from last year. Several companies, including Vienna Capital Partners investment fund and the main Polish oil company PKN Orlen have shown their interest in taking over Oltchim.
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Several plots of land in the Republica - Faur area have already been sold and an investor could buy most of the remaining land in the near future, said Regatta's industrial and retail director, Costel Alecu. Most of the land plots in the platform belong to the company Republica, currently under liquidation. The sale of land is one of the methods utilized by specialized liquidator Moore Stevens RVA for the recovery of the assets.
The transformation of the Republica - Faur zone into a residential area would be facilitated by the existence of a residential area in the vicinity so that the development of utilities networks would pose little difficulty.
Former industrial facilities are usually endowed with considerable plots of land, very attractive for developers in all significant segments of the real estate industry: residential, commercial and office.
At this point, many of the production facilities in the Policolor industrial zone have been shut down and turned into commercial and office spaces. The Pipera area has become an integrated center for office and logistics. Another example is the Metav industrial park in the Baneasa area where many multinational companies in need of office and logistics spaces have established their headquarters.
MYO-O, the group that controls the farming equipment producer Semanatoarea, has announced the development of a large real estate project on the 42 hectare plot of land currently occupied by production facilities. The factory would be relocated outside Bucharest and the land would host residential and commercial spaces and offices.
The Regatta official explained that the rehabilitation of the land contaminated by industrial by-products would involve a significant amount of investment. The demolition of foundations, most of them of solid concrete, would also be a difficult task. According to European norms, all industrial zones must be moved outside the city after the European Union accession.
"The former industrial zones have numerous advantages, including access to means of transportation, the existence of utilities, which would result in important savings. Disadvantages are less important than advantages," Alecu argued.
The Regatta official explained that over 75 percent of the transactions with land located in Bucharest are meant for the development of real estate projects, while until one or two years ago between 80 and 85 percent of the acquisitions were speculative operations.
"Developers covet downtown locations for both residential and commercial projects. But such development can only be of very small dimensions as locations that allow expansion are almost nonexistent," said Regatta's land and investment director, Alexandru Nitescu, in a press release.
Large developers had been focusing on central areas of Bucharest but increasingly more on areas labeled peripheral until recently, such as Drumul Taberei, Militari, Baneasa, Bucurestii Noi, Barbu Vacarescu-Petricani, Pipera, Pantelimon and Titan. These areas allow the construction of dwellings as well as class A and class B office buildings, as the prices for locations in downtown and northern Bucharest have increased considerably.
"Under these conditions, the price hike was more spectacular in semi-central areas (80 to 100 percent) but remained constant in the center and northern areas (50 to 60 percent)," explained the Regatta representative.
The company official estimates that the modification in the structure of the demand is a sign that the market is close to maturity.
Nitescu believes that this trend is clear on the Bucharest market but it will take some time before it is followed by the other major cities in Romania, where the share of speculative acquisitions is still superior to the share of those intended for developments.
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The forecasts regarding economic growth are a bit more pessimistic compared to the figures published in January, which indicated for this year an advance of 6.3 percent. However, the GDP increase will be higher than in Central and Eastern European countries where it is 5.1 percent.
Last year the economic growth of Romania was of 4.1 percent, a decrease compared to the 2004 level of 8.4 percent, according to the data published by the National Institute of Statistics.
The National Commission for Prognosis anticipates for 2006 an economic growth of six percent and an average inflation of 7.2 percent.
On the other hand, BA-CA estimates for 2006 an average inflation of 7.5 percent and for 2007 6.2 percent. The Romanian National Bank (BNR) announced a five percent target for consumption price increase in 2006, plus or minus one percent.
For 2006 economists estimate an important inflow of funds from direct foreign investments amounting to eight billion euros, meaning 8.5 percent of the GDP, because of the privatization of several major companies, such as the Romanian Commercial Bank.
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"The Italian company offered the pope's spokesman Joacquin Navarro-Valls several pairs of Geox Uomo Light loafers, fitted with a system against foot perspiration, as a present for Benedict XVI, the Wall Street Journal reports. According to the quoted source, Navarro-Valls is a close friend of the Geox founder, Mario Moretti Polegato, and member of the ethics committee of the company.
When the pope wore the shoes, Geox chose not to promote the event through advertisements or press materials. But the company was delighted when word got out. "If the pope uses our product that means it works. He's out in public under the sun for hours in a heavy tunic, so he risks becoming sweaty. What better testimony could you ask for?" says Geox spokesman Eros Scattolin.
