Selling the state’s assets seems to become a highly-favored solution in the context of the predictable 2015 budget crisis. Giving up public share holdings could bring a lot of billions of Euros.
According to our estimates, the sums collected in 2015 will fall at least 15 billion lei short of the set deficit target. Five billions will be necessary to cover the revenue loss generated by the cut of the health insurance tax (CAS) by 5%, another five billions to reduce the budget deficit by 0.8% of the GDP, while other 2.5 billion lei will be required as defense costs and the sum used to co-finance European funded projects will both increase.
The ideal scenario would be that the economy bounces back and/or the battle against tax evasion pays back, so that tax collecting improves significantly. The realist scenario is that new taxes will be enforced or those already existent will be increased, in an attempt to close the gap. A less heard of scenario is that of launching an accelerated process of privatization, which would secure us at least part of the needed money.
Flops, delays and stock listings
In fact, according to the agreements signed with the IMF in the last years, the state should have sold, totally or partially, its share holdings in several important companies. In this sense, the names that have sprung up are that of Oltchim, CFR Marfă (Goods Transportation), CupruMin, Electrica (supply and distribution), the energy plants Oltenia and Hunedoara (where the state should have sold its majority stock packages). Also, the state has smaller stock packages at Transgaz (15%), Romgaz (15%), Hidroelectrica (10%), Nuclearelectrica (10%), OMV Petrom (10%) or the Rompetrol Rafinare. The attempts to privatize the first three companies on this list have all ended in resounding flops and even penal investigations. The selling of nearly 10% of the Petrom stocks was aborted in 2011 because of lack of interest and has not been resumed, while the plan that both Hidroelectrica and CE Oltenia go public in 2014 has been delayed.
In the case of Rompetrol Rafinare, where the state holds 44% of the stocks, the government has announced time and again the selling of a stock package of 26%. On the other hand, representatives of the Kazakhstan company said this summer that they were expecting to finish the buying procedures of the share package from the state by the end of the year (in accordance with the memorandum signed with the government that stipulated the sum of 200 million dollars). Recently questioned on the subject, the minister of finance Ioana Petrescu refused to answer.
At the same time, 15% of Transgaz was sold in April 2013 for 72 million Euros, the price for one share being 16% under the price for which the company was traded at the time and approximately 10% lower than when the company went public in 2007 (even if its profits have increased with nearly 50% and dividends have doubled). All this while the state received a sum five times larger in the fall of 2013 for 15% of Romgaz – 390 million Euros. Roughly at the same time, 10% of Nuclearelectrica shares were traded for around 63 million Euros.
Moreover, 51% of Electrica shares were bought by private parties through BVB this summer. ‘We have gathered almost two billion lei for the share packages we have offered. These sums will not be transferred to the budget, but will remain with the company,’ explained, at that time, PM Victor Ponta. Considering these sums, the state’s share holdings in these four traded companies would amount to over 3,5 billion Euros. This is exactly the estimated budget deficit for 2015.
A varied portfolio
But the state is much wealthier. According to the Ministry of Finance’s database, the state controls 100% of the mining companies Minvest Deva, Remin Baia Mare, MinBucovina Vatra Dornei, Moldomin, Minvest Roşia Montană, the National Company of Uranium, the National Association of Coal and Băiţa Ştei; in addition, it holds 100% of Ape Minerale SA and 51% of Salrom. The state is also the only or the majority shareholder of several important companies in the oil and gas businesses, such as Oil Terminal or Conpet, and on the energy market, such as Transelectrica, Termoelectrica or Electrocentrale, along with holding smaller, but important share packages in the former Distrigaz Sud and Distrigaz Nord and in the privatized branches of Electrica.
To this list we can further add other industrial companies (such as Romplumb or the Shipyard of 2 Mai), research institutes or tourism companies (such as Mamaia SA, Neptun Olimp SA, Litoral SA, Predeal SA, Hotel Cota 1400 SA, Bega Turism SA or THR Marea Neagră SA). The Ministry of Economy’s portfolio also includes the companies operating in the defense industry. At first glance, these cannot be privatized, but a closer look reveals the fact that among them there are companies which the state has already announced that it wants (or even tried) to sell, like Romae-ro (which would have assets of around 175 million Euros), IAR Ghimbav or Avioane Craiova (the airplane production company would be at its sixth attempt of being privatized in the last twenty years).
In 2014, the Energy Department under the Ministry of Economy would have had to collect around 700 million lei from privatizations, according to its own budget of revenues and expenditures. An important part of this sum (75 million lei) would have then gone on expenses for managing privatizations (including paying the counselors and lawyers involved), while approximately 617 million lei would have ended up in the State’s Treasury. Meeting this set goal is doubtful at the moment.
The new AVAS and its billion
We should not forget that the state also holds, through AAAS (the Authority for Managing the State’s Assets), nine commercial companies, as the only or majority shareholder, to which we can further add other 600 companies where AAAS is a minority shareholder (around half of them being considered companies that could be privatized). All in all, the value of the social capital AAAS holds is over one billion lei, but the sum with which the share packages could be sold could vary, depending on many factors.
As for where the money from privatizations would go, the former minister of finance, Florin Georgescu, declared two years ago that they would be invested in strategic state companies in the energy and transport sector. ‘We will invest in economic agents of great strategic and economic importance, in the energetic and transports sectors, where we have unexploited resources,’ he explained. Meanwhile, Georgescu has left the Ponta cabinet and the present state of the budget, especially with the estimations for the next year, points to only one thing: any extra money will be used to cover an epic-sized gap.
1 billion lei is the value of the social capital that AAAS holds in the approximately 600 companies included in its portfolio.
2.6 billion Euros. That is the market value Romgaz has been estimated to when it went public with 15% of its shares in autumn, last year. Considering how it is traded at the moment, the company’s value amounts to approximately 3 billion Euros.
15 billion lei. These are the estimated necessary funds for covering the budget deficit in 2015, as a result of the cut in the health insurance tax and the rise of military expenses and, also, EU financed projects expenditures.