One of the keynote speakers at Spring Cocktail 2018, Bogdan Badea, the Chairman of the Hidroelectrica Directorate announced that the electricity producer registered a record gross profit of 500 million lei in the first quarter of this year. The company’s director also showed that between 2018 and 2020, Hidroelectrica plans to complete new hydropower plants with a total installed capacity of about 140 MW. In an interview published in the Spring edition of energynomics Magazine, Bogdan Badea detailed on modernizing the Vidraru Hydropower Development..
Dear Mr. Bogdan Badea, during the last five years, Hidroelectrica has managed to reach a total net profit of over 5 billion lei. We also understand that the last judicial risks caused by the triggering of the insolvency procedure have disappeared. We turn, thus, as it should be, on achieving the investment plan and business consolidation. Where does your company stand from these two perspectives?
Hidroelectrica has overcome the financial problems of the past. The exceptional results of 2017 speak for themselves about the performance that Hidroelectrica is capable of: we have an estimated gross profit at over 1.6 billion lei, a historical maximum. Our business philosophy however involves more than just getting profits, as we have emphasized repeatedly. The focus of our priorities are the projects for refurbishment and the realization of the yearly maintenance schedules, but also the development of new projects and solving the situation of investments with complex function. We are also keenly following the identification of new investment opportunities in the country or in nearby regions. We are undertaking a study on this subject, and a decision in this matter would solidly be based on it. I would like to strongly underline however, that we will only promote those investments which are economically justifiable and are generating value for the company.
Regarding the situation of short- and medium-term projects, I’d like to remind that we have recently relaunched the tender for the refurbishment of the Vidraru HD, a project worth over 80 million euro, which we hope to accomplish in an accelerated manner. We’d like to breathe new life into the whole Vidraru Hydropower Development. The documentation for the public tendering of these works has been adapted to the new legislation, with the requirements of the technical specification offering flexibility, so that the possibility of the potential service providers to participate in the tender is not restricted. We’ve put a lot of work into optimization, so that we can offer the possibility for the proposed technical solutions to meet state-of-the-art standards.
In the period 2018-2020 we estimate that we will commission the Hydro-electrical Power Plant Bretea with an installed power of 12.3 MW,
Racoviță HPP – 29.9 MW installed power and Răstolița HPP – 35.2 MW installed power. We would also like to unblock the legal situation and continue working at the hydropower development on the Jiu River, in the Livezeni-Bumbești sector, where we have two plants in a very advanced stage of development, approximately 98%, and also Dumitra HPP with 24.5 MW installed power and Bumbești HPP with 40.5 MW installed power.
You were speaking, last year, about the need to strengthen the management team, by extending the Directorate with another two members, but also about attracting a number of 140 specialists. What stages are these initiatives at?
The consolidation of the management team is a must and the recruitment process is near completion to fill in the two vacant positions. What is more important, however, is assuming responsibility in the management act. Each team member must have a clearly defined area of responsibility, and accurately know that they are responsible for the aims that have been defined. In relation to attracting specialists within the executive departments of the company, this, also, is an ongoing process. We need human resources in order to consolidate departments dealing with refurbishment, development and maintenance – particularly in the construction design field. I’d like to make it very clear that these activities are the basis of what represents the future success of Hidroelectrica and are vital for the durable development of the company.
In preparation for the listing, but also in its absence, strictly related to the health of the organization, the company will have to move toward a firmer corporative governance system, with increased transparency, in which the dialogue with the shareholders and other interested parties takes on new dimensions. What are the steps you are taking in this direction and what expectations should we have for 2018?
Communication and transparency are priorities for Hidroelectrica. We have made and we are making efforts in this direction, wishing that the company shareholders were our dialogue partners. The way in which the company operates is very important to be understood, and how we justify the decisions being made, based on principles of good corporative governance. We are working in a very technical field, which can sometimes be a barrier to communication, particularly when lacking common conversational ground with some representatives of the shareholders. We would, for example, prefer a more constructive dialogue with the representatives of the Fondul Proprietatea. That is where we believe there is work to be done in order to overcome prejudices. We would like it to be very clear that we’d like to efficiently work together, for the common interest. The market success of the company is our priority, as it surely is for the shareholders too.
We are aware that Hidroelectrica must communicate with the market, promote itself in the investor and analyst community. We are making important strides in this sense, both from the standpoint of our way of acting, as well as with documents that our activity is based on. We are preparing a communication strategy which will be applied by Hidroelectrica in the next period, after approval by the Supervisory Council of the company. This document also considers the scenario of the public offering.
The listing of the company seems not to be a priority anymore for the majority shareholder. What is the main reason for this in your opinion?
The decision to have Hidroelectrica listed on the stock exchange has to be taken by the two shareholders. They are the ones deciding the right time or the percentage of stocks to be put on market. While awaiting these decisions, we, the people in the executive management, act in the sense of removing all obstacles that could affect the IPO.
In spite of the spectacular incomes shown for years, Hidroelectrica still bears the weight of historical investments. What are the perspectives that at least some of these are eliminated from the books of the company in 2018?
The situation of historical investments is of particular interest to us. This is a problem that we want solved, especially since it acts as a brake in relation to the eventual IPO (Initial Public Offering). We are internally analyzing these objectives and a decision will be taken on whether some of these works will be resumed or others will be abandoned. The main criteria we are considering is, as we said, the economic criteria of profitability. If the data resulted from the analysis show investments which could be profitable to Hidroelectrica, we will implement these investments.
The fulfilling of investment plans is a priority undertaken by the current Hidroelectrica management. I’d like to underline the fact that, in 2017, when I started this mandate, investments were made at about 31%. We have made up ground in the second semester, managing to achieve over 92% of what was planned, which means that, overall throughout the year, the investment rate was of over 62%.
As a major player on the electricity market, the moves that Hidroelectrica makes have a massive impact on hundreds of companies providing services and support. What are the most important investment projects over the next period?
In 2018 we have a total of approximately 490 million lei assigned to investments, refurbishment and maintenance. We are aiming to minimize the differences between assigned values and effectively achieved values. I believe we have made great progress in this direction. Last year, for example, the investment rate was over 62%, more than double compared with 2016, when it was only 28%.
Our interest is to use as much as possible of the assigned budgets so that our projects can be accomplished. We are updating technology at Stejaru (ongoing), Vidraru, Mărișelu, Râul Mare Retezat, we have projects at Bretea, Răstolița, Nehoiașu, Racoviță, and we are completing the developments on Jiu after sourcing new building permits.
What is your plan for clarifying the situation at Hidroserv and securing for Hidroelectrica the services that should have been provided by Hidroserv?
Hidroelectrica needs the Hidroserv specialists. Unfortunately, the service company is still facing difficulties in optimizing its costs and reorganizing based on economic efficiency criteria. If this process will not be successful, we are also looking at other scenarios, such as the total or partial internalization of these services, but not under any conditions, but by attracting only those specialists with confirmed results. However, as I said, whatever decision shall be made, it must be viable for the company and prove to be profitable.
—————————————-
This interview firstly appeared in the printed edition of energynomics.ro Magazine, issued in March 2018.
In order to receive this issue of energynomics.ro Magazine, we encourage you to write us at office [at] energynomics.ro to include you in our distribution list. All previous editions are available HERE.