The authorities in charge, ELCEN, having as main shareholder the Ministry of Energy, and RADET Bucharest, owned by the City Hall of Bucharest, took over the solution for restructuring the centralized heating system in Bucharest, as proposed by KPMG Restructuring, for a successful exit from the financial deadlock of the past years, but also for realizing the investments required for maintaining this system operational. We talked to Claudiu Crețu, Special Administrator of ELCEN, just days before the main creditors of this company, insolvent since 2016, ruled on the transfer of the ELCEN assets to a third party controlled by the Bucharest Municipality.
ELCEN entered into insolvency in October 2016 and is still undergoing the reorganization plan drafting stage; this plan is to be submitted before the syndic judge in June 2018 at latest, correlated with the submission of reorganization plan of RADET. The two companies entered into insolvency at the same time and are indissolubly connected because the law refers to an integrated heating system, so the situations and prospects of ELCEN and RADET should be examined simultaneously.
The entry into insolvency enabled overcoming the deadlocks you are referring to because there are no penalties for historic debts being charged during this period. Regarding the current year, in 2017 ELCEN recorded a gross profit of RON 45 million lei as a result of the evolution of the prices in electricity.
Under normal circumstances, ELCEN would be a profitable company, as indicated by the first quarter of this year during which we had a slight profit. This time around, our financial performance was affected by the lower prices on the day-ahead market as well as a strong growth of the CO2 European Emission Allowances Price.
There are talks between the ELCEN representatives and Bucharest Mayor’s Office for building the integrated heat production, transport, distribution and supply system for the people of Bucharest, which would better cater to the essential needs of utility and general public interest.
Considering both RADET and ELCEN are undergoing insolvency, with no credibility or reliability with respect to negotiations, acquisitions, attracting non-refundable structural funds for the investments required for the rehabilitation of the heating system, we are searching for the best possible options to make the system efficient and increase the life quality of the inhabitants of the Capital.
The key element, proposed by the Judicial Administrator, KPMG Restructuring, is the acquisition of the ELCEN assets by the Bucharest Mayor’s Office, through The Compania Municipală Energetică (CME). The latter will take over and operated the ELCEN assets and will ensure the production, transport, distribution and supply of electricity and heat within the integrated central heating system service (integrated SACET).
The new entity, which is not a party to the insolvency proceedings, will enable the revitalization of the heating system in the Capital and may take steps for attracting non-refundable structural funds available through the Large Infrastructure Operational Program (POIM) and/or refundable bank financing granted by international financial institutions (BEI, BERD, BM etc).
ELCEN will sell all its assets and liabilities for the amount of its assets, a portion of its receivables, that is, because under the law, budgetary debts to the National Agency for Fiscal Administration (ANAF) are not subject to transfer. The other commercial debts – to gas suppliers, banks, unsecured debts etc. – will be transferred.
The correlated reorganization plans of RADET and ELCEN will also deal with the matter of historic debts and penalties, according to the law. For the reorganization to be achieved, all the parties involved, i.e. creditors and shareholders, should understand and approve this mechanism. The previous version, which provided for the purchase from the Ministry of Energy by the Mayoralty of the actions of the ELCEN thermal energy producer and subsequently its takeover by absorption by RADET, requires more time than we have available, both in terms of investment needs in the heating system, and from the perspective of the absorption of European funds, an option accessible only to companies that are not insolvent.
ELCEN’s assets were evaluated in the insolvency proceedings by Veridio SRL The evaluation of the actions, according to GEO 61/2017, was the responsibility of the Ministry of Energy.
An assessment of the ELCEN assets was conducted for the purposes of this insolvency procedure; it stated that a large portion of the debts will be paid, if not 100%, at any rate, something close. The recovery rate will be identical for all the chirographic creditors, through the reorganization plan and then, after negotiations, the level of recovery will depend on the funding structure that PMB and the Municipal Energy Company will be able to access. It can be 100% during a longer time period or less during a shorter period.