New PPP policy of the Romanian Government

The Romanian Government decided yesterday, April 27, 2011, that a number of infrastructure projects be structured as public-private partnerships, for reasons including the magnitude or complexity thereof. This is indeed just a preliminary list of Romanian projects initiated by a central authority which are deemed eligible for or require a PPP-based contractual arrangement and it is to be expected that such shall be amended and supplemented to include all those infrastructure works having particulars that may be better managed under a public-private partnership formula, as well as the initiation of similar projects by local administration or by other entities qualifying as contracting authorities.

These are the very first projects which might be to be developed, as a test, under Law no. 178/2010 regarding the Public-Private Partnership, the application of which has been de facto suspended due to legislative deficiencies. Law no. 178/2010 has been modified pursuant to Emergency Government Ordinance no. 39/2011 published on 21 April 2011, as we shall detail in a separate newsletter dedicated specifically to the merits of this legislative intervention.

According to a press release published on the Romanian Government’s website, this list includes construction projects regarding highways, ring roads, hydroelectric power plants, steam power plants, bridges, channels, dwellings, hospitals and one penitentiary.

1 PPP projects in the transportation field

Comarnic-Brasov Highway
Romania experienced a well-known failure with regard to the works for this highway project. The Vinci-Aktor consortium was supposed to design, finance and build the highway, and subsequently, for a period of 30 years, to manage the 55 km of the project. However, the consortium pulled out from this project at the last minute, due to lack of funding. The contract value was assessed at EUR 4.7 billions. Currently the authorities are trying to identify new investors.
Sibiu-Pitesti Highway
For this 116 km-length highway project, the authorities are struggling to identify the necessary funding. This is the only section of the Pan-European Corridor IV Nadlac-Constanta for which no financing sources have been so far identified. The other sections will be built using EU funds, but the financing for the Sibiu-Pitesti section is very difficult to obtain, due to the extremely high costs thereof, estimated at Euro 3 billion. Romania also requested funds from the European Commission for this project, but no positive response has been received yet to this end.
Ploiesti-Buzau-Focsani Highway
In August 2008, the company Louis Berger Group was selected for performing the feasibility and technical assistance study. This section will be 133 km long.
Targu-Mures-Iasi-Ungheni Highway
This highway will constitute a new pass through the Oriental Carpathians, thus supplementing the two existing roads (National Road 12C and National Road 15). It will be 306 km long. The feasibility studies are planned to be completed this year.
The Bucharest Northern Ring Road (highway)
The Bucharest Southern Ring Road (highway)

2 PPP projects in the power supply field

Tarnita-Lapustesti hydro-electrical power plant
The construction of the Tarnita-Lapustesti plant with storage by pumping involves investment funds higher than Euro 1.164 billion (VAT excluded) and is intended to be realized by attracting by transparent means the private capital of companies in good standing that have the necessary financial power.
Current status: Hidroelectrica SA has selected a project consultant (the consortium Deloitte Consultanta SRL, HydroChinaZhongNan Engineering Corporation, Banca Comerciala Romana SA) in order to render legal, financial, commercial and technical assistance services in view of selecting investors and establishing a special purpose vehicle to develop this project. The consultancy contract, amounting to approximately EUR 5 millions was executed on August 25, 2010.
Units 3 and 4 of the Cernavoda nuclear plant
The company ENERGONUCLEAR was established in order to complete this project having an estimate value of approximately Euro 4 billion. The shareholders of ENERGONUCLEAR were: Nuclearelectrica SA 51%, RWE, GDF SUEZ, ENEL, CEZ, each holding 9.15% and ARCELOR MITTAL and IBERDROLA each holding 6.2%. CEZ, RWE, GDF Suez and Iberdrola withdrew from the project, whereas Arcelor Mittal and Enel continue to support it. Nuclearelectrica SA took over the stake of these companies in the project. Currently, it is prospecting new investors and is willing to sell a large stake in the project.
Doicesti steam power plant
At Doicesti, the authorities intend to build a new condensing group of approx. 250 MW, using coal from domestic sources of imported from abroad. China National Machinery & Equipment Import & Export Corporation sent a letter of intent regarding a possible participation as investor in this project. In case of a negative outcome, the Doicesti plant might be closed and sold. Until such time, Termoelectrica SA already started the demolishing works at group no. 7 with a power of 200 MW (which is no longer operational). In view of building the Doicesti project, Termoelectrica SA has engaged in discussions with Mechel, a Russian group operating in the field of metallurgical engineering and mining, such discussions lasting from 2008 until 2010, and were ultimately abandoned.
AGRI Interconnector
By means of the AGRI project, gas should be transported from Azerbaijan to Europe, on the route Baku (Azerbaijan)-Kulevi (Georgia)-Constanta (Romania). The gas from Azerbaijan will be liquefied in Kulevi and then transported by water (on the Black Sea) to Constanta, where a reverse process will be carried out through the LNG terminal. In a first stage, between 3 and 8 billion cubic meters may be supplied and the quantity may increase up to almost 20 billion cubic meters. Four states are involved in this project: Azerbaijan, Georgia, Romania and Hungary, who formed a project company seated in Bucharest.

3 PPP projects in the environmental field

The fitting up of Siret-Baragan channel, investment assessed to EUR 200 millions, and the Ministry of Environment and Agriculture will cooperate to this end.

4 PPP projects in the regional development field

ECO project in the Ghencea Bucharest neighborhood having an area of 100 hectares and envisages the construction of 10,000 dwellings and the relevant infrastructure.
Esplanada project amounting to Euro 800-900 millions.
Danube-Bucharest canal project (in partnership with the Ministry of Transports).
Bridge over the Danuve between the Tulcea and Braila counties (in partnership with the Ministry of Transports).

5 PPP projects in the health field

Six regional emergency hospitals located in Timisoara, Cluj Napoca, Targu Mures, Iasi, Craiova and Bucharest.

6 PPP projects in legal field

A penitentiary to be built pursuant to the UK model.

The list of projects and the press release is available on the Romanian Government’s website at the following address:
http://www.guv.ro/premierul-a-prezentat-lista-proiectelor-care-vor-fi-dezvoltate-in-regim-de-parteneriat-public-privat__l1a113179.html