Contacted by Ziarul Financiar, Scattolin stated the shoes given to the pontiff had been made at the factory Geox has in Timisoara.
"The shoes for the pope are no different than those sold through the company's stores and are manufactured in line with the company's trademark system whereby the sole is made of pores that allow the foot to breathe," stated Codruta Dobrescu, the official in charge of press relations of Technic Development, the Timisoara branch of Geox.
She added there were also other prominent figures in Romania wearing Geox footwear, such as the Italian ambassador to Romania and National Bank Governor Mugur Isarescu.
The Italian manufacturer opened the production facility in Romania in 2001 and the initial investment amounted to 15 million dollars (12 million euros). Investments in the facility in Timisoara have continued since then and currently stand at 35 million dollars (28 million euros). Almost the entire output, 6.5 million pairs of shoes a year, is exported, with the main destination being the parent company in Italy. Only a small part of it finds its way onto the Romanian market through the company's own stores opened in Bucharest and Timisoara."
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"Renewable energy will have to cover 22 percent of the Romanian energy production until 2010. Romania will become an interesting market for producers of renewable energy, ... and ADEME is here to look for project opportunities," said Meraud, who attended the Exhibition of Technologies from Renewable Resources in Bucharest.
He added that it is necessary to promote the renewable energy production in Romania since it would have to meet the EU directives.
The President of the National Agency for Energy Conservation (ARCE) Ioan Silviu Lefter stated that a law draft is in development regarding the granting of fiscal incentives to renewable energy producers.
"It is rather difficult to assess how long it will take for Romania to become a serious competitor on the energy generated from renewable sources. ARCE's duty is to encourage both producers and consumers," continued Lefter.
The National Agency for Energy Conservation activates in Romania since 2002 and it is mainly involved in creating the national policy and attracting investments in the energy sector.
An energy source is included in the renewable energy category if the products or the natural processes comply with two criteria: having energy potential and being convertible into energy by means of currently accessible technologies.
Some of the categories of renewable energy are hydraulic energy, biomass energy, solar energy, wind-power energy, ocean energy, geothermic energy and others.
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"The profit estimation grounds mainly on expected daily average trades worth some 14 million euros.
Currently, they stand at 11 million euros, but we believe the situation will improve in 2006, given the fact that early this year we managed to have a daily average turnover of over 16 million euros," said Stock Exchange general director Stere Farmache.
He estimates that the company's revenues will stand at 14.28 million euros this year.
"The budget could be revised any time. What we need to point out is that if we attain the targeted figure sooner, we will slash our commissions by 15 percent," said Farmache.
The Stock Exchange will not pay its shareholders dividends in cash from last year's profit, but will take up the bulk thereof into its reserves.
The bourse will increase its share capital from 6.5 million euros to over 10 million euros, by adding the existing reserves and the merger bonus, while as part of the operation, the shareholders will receive free stock.
The Stock Exchange shareholders approved the Bourse Code that bans the de-listing of the companies by a simple vote cast in the Shareholders Meeting.
After heated debates, the bourse shareholders also agreed with the institution's merger with the Sibiu-based Financial-Monetary and Commodity Exchange.
However, the yield of the BRD dividend is quite modest, just 1.8% a year.
BRD reported in 2005 a net profit of 553.24 million lei (153 million euros), of which 74.8 million lei will be assigned for the increase of the banking risks reserve, 263.1 million lei will be recorded as carried-over outcome and the difference will be paid to the shareholders, as dividends.
The bank management warned that high profit rates will be increasingly difficult to attain in the coming years because of narrowing interest margins and tough competition on the banking market.
In 2005, the interest margin accounted for 54.9% of the net banking income, whereas revenues from commissions reached 34.7% of total incomes.
?Although it is an actively managed and not an index-type fund, Premio is the first investment fund on the Romanian market to measure its performance by a combination of bourse indices.
Thus, for the first 6 months of activity, the benchmark will be given by a combination between the BET and the BET-FI indices, accounting for 55% and for 45% respectively.
We consider that this approach, which is usual on mature capital markets, will rise the standards of transparency and professionalism on the local market of mutual funds,? said CA-IB Asset Management executive Florin Dolea.
However, ?the structure of the portfolio will not coincide with the structure of the benchmark, which is only a reference on the basis of which the clients can assess the fund?s performance at any time.
