Chasing private money: Facing a better North

Chasing private money: Facing a better North

Signs of recovery are visible in certain sectors with the most significant transactions signed in retail, real estate, energy and the fertilizers production sector, says Robert Ghelasi, Managing Partner, Energie Finanzierung und Kapital.

Romania’s share of regional private equity investments has declined in recent years as a clear divide has emerged between countries to the North such as Poland and the Czech Republic and those to the South such as Romania and Bulgaria – reflecting investor concerns around macroeconomic stability and the perception of relative lower investment risk in Poland and the Czech Republic.

The M&A market remained sensitive both to the Euro zone crisis and the domestic political environment, leading to a contraction in global liquidity, while investors’ appetite for emerging markets has decreased significantly. But the appetite for acquisitions is still present, despite sluggish economic growth in the Euro zone. The difficult situation facing the Euro zone may actually represent an opportunity as long as investors perceive Romania as a country with good economic potential, which offers an attractive yield on investments.


Signs of recovery are visible in certain sectors – the most significant transactions were in retail, real estate, energy and the fertilizers production sector.



  • Decreasing bureaucracy: By implementing a valuation system of public officials and by developing an ERP to integrate all public functions (fiscal included) to allow an easy and quick response of authorities to tax-payers needs,
  • Unifying all employee-related contributions into income tax and all employer-connected contribution into an overall employer's tax,
  • Increasing public revenues by reducing corruption as well as the involvement of political interests in the actions of tax-enforcement authorities while easing the overall level of taxation effort of tax-payers.



There is an urgent need for setting a clear blueprint of long-term strategic development of the Romanian economy with steps to follow - i.e., the areas in which our economy would develop a competitive advantage within the world economy.


Also, a major lesson to be learned is that going to extremes is wrong regardless of direction;


More specifically, total privatization is detrimental to the welfare of citizens when we are talking about energy sector. Why? Because in comparison with other sectors, the energy is more than a simple traded good on a competitive market but it is a complex product with a big economic, social, strategic and political value. The strategic role of energy was clearly revealed in the last 40 years by various oil crises, regional conflicts, which degenerated into serious power failures, social protests (see the recent evolutions from Bulgaria).




I would point out here as a bad example of deregulation of the electricity market, the California electricity crisis of 2000 and 2001 when California has been confronted with a shortage of electricity caused by market manipulations, illegal shutdowns of pipelines by Texas energy consortiums, and capped retail electricity prices. The state suffered from multiple large-scale blackouts, one of the state's largest energy companies collapsed. This caused 800% increase in wholesale prices from April 2000 to December 2000. In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers. The California crisis cost between USD 40 to USD 45 billion.


Romania has privatized utilities and energy state companies by selling them to European state-owned companies and now this policy is likely to be perpetrated with such state companies as Hidroelectrica, thermo-power units. The solution is partially the listing of all these companies on Bucharest Stock Exchange to allow improved transparency while hiring private merit-based strategic management. In order to diminish political interference, a solution would be leaving the reporting to legislative bodies instead of the Government. I would mention here as a positive example to be followed by the Romania, is CEZ Group – a state owned utility company but treated with transparency (35 percent being listed on Stock Exchange) and responsibility (the strategic policies are not influenced by the political and governments changes) with private stable management (evaluated based on clear performance criteria). The results were obvious.



Neither. Assets valuation (currency included) has its own generic determinants with differences only of amplitude among various asset classes. It has been already been proven both theoretically by behavioral economists and especially by empirical evidence that markets are imperfect. Therefore, a move by a certain measure in a certain direction may not be taken as a gauge of health or ailment in the overall standing of a national economy. The current moves about stock exchange and local currency have been solely based on the concerted actions of two things: a substantially larger liquidity in the money market (money supply in euro-area currently notches +13% larger than 5 years ago) and an improved investor confidence in the recent actions of the euro-area leaders. 


Hence, the two drivers are totally exogenous to the state of the Romanian economy. On the other hand, they cannot be labeled as mere "happenings" , either.