21 October 2020

Gheorghe Russu

Vice-director, The Center for Combating Economic Crimes and Corruption

Parties-Phantoms, Parties - State Institutions, Parties - State Enterprises


20 parties have registered in the current election campaign. Many people say it is a too big number for such a small country as Moldova. At the same time, much more parties could take part in the election campaign.

Last week illustrated

Activists launch Moldova’s first ‘Space Camp’ © Susan Coughtrie

Restructuring of companies and debts in the energy sector

A few days ago, after a very agitated and loud meeting, called by the Prime Minister Vlad Filat, it was announced that the Minister of Economy will develop a restructuring program for the energy sector, in order to make the state owned companies efficient and competitive.
Ion PREAŞCĂ, 9 February 2010, 18:32

At the same time, the program is supposed to solve the problem of debts accumulated by the companies from the sector over the years. According to the Deputy Prime Minister Valeriu Lazar, the new government undertook a very difficult burden in the energy sector, to solve the problems of these companies within four-five months. The debts accumulated by economic agents in this field only to Moldovagaz amount to 2, 3 billion lei.

This intention is no news for anyone. Vasile Tarlev and Zinaida Greceannii were talking about it when they were prime ministers. Certain projects on sector restructuring were developed, but none of them was actually implemented. The communists preferred to just leave the situation as it is, without taking drastic measures.

In fact, we can only talk about restructuring when it comes to companies from Chisinau, but not form the entire republic. The chain of evil starts from Termocom, continues with CET (thermo-electric plant) 1 and 2 and, finally, gets to Moldovagaz. Taking into account the fact that these debts were accumulated during 10-11 years, it is obvious that the problem cannot be solved within several months. But the simple liquidation of Termocom, as some politicians suggest, is not a solution to the problem.
We become aware of the fact that the circumstances are exactly as they were in 1997-1999, when the authorities, finding themselves in a no way out situation, decided to restructure the sector. In April 1999, the Parliament adopted the Law on debt restructuring of energy sector companies: „with the view of improving the financial situation of companies from the energy sector and preparing them for privatization and executing of the Law No. 233-XIV of December 23, 1998 on the individual privatization of energy sector companies."

According to this law, companies like CET-1 and CET-2 from Chisinau, CET Nord from Balti and EN (electric networks) Chisinau, RED (electric distribution networks) Sud, RED Nord and RED North-West were to be privatized „without accounts receivable and accounts payable over 60 days old, as of the date when the stock purchase and sale agreement was going to be signed".

Also, the debts of budget institutions for natural gas, liquefied gas, electric energy and thermal energy were annulled.
The estimated annulled debt was of several billion lei. Only the former state company Moldenergo accumulated debts over 1/3 of the annual budget of the country, 80% of which were for gas.

According to the same law the debts of 140 million USD of RE Chisinau, RED Centru, RED South, RED Nord and RED Nord-Vest to the state company Moldtranselectro for electric energy, were annulled.

The annulment of huge debts, or undertaking of such debts by the state, made it possible for three electric distribution networks to be privatized by Union Fenosa in February 2000. However, the privatization in the sector did not go any further.

Due to these actions, even if later than expected, the energy sector was able to overcome the crisis of payments and completely eliminate the payment through barter. The distribution networks had the best evolution, managing to repay the accumulated debts in 2000-2003 and make investments. The thermo/electric plants are in a much worse situation, not being able to pay their debts and pay 100% of gas delivered to them, up to this moment. Actually, they might be able to pay, if Termocom would pay for delivery.

For example, accounts payable, but also accounts receivable of the three TEP continuously increased. If at the beginning of 2001 accounts payable amounted to 976 million lei, and accounts receivable 815 million lei, by the beginning of 2008 these debts doubled. 65% of accounts payable are for gas, the rest is for technical water, to the banks etc. In other words, the debts for gas are only part of the problem, the most important one.

Thus, the law from 1999 did not bring to the complete elimination of debts in the energy sector. Even after 1999, some companies signed contracts of energy purchase from various foreign providers. Subsequently, the companies could not pay; therefore, the producer initiated court proceedings to get their money back. In 2000, at the request of certain companies registered in Switzerland, a local court decided to sequestrate all assets of the hydro-electric plant from Costesti, the building of the Ministry of Energetics and other assets.

In August 2009, we witnessed the same situation, when because of a 20 million lei debt, accumulated by state companies, the accounts of the Ministry of Economy were blocked. In December 2009, at the request of Chisinau-Gaz the accounts of CET-2 were blocked. At the beginning of 2010 because of a 40 million lei debt, accumulated by Apa-Canal Balti to the energy provider RED North, the electric energy delivery was about to be blocked and, consequently, the town Balti and other localities were at risk of remaining without water.

Apparently, the former communist government left behind a bomb, which might have destructive effects, if it will not be deactivated. That is why, the Prime Minister, Vlad Filat, asked the National Agency for Regulation in Energetics (NARE) to carry out an audit OF all energy companies, in order to clarify their real situation, but also to identify potential ways of solving their problems.

Until then, we can only say that there were a number of factors which led to this situation. First of all, unrealistic tariffs. According to certain calculations, there were years when the price for energy delivery covered only 2/3 of the real cost. Currently, the thermal energy is being distributed to the household sector of Chisinau at a lower price, compared to real costs. Even NARE admits it, saying that it did not include in the tariff the losses accumulated by the company, as a result of the delay in the change of tariffs.

Second, high production costs were caused by physical and moral wear of the equipment, some of which is over 50 years old. There is also the problem of neo-communist mentality dominating the economic sector in Moldova, the practice of freezing debts by means of agreements-memorandums etc. At the same time, huge debts make the attraction of investments in electric plants impossible. Only for the modernization of thermo-electric plants, billions of lei are necessary and there is no money for that. According to the deputy Prime Minister, Valeriu Lazar, the only solution would be to identify solid partners for a 15 years period, willing to invest in the modernization of thermo-electric plants, with the prospects of recovering their investments.
The recent evolutions show that, both authorities and managers know that without solving the problem of debts, no investments can be attracted to the energetic sector. It is difficult to guess how the problems will be solved this time. Being under pressure from Gazprom and especially of the increasing prices for energy resources, the authorities are looking desperately for solutions to make the companies in the sector profitable and efficient.


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