Răzvan Pârvulescu, Development Director of the Natural Gas Division at Hagag Energy
Hagag Development Europe, present in Romania since 2017, is diversifying its local activities and consolidating its presence in the country by expanding into the energy sector, where it operates under the Hagag Energy sub-brand. It began with expansion into the natural gas sector, where the company has reached 72 active contracts for concessions and network design, construction, and operation, with national coverage of 95 localities and two cities. We spoke with Răzvan Pârvulescu, Development Director of the Natural Gas Division at Hagag Energy, about the company’s expansion plans and medium- and long-term strategy.
How do you assess the medium-term sustainability of gas investments supported by the Anghel Saligny program?
At the macro level, the sustainability of investments in gas networks financed through the Anghel Saligny National Investment Program is mainly determined by the degree of utilization after commissioning. This is because, in practice, the economic viability of a network depends on the number of connected consumers and the volume of consumption they generate.
Connection is a gradual process, in the sense that approximately 25-28% of the total consumer potential connects in the first year after the network is put into operation, and the peak of connections – representing around 70-80% of the potential – is reached in the seventh year. Therefore, the minimum number of connected households directly influences the return on investment.
At the same time, it is important to take into account aspects related to demographic structure and consumer density, two factors that are relevant for maintaining an optimal level of consumption in the long term. In this case, we are talking about an interdependent relationship: while localities with a stable population attract investment, the presence of the gas network – along with other basic utilities – becomes an engine of development in itself and contributes to increasing the attractiveness of the area.
Therefore, projects are more sustainable in localities with high housing density, shorter distances between consumption points, and lower connection extension costs, while areas affected by depopulation or migration may reduce gas demand in the medium term.
However, the presence of natural gas in rural areas has the potential to drive sustained population growth, mainly due to the presence of non-residential consumers – such as industrial units, SMEs, or public institutions – which generate higher and more stable consumption throughout the year, helping to reduce the impact of seasonal variations specific to residential consumption and maintain a more predictable level of demand.
For us, as an operator, all these aspects are important because they indicate both the sustainability of the project and the development potential of the localities concerned.
What is the logic behind the selection of concessions you have focused on, and what criteria will determine a possible new wave of expansion?
The selection of concessions is obviously based on criteria of economic and operational viability. As mentioned above, consumer density is an essential indicator, but we also analyze long-term development prospects, given the duration of the concession, namely 49 years.
Another relevant selection criterion is the consumption profile of the targeted localities, namely the ratio between domestic and non-domestic consumers, which contributes to long-term demand stability. We also look at the level of co-financing provided by local authorities, either from their own budget or from the state budget through PNIAS, as this accelerates project implementation and reduces the financial pressure on the operator. We also pay close attention to the maturity of the technical documentation, the existence of feasibility studies, and the quality of the technical projects submitted. Of course, we also aim to consolidate our regional presence in areas where we already have concessions and where we want to create regional distribution hubs that will allow us to optimize operating costs and plan coherently for future infrastructure development.
And when it comes to expansion, our approach is based on the performance of concessions already implemented and the dynamics between demand and consumption. At the same time, we analyze the economic efficiency of investments, including the cost per kilometer of network and the cost per connected consumer, but also access to public or European funding programs, which can accelerate the expansion of networks in areas with economic potential. Of course, we also assess the compatibility of the developed infrastructure with energy transition objectives, including the possibility of using the infrastructure for biomethane and hydrogen blends in the future.
Regarding the 2027 target – the completion of the 69 concession networks – what are the main execution risks that could derail the schedule?
Mainly, delays in obtaining permits and authorizations are one of the most common risks. Due to the complexity of the works, but also to the fact that multiple institutions are involved in the approval process, administrative procedures may exceed our initial estimates. Therefore, collaboration and coordination with the local authorities involved is very important. We pay special attention to communication with institutional partners, and we are aware that this can positively influence the pace of projects, especially if we encounter situations that require clarification regarding the legal status of the land on which the SRMP network or equipment is to be located.
Also in terms of risks, I would include issues related to the supply chain, which can also affect the availability of the necessary materials, as well as unforeseen technical conditions that can arise at any time during execution, such as difficult underpasses, existing underground infrastructure, or other obstacles that our colleagues encounter in the field.
What performance indicators do you monitor for networks already in operation and those coming into service? Are investments “mandatory” to standardize operation on a national scale?
For networks that are already operational, as well as those that are about to be commissioned, we monitor a series of operational, technical, and economic indicators that reflect the performance of the infrastructure and its level of use. Among the most relevant are the degree of connection to the network, the number of connected consumers relative to the estimated potential of the locality, the annual rate of new connections, and the evolution of gas distribution volumes.
We monitor, of course, indicators such as the number and duration of outages, response time in case of breakdowns, operating and maintenance costs, as well as the duration of the connection process for new consumers. At the same time, we closely monitor response times to customer requests, an essential indicator for maintaining a high standard of service.
In parallel, we are investing in standardizing our operating methods across our entire concession portfolio, with the aim of creating a unified operational framework that ensures optimal performance, control and safety in network operation. At this time, our focus is on developing the existing command center, which allows us to monitor networks in real time and coordinate interventions at the national level. We also aim to implement modern SCADA-type monitoring and control systems, which enable the efficient management of technical parameters of the networks and contribute to increasing the level of operational safety. The implementation of a high-performance, unified smart metering system is another key element in our development strategy, especially in terms of optimizing commercial processes for supply activities, but we are also pursuing the digitalization of maintenance and asset management processes with the aim of increasing operational efficiency and infrastructure management capacity on a national scale.
Beyond distribution and supply, what are the most likely directions in the next 2–3 years? How will you decide where to allocate capital from the investment plan of over 400 million euros?
From the outset, Hagag Energy set out with the ambition to become an integrated energy platform and to expand Hagag Development Europe’s long-term investment vision in Romania’s regulated utilities sector. In the medium term, we aim to diversify our operations into areas complementary to natural gas distribution and supply, in line with the transformations taking place in the energy sector in Romania and Europe.
For the Natural Gas Division, however, the priority remains the development and operationalization of the natural gas distribution networks in our portfolio, activities for which we will allocate approximately 100 million. At the same time, we are also investing in the development of our own production capacity for equipment specific to the natural gas sector, namely the regulation-measurement-delivery stations (SRMP), which are essential for the safe operation of the networks. This approach reduces our dependence on external suppliers, accelerates the implementation of infrastructure projects, and ensures a high level of safety. And yes, in the context of European decarbonization targets and estimates showing that Romania could produce up to approximately 5.5 billion m³ of biomethane by 2040, we are also exploring the opportunity to integrate green gases, biomethane and hydrogen into Hagag Energy’s portfolio.
At the macro level, beyond the basic infrastructure, we are looking at several directions for expanding the value chain and rigorously analyzing the diversification of business lines and the renewable energy segment, including, but not limited to, projects dedicated to storage, which are becoming increasingly relevant in balancing the energy system.
Capital allocation decisions are guided by several clear criteria: regulatory stability, regional development potential, project scalability, and long-term returns. Essentially, we focus on opportunities that favor the consolidation of an integrated energy platform capable of supporting both critical infrastructure and the energy transition.
