Insolvency and privatization
The Romanian chemical plant Oltchim will be declared insolvent, with a view to reorganisation.
Ştefan Stoica, 25.01.2013, 14:20
The fate of the giant chemical plant in Ramnicu Valcea, in southern Romania, remains uncertain. The only short-term solution found by the Government and accepted by Oltchim’s board is for the plant to be declared insolvent, just like another important state-owned company, Hidroelectrica. Insolvency is a way by which heavily indebted companies can negotiate new payment deadlines and reorganize themselves to become efficient. Oltchim’s debt stands at 600 million euros.
The first option for the plant was privatisation, but the attempt to sell its majority stake failed last autumn. While the plant’s board says insolvency is the only measure that can lead to its economic recovery, trade union leaders have their doubts. They have threatened with new protests unless the government commits to providing 45-million euro in aid to resume production.
Moreover, Oltchim employees fear their companz will be in the same situation of Hidroelectrica, where reorganisation led to layoffs. The announcement regarding Oltchim’s insolvency has triggered a 15% decrease in the company’s shares on the stock market. Oltchim has found itself in this difficult situation because of its high production costs, the large number of intermediaries who sell its products and the excess staff.
The situation at Oltchim is quite common in Romania, with many other state-owned companies being unproductive and heavily indebted. Under an agreement concluded by Romania with the International Monetary Fund, the European Commission and the World Bank, the Bucharest authorities have committed to a reform of state-owned companies, some of which are of strategic importance. Nevertheless, an IMF mission to Bucharest has recently found that this process has been constantly delayed.
The list of companies in financial difficulty also includes CFR Marfa, the freight division of the Romanian Railways Company, whose privatisation is the government’s top priority in the transport sector. Tarom national airline also has six months to go public with 20% of its shares. As far as energy companies are concerned, the Romanian authorities have promised to sell the majority parcel of shares in Transgaz and NuclearElectrica by April. The privatisation deadline for the other state-owned companies in the energy sector is the first quarter of 2014.