To assess the fund?s performance after a given period, the investors will follow the evolution of the BET and BET-FI indices over that period and will easily calculate the evolution of the reference index, comparing it with the yield offered by the fund in the same period,? explained Dolea.
?We will not strictly observe the structure of the benchmark but we?ll also invest in shares that are not included in the two bourse indices taken as reference.
However, by this strategy we also take a risk because the fund?s yield might differ from the yield of the index we take as a reference,? explained Dolea.
Premio will not charge a buyback commission but instead it will have an underwriting commission of 3% of the underwritten amount. The commission will be cashed by the distributing bank and is intended to motivate the equity distributor.
?The underwriting commission is meant to motivate the distribution network, which has a key-role in the development of the market of mutual funds.
The lacking distribution was so far one of the main hindrances that has slowed down the market?s development and we won?t be able to catch up with the neighboring markets unless we develop our distribution networks,? said Dolea.
HVB Bank will also collect a part of the management commission, which will stand at a maximum of 0.3% of the monthly average assets.
Then, the boards of directors will have to establish the merger projects.
Later, the effective mergers will be discussed in other general assemblies of the shareholders.
Usually, this type of operation lasts approx four months,? stated Stere Farmache, BVB General Manager.
He also mentioned that the merger will be made through absorption, the absorbent part will be BVB.
According to the Sibiu Stock Exchange president, Teodor Ancuta, BMFMS shareholders will discuss on Friday the basic merger with BVB.
He mentioned that the merger will be the only topic on the Assembly?s agenda, showing optimism regarding the approval of the operation.
Thus, the merger projects will include the mention that a part of the financial investment service companies (SSIF), shareholders in BMFMS which hold shares over a ceiling that is to be set, will sell their surplus of shares to the National Association of Securities Companies (ANSVM).
The shares will be later redistributed, equally to all BVB shareholders.
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Therefore, SIF Banat-Crisana and SIF Transilvania shareholders will receive a gross dividend of about 0.014 euros per share for last year.
The value established for SIF Moldova is around 0.019 euros per share, while for SIF Muntenia and SIF Oltenia the gross dividend is about 0.017 per share.
SIF shareholders also debated the payment conditions for dividends, the statement on net profit distribution and financial reports.
The first assembly of AGA was planned for Friday, but because the majority was not met, a second meeting was scheduled for Saturday.
SIF shares were suspended from trading on Friday as the shareholders' meeting took place, as provided by Romanian Stock Exchange rules.
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As a result, Raiffeisen Bank Romania and Schwaebisch Hall from Germany will each hold 33.324 percent of the total capital, while Raiffeisen Bausparkasse Austria will have a 33.35 percent share, shows an RBL statement.
The president of the Raiffeisen Housing Bank, Ionut Costea, stated that the capital increase will sustain the bank's strategy and development plans.
RBL started its activity in June 2004, being the first bank in Romania set up according to Law 541/2002 regarding savings and crediting in a collective system for the buying, building and refurbishing of dwellings.
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A year after the introduction of fiscal reform SAR evaluates the results and consequences of the measures.
In a report published Monday the Romanian Academic Society (SAR) believes
there are no income deficits due to the fiscal reforms of 2005, including
the reform that introduced the flat tax. Moreover, SAR says that these
reforms could lead to an increase in public revenues, as an absolute figure
as well as a percentage from the Gross Domestic Product (GDP).
The real problem is that Romania has more budget resources than it can
efficiently administer, shows the report "The truth about the flat tax"
prepared by the Executive Director of SAR Sorin Ionita.
The report on budget revenue collection between January 1 and April 16
indicates an increase of the budgetary returns in all sectors (income tax,
profit tax, value-added tax, excises, customs taxes, contributions to the
social insurance funds, revenues fromlocal administrations), compared to the
same period of 2005. The sole exception is represented by the contributions
to the unemployment fund, which slightly decreased.
On the other hand, the official figures show that the percentage from GDP
collected to the state budget is identical to the one before the reform
became effective, although the tax payers (especially corporate ones) had
more money at their disposal.
SAR estimates that the current tendency of public revenues could be the key
to bring for the first time the Romanian budget at more than 30 percent of
the GDP on a constant basis. By projecting for the entire year the dynamics
of the January 1 - April 16 period, it is possible that the advance due to
the introduction of the reform be of approximately one percent of the Gross
Domestic Product.
