“After the dust settled…”: The first 8 conclusions for the Romanian Renewable Energy market


* this article was first published on the 23rd of April 2012

The first law for the Romanian Renewable Energy market was published in 2008. There were some serious investments that followed, but not many. As we all know, the real kick-start for the market was the new law passed by the Romanian Parliament in the autumn of 2011, once it was approved by the European Commission earlier that summer.

As it always happens, in the first period “a lot of dust was created”. Too many stories, noises, proposals and approaches became part of our daily life, in which “everyone talks to everyone about everything”. Having been present in 9 transactions for important Green Energy projects during the last 6 months, I have reached a few conclusions regarding this market. Let’s discuss them together:

1. There is an inflation of projects available, but not many really good ones

In the beginning there were few available projects. Now tens of wind and solar projects are available on the market. Rumors have it that hundreds of others are under preparation. But just a small fragment of them are still good after a “pre-due diligence” process as we conduct. Sooner or later prices will start correcting themselves. Expectations are already lower compared to 2011.

2. The majority of banks remain defensive

There are many international problems that force Romanian banks to be defensive towards any investment. The Romanian subvention scheme is a local factor as well, due to the lack of stable pricing. There are indeed some projects that are financed, but I am expecting news in the second part of the year (and most probably in the last quarter).

3. PPA contracts are not easy to sign

Almost everyone is searching for them but very few will finally sign them. These will be the winners of the Romanian Green Energy race, especially if they construct in the following 18 – 24 months frame.

4. The majority of investors need financing

There are very few investors who depend on their own capital. A minority has secured funds from abroad, while the majority is searching on the local market. With banks being defensive and PPA contracts representing a challenge, there is no surprise that most of the investors who need financing will have to revise their strategy later this year.

5. Nothing moves fast. Everything is triple-checked

All the big players verify the projects down to their last details. They… triple check everything and this is a good sign for the future of the segment. There might be a problem with the private individuals investing, who tend to avoid “too many expenses in procedures” and prefer “fast and cheap solutions”. (And when you hear “fast and cheap” you know what will come in a few years’ time: cries and accusations…)

6. Serious players really make deals. They don’t just talk

Many important companies are active on the market, securing projects, having a target to reach by the end of the year and another one for 2013. This is the only segment of the Romanian market where you can find so much money available with the intention of investing the capital in the very near future.

7. Too many private investors focus only on price, not quality

The experience accumulated by other markets tells us that the cheapest price brings us the lowest yields usually, the biggest problems and all kinds of unexpected trouble. Still there are too many private investors who focus only on price, ready to deal with people they might never see again. But the quality they will use in their investment will determine its success as well.

8. 2 more years. Maximum 3.

This market will not be open forever. Tens of projects of thousands of MW will be signed this year. If one does not move fast, he might be in for a surprise. On the other hand, there are still some segments which remain unexploited. But these I will share with you in private…

What is your opinion?