Sorin Ionita says that the SAR report has some good news for the EU
Ministers of Finance, taking into account that they will be preparing a
report with recommendations this week. He considers that the conclusions of
this report should be reassuring for the Western politicians as well, since
they always repeat that they do not wish to cover with European money the
income deficit produced by the tax reductions in Romania.
"Moreover, these very reforms could lead to the public revenue increase,
as an absolute figure as well as a percentage from GDP, making life easier
for the Western tax payer," believes Ionita.
From the beginning the reform was focused on two aspects: personal income
tax, where the progressive modifications were eliminated in favor of the 16
percent rate (the flat tax as a new concept) and company profit tax, which
substantially decreased from 25 percent to 16 percent (this tax was flat
before, only the percentage diminished).
As for the EU programs developing in Romania, Ionita says that they either
go slowly or in the wrong direction and that this cannot blamed on the lack
of co-financing resources, but the poor capacity of the public institutions
to generate and administer projects. In other words, the SAR report shows
that it is not a money deficit we are dealing with, but a poor management
and organization.
The report concluded that "The following months will show whether the
positive trends analyzed in this report are constant or not." Ionita thinks
that the government should not listen to the pessimists, but continue the
implementation of the 2005 fiscal reform and take further actions to improve
and consolidate it. The probable result could be a rather effortless
stabilization of total budget revenues at 33 percent of the Gross Domestic
Product (GDP).
Based on SAR experience, the report says that budget revenues of 33 percent
of GDP are sufficient for what the Romanian state can administer in the
following years. The report continues by explaining that the 33 percent can
increase naturally in the following decade as the general welfare increases
to the level of the countries previously accepted in the EU and as the
Romanian administration becomes more effective in spending the resources it
already has. The percentage represents more than the US collects today and
more than France and Germany collected when they had the same development
level as Romania.
Financial investment companies (SIFs) do not intend to sell their 30 percent stake in the Romanian Commercial Bank (BCR), as the shares have a good return, announced SIF representatives for Mediafax.
"From the talks we have had with the Erste management and other SIFs we
have reached the conclusion that no SIF is willing to sell its stake in BCR
at the moment. We have not considered this possibility and Erste is in no
hurry to purchase our shares," said SIF Transilvania president Mihai
Fercala.
BCR employees received last week a letter from Erste Bank's president,
Andreas Treichl, announcing the Austrian banks' intention to make an offer
by the third quarter of the current year for the purchase of the shares they
hold. The acquisition will be perfected over three years and will imply
either cash payments or conversion of BCR securities into Erste shares. The
five SIFs hold 30.12 percent of BCR shares, while bank employees another
eight percent. If minority shareholders would accept to sell their shares at
the 7.65 euros per share price paid by Erste to the Romanian state for the
majority stake, the Austrian bank would have to pay approximately 2.3
billion euros, 1.8 billion for the SIF stakes alone.
Erste Bank won last year's tender for the privatization of BCR, by offering
3.75 billion euros in exchange for 61.88 percent of shares.
The SIF Transilvania official mentioned that SIFs have nothing to lose as
long as dividends are still paid. According to a clause in the BCR
privatization contract, shareholders will receive dividends for last year
with a 50 percent limit of the net profit obtained in 2005. The bank
registered a profit of 202 million euros, a 25 percent increase from the
2004 result. The contract signed between current shareholders and Erste also
stipulates that BCR is bound not to give dividends or distribute profit,
with the exception of 2005, in the period between the signing of the
privatization documents and the finalization of the
process.
"For the moment there are no difficulties between SIFs and Erste and I do
not believe there will be any in the future. We wish for the capitalization
of BCR to be as large as possible, so that we may sell our shares at high
prices, when BCR is listed on the Bucharest Stock Exchange (BVB)," Fercala
said.
The possibility of converting BCR shares into titles of the Austrian bank
can also be considered if Erste is listed on the BVB and if after evaluation
and the establishing of the exchange quota, it is found to be more
profitable. The president of SIF Banat-Crisana, Ioan Cuzman, showed that
Erste was not expressed a clear interest in the purchase of the SIF stakes
in BCR, but that such an offer could arise in the future. "We shall have to
wait and see. At the moment we are not discussing any version," Cuzman
said.
Sources with SIF Moldova showed that the talks on Erste purchasing SIF
stakes in BCR were evasive and basic. Florin Buzatu, member of the Board of
SIF Oltenia said that he does not believe that any of the SIFs would sell
their BCR shares, as the stakes are stable, profitable and there will be no
market opportunities to place the amounts obtained from the sale on the
market.
Erste Bank announced it would finalize the takeover of BCR on June 21 or
before, according to the Dow Jones.
The contract between SIFs and the Authority for the Recovery of State Assets
(AVAS) on the sale of BCR sales was a controversial issue at the SIF general
shareholders meeting. "The text of the sale contract shows that AVAS did not
fully respect its commitments. Therefore a SIF may adopt any position
favoring its shareholders," a Banat-Crisana notice at the shareholders
meetings said.
Informing shareholders of the position of the board of directors on the BCR
privatization process was discussed in other SIF shareholders meetings at
the end of last week.
Banat-Crisana president Ioan Cuzman explained the issue in question was
the provision that the listing of BCR shares on the BVB be done only though
an initial public offer. In November of last year, AVAS and SIFs signed an
agreement which protected minority shareholders. According to the
privatization contract, BCR shares will be transacted on the BVB in three
years after the takeover is complete, but the Erste stake is not to go under
the 50 percent plus one share limit. The clause regarding the listing of BCR
was requested by the five SIFs but they had to give up the 75 percent vote
threshold for the adopting of major decisions in the shareholders general
meeting. However, the contract provides that several major decisions still
be made with a 75 percent majority. These include the selecting of the
president and vice president of the Supervision Council, appointment of the
executive president and other top management, reorganization, consolidation,
mergers or sales of assets.
Oresa will receive shares in exchange for a capital contribution and the support for Guzuchim expansion and development plans, shows a statement of the two parties. Part of the investment will be oriented towards the completion of a new production unit and the extension of the national distribution network.
The two parties did not reveal the number of shares to be taken over by Oresa. The General Manager and Guzuchim main shareholder Daniel Guzu stated in February that 40-45 percent of the shares would be sold.
Guzuchim is one of the top three Romanian producers of decorative paints, having a market share of 18 percent and a turnover of 25 million euros in 2005.
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The increase was mainly due to a 34 percent increase in the number of clients, up to 7.1 million.
Orange Romania reported an 870 million euro turnover in 2005, up 39 percent from 2004.
The mobile telephone operator's turnover in the first three months of the current year is 249 million euros compared with the similar period in 2005.
Orange Romania launched several video services that offer customers the possibility of watching TV shows or movies through the WAP (Wireless Application Protocol) portal.
Orange closed broadcasting contracts with 13 television and four radio stations. Both Orange subscribers and Prepay users can watch BBC World, TV5, Fashion TV or Realitatea TV after paying a four-dollar subscription that is available for 30 days.
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"We expect Romania to become one of the main markets in Eastern Europe," added Loidl.
The Romanian auto market registered last year an increase of 41.7 percent, reaching 256,414 vehicles, of which 215,532 were cars.
The general growth of the market will generate a sales increase for Porsche Romania, part of Porsche Holding.
"Porsche Romania has established a 35,000 unit objective for 2006, and our growth chances are very significant since the motor network in Romania represents only a third of that in Western countries," said Franz Fruhwirth, general manager of Porsche Romania Franz Fruhwirth.
Porsche Romania, the general importer of automakers Audi, Porsche, Volkswagen, Skoda and Seat, intends to invest this year around 40 million euros to extend their dealer network.
Porsche Bucuresti Vest 1, the third branch of Porsche Romania to emerge in the country, was inaugurated on Thursday, with a total area of 37,000 square meters and representing an eight million euro investment.
Wolfgang Porsche and Michael Piech, the main shareholders of Porsche Holding, were present at the official opening of the new auto complex.
Porsche Romania managers will be able to activate in the international network of Porsche Holding in the following years, stated Thursday Wolfgang Porsche, spokesman of the Porsche family and shareholder of the car manufacturer.
"Porsche Romania is successful, first of all, because the right people are in the right place. A strong team is one of the main factors that push a business forward," continued Wolfgang Porsche.
Porsche Romania is also preparing to introduce on the Romanian market the luxury brands Bentley and Lamborghini.
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The Sibiu Monetary-Financial and Commodities Stock Exchange (BMFMS) shareholders will discuss the merger with the Bucharest Stock Exchange (BVB), on May 5.
The statement belongs to the BMFMS president, Teodor Ancuta, who showed optimistic about the approval of the operation. BVB's General Extraordinary Shareholders Assembly approved the merger thorough absorption with the Sibiu Stock Exchange, last Thursday. BVB is the company absorbing the Sibiu Stock Exchange.Stere Farmache, BVB's general director, said that after the BMFMS will approve the operation the administration councils of the two market operators will have to draw up the merger projects and to start negotiations afterwards. The approval of the merger by the two operators will be performed in a future General Shareholders Assembly.
Farmache said that merger projects would include the obligation for a part of the financial investments services companies (SSIF), who are BMFMS shareholders, to sell shares that surpass a predetermined level. The shares surplus will be sold to the National Association of Securities Companies. These shares will be distributed afterwards to all the BVB shareholders.
The BVB official showed that the limit will be established after the evaluation of the two stock exchanges, made by and audit and consultancy company. The sales price of the titles that surpass the imposed limit could be calculated by using their acquisition value and a certain interest. The Sibiu Stock Exchange has 74 shareholders of which 38 are SSIF. The institution has a nominal capital of approximately 500,000 euros. The BVB shareholders have equal shares that amount to 1.48 percent of the nominal capital. The National Securities Commission (CNVM) authorized both BVB and the Sibiu Stock Exchange as market operators at the end of January 2006.
According to CNVM's rules, the nominal capital of a market operator should amount to a minimum five million euros by the time Romania will become an EU member. BMFMS's administration board established at CNVM's request a capital increase program.
This shows that the institution's capital should reach one million euros by 31 March, two million euros by July 31 and to five million euros by December 31. Audit and consultancy company PricewaterhouseCoopers (PwC) and the Romanian
Compensation House evaluated in 2005 the Sibiu Stock Exchange, at 3.4 billion euros. PwC evaluated the Bucharest Stock Exchange at 16 million euros.
The Sibiu Stock Exchange was created in December 1994 and had 11 shareholders.
BVB merged with the Romanian Securities Market (Rasdaq) at the beginning of this, according to CNVM's president Paul Miclaus.
The CNVM official specified, however, that the approval of the merger did not include approval of the statutory document of the BVB which will have to be modified. Changes will have to comply with the provisions of the capital market law. Miclaus suggested that the necessary changes could be adopted by the first general assembly after the merger or even at the time of the merger itself.
The only phase remaining until the completion of the merger is the registration of the new entity resulting from the process in the Trade Register. The new stock exchange institution will maintain the name of BVB.
Rasdaq was created in 1995 with the help of the American agency USAID who modeled it after the New York-based Nasdaq. The electronic system Arena used by BVB allows real time transactions with a wide range of financial instruments such as state securities, corporate bonds, shares and preference rights. Arena was developed by BVB specialists and launched in 2001.
The new structure of the BVB will include the regular market as well as an Alternative Trade System (ATS) for companies that do not fulfill the prerequisites for being listed on the main market. Both markets will enclose two segments: cash (for shares and bonds) and derivatives (futures and options).
The catalog of BVB-listed companies after the merger will be established by CNVM ruling.
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The increase rate surpassed the predictions of the National Bank of Romania.
The main cause of the positive evolution was RON credits, which amounted to 33 billion lei, up 92.8 percent compared with the total credits granted in the first quarter of 2005.
Foreign currency credits lost first place after amounting to 9.3 billion euros and an annual increase rate of 24.8 percent.
The advance of non-governmental credits was five percent in March.
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A major part of the order is being built in Central European manufacturing facilties. Polish rolling stock manufacturers will deliver 145 new tank wagons for EWS's contract with the Total Fina Elf oil company. The wagons are expected to arrive into the UK by the end of May. They will be delivered in batches of ten a week until all are delivered.
68 aggregate hoppers are currently being constructed in Romania, with the first set of these wagons due to be delivered by June. All of these wagons are expected to be delivered to EWS by the end of October.
EWS says the new fleet, such as 'omindeck' wagons for carrying steel, will enable the company to win new freight volumes to the railway as it targets traffic which currently only goes by road, making progress on EWS's plans to increase rail freight volumes in Britain.
The 155 omindeck wagons have gone through an extensive design phase, and tenders have been issued for the construction of these wagons to be delivered to EWS by the end of the year.
EWS says these wagons have been designed for its steel industry customers and will be multi-purpose, enabling current road-only freight movements to be won to rail for the first time.
EWS has invested in over 3,000 new wagons since the company was formed ten years ago.
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The price of Petrom shares was up 4.6 percent to .565 lei Friday on the Bucharest Stock Exchange (BVB), following news that Petrom might sell the employees' stock package.
Minister of Economy and Commerce Codrut Seres announced on Friday that the ministry has drafted a governmental decision project which provides for the eight percent stock package meant for employees to be sold directly to them and not through an association. The project will be sent for endorsement to several ministries after eventual notification from bank representatives. Minister Seres hopes that the project will be approved by the government as soon as possible, so that the actual sale of shares can begin. The minister denied information recently published in the press, according to which the Office of State Industry Participation and Privatization (OPSPI) had already sent Petrom employees notifications in view of certifying their status as employees of the oil company, with the purpose of receiving shares.
At the beginning of August last year, the Petrom Employees Association had formed a consortium with investment bank Credit Suisse First Boston and law firms Squires, Sanders and Dempsey; and Voicu and Filipescu in order to negotiate the purchase of the eight percent minority stake, although the government had not established the way in which the shares were to be transferred. Credit Suisse First Boston had been authorized to finance the purchase of the eight percent stake with 235 million euros, in exchange for a part of the shares. Prime Minister Calin Popescu Tariceanu recently asked the Romanian Banking Association (ARB) to locate solutions so the shares intended for employees could be sold directly to them, through the agencies of interested banks. Tariceanu believed it inadvisable for the sale to take place through only one bank, as solutions should be found to involve all banks interested in financing the employees in acquiring shares, government spokesperson Oana Marinescu had announced. Economic analyst George Vulcanescu told online news source Hotnews.ro that the direct sale would make it difficult for the Petrom Service head Liviu Lucas's business group to collect the eight percent stake. The version of selling the shares to an employees' organization would favor the Union led by Luca, Vulcanescu explained.OMV announced that it intends to maintain a high figure of its titles on the market in case Petrom employees decide to massively sell the shares they receive. "OMV is gathering funds to purchase shares in case the market becomes too liquid," announced Seres, after talks in Vienna with OMV President Wolfgang Ruttenstorfer. The minister emphasized that the time restriction suggested to prevent massive sales is not provided in the Petrom privatization law. "Most employees do not wish for an association to buy the shares. This is only the wish of a part of directors and middle management. Therefore, we cannot speak of a constant attitude towards the sale of the eight percent of shares," the minister said.
The Petrom privatization law establishes that the shares are to be sold at the same price that Austrian Group OMV paid in 2004 when it took over the majority package. At 5.25 eurocents per share, the price paid by OMV, the value of shares to be sold directly to employees would be .182 lei per share, three times less than the market price at Friday's close of the BNR exchange rate. The minority stake would thus be worth 235 million euros. "The evolution of the Petrom quote will depend on the clause related to the moment when the securities are sold on the market," said investment consultants KTD Invest President Iulian Panait for Mediafax. In case the employees are not allowed to sell the titles for a certain period, it is possible that prices would climb to the level at which they would begin to decrease, namely .60 lei per share, and in case there is no time restriction, the price could go under .50 lei per share, Panait added. Prices could fall due to the new supply of Petrom securities on the market. Ten percent of Petrom capital is currently traded on the market but the inflow of eight percent sold by employees would double the supply. Transactions with 1.2 million Petrom shares amounted to 6.7 million lei on Friday, making Petrom the most liquid title on the market, covering 70 percent of transactions. Overall, liquidity was, however, low, as most companies listed, including the five financial investment companies- SIF, were suspended from transacting as they had announced general shareholders meetings or financial results. The BET index, which takes into account the most liquid titles, was up 0.79 percent and the overall BET-C rose by 0.66 percent.
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The recording of IFNs in the Special Register will be done by BNR if the abovementioned criteria are met for four successive fiscal quarters, according to the BNR project regarding the norms of implementation of government ordinance regulating the activity of these institutions.
All non-banking financial institutions, except pawn shops and mutual aid houses, will be recorded in the BNR General Register, according to an ordinance approved by the government at the beginning of 2006.
The companies which surpass the limit established by BNR regarding financings and internal sources will be listed automatically in the Special Register.
Once financially qualified for the Special Register, companies will be monitored in various aspects of their business, including those related to prudence.
The latter conditions refer to companies' own funds, exposure with debtors and aggregate exposure, exposure towards persons having special relations with IFNs and, refer to internal organization and control.
These aspects will be regulated later on by the National Bank, sometime before fall 2006.
BNR will monitor the non-banking financial institutions in the General Register and supervise from a prudential viewpoint those in the Special Register.
On the Romanian leasing market less than 50 companies out of approximately 300 companies are eligible in terms of BNR requirements.
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"In the worst case, at the end of 2006 there will not be a negative influence over the profit," said Treichl.
Erste paid 3.75 billion euros for BCR.
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Authorities have contacted the designer of the installations, American company Babcock & Wilcox, in order to find solutions for repair and installing. "If, God forbid, the equipment must be thrown away, it will be a disaster. We will have to order new ones and they are not produced in Romania anymore. Even if Babcock would be able to produce them in one year instead of two, all is lost," Seres said. Another problem refers to Nuclearmontaj, one of the contractors whose bank accounts have been sequestered by the National Authority for Fiscal Administration (ANAF) due to overdue debts. The company is due to finish construction work in about two months and the organizing of a new bidding for another contractor would take too long, Seres said. The minister suggested that a meeting be scheduled for next week between the representatives of ANAF, Nuclearmontaj, the Ministry of the Economy and Nuclearelectrica, the operator of the Cernavoda nuclear plant. One of the solutions would be for ANAF to sequester other Nuclearmontaj assets instead of the accounts.
The problems that have arisen at Cernavoda are to be discussed in a government meeting in two weeks' time. The government recently allowed the Ministry of Public Finance to contract loans worth a total of 217 million euros for the completion of works at the second reactor and the purchase of heavy water. The Ministry of Economy and Commerce made a proposal at the beginning of April for the simultaneous construction of reactors three and four, which require an additional 2.2 billion euros.
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The Institute for Energy Studies and Design started a few months ago to prepare a technical study to identify restructuring solutions for the energy sector by merging thermo and hydro structures.
One option is to establish regional structures, named Carpati and Muntenia, added Seres.
"It is not definite that this is the best option as the conclusions are not closed," continued the minister.
According to him, the key element of the project is the units merging so to create a balance of electricity production and the price kept relatively reduced.
"We cannot include a thermoelectric power plant from Deva in a holding with a hydroelectric power plant in Moldova. The great advantage of existing thermoelectric power plants is that they are spread throughout the country and have access to the national energy system," said Seres.
As to the production price for electric energy, it should be below the level of the energy complexes, which produce energy mainly in thermoelectric plants.
"We have to create a viable structure, with such a price per MWh to allow it to be competitive on the market. The price should be a little over 30 euros, between 31-32 euros/MWh of Nuclearelectrica and 36-37 euros of energy complexes. Below 40 euros is all right" added the minister.
The project completion depends on the approval of the European Commission and Competition Council for writing off Termoelectrica debts, for the activity of the newly created structures not to be affected by these debts.
"I would like to receive the approval from Brussels in a month to month and a half, so that in the summertime the new thermo-hydro structure can be completed and prepared for the winter season," continued Seres.
In case the position of the competition authority will not be communicated in due time, the project could be postponed for next spring, concluded the Minister of Economy.
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"OMV is considering having funds set aside in order to buy these shares when the market becomes too liquid, before others do," Economy and Trade Minister Codrut Seres stated.
He added he had previously had a number of discussions on this topic with OMV's chairman, Wolfgang Ruttenstorfer in Vienna.
OMV took over a 51 percent share of Petrom in 2004, in a deal worth 1.5 billion euros and intends to boost its stake.
Another party interested in taking over the eight percent share in Petrom is this company's Employee Association (PAS), run by powerful union leader Liviu Luca. PAS Petrom gathered proxies from 55,000 current and former employees of the company to buy the shares and selected Credit Suisse First Boston investment bank that should provide a loan to the employees upon the acquisition of the shares.
A possible sale of the employees' shares on the Bucharest Stock Exchange caused investors to panic three weeks ago, with Petrom's shares subsequently falling about eight percent.
"Maybe this explains why I am being made to look like the bad guy here and why the state is fighting us, the Association, to keep us from getting the shares," Liviu Luca commented on the statement of the Economy Minister about OMV's plans to buy the employees' shares.
OMV officials had made no comment on this topic by the time the story was ready for print.
The sale of the shares to Petrom employees is one of the biggest transactions on the Romanian market this year.
Current employees and retired employees of Romania's largest petroleum company have the right to buy eight percent in Petrom at the same price as paid by the Austrian group in 2004, 5.25 eurocents/share. Under the circumstances, the acquisition by the employees of the eight percent stake will be worth approximately 235 million euros, about half a billion euros lower than the market price, 0.565 RON/share. Petrom shares rose by 4.6 pecent during the latest trading session, with the company's market capitalization going up to 9.118 billion euros.
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