Hidroelectrica, a state owned company, is the leader in hydro power generation and main supplier of ancillary services required within the National Energy System. The company plays a key role in Romania’s energy security.
Hidroelectrica is currently one of the most profitable company in Romania. How has it evolved in the local economy and what contributed to this successful outcome?
Hidroelectrica came into being through the unbundling of the National Electricity Company, a mammoth corporation, which in 1998 was broken down into several producers by type of resources. Since then Hidroelectrica went through various phases, including one of insolvency which required a major internal restructuring and led to the rethinking of the business philosophy. This was followed by a period of consolidation and development, with the central points being maximization of revenue and cost optimization.
On top of these, in the past two years we added a third strategic element which regards employees, namely creating motivation and loyalty by correlating the company’s success with increases in their salaries and bonuses. With priority, in 2017 we strengthened the team in charge of investments, that had a minimal structure at the time and an insufficient capacity to handle the major projects that we had underway. We are now in full process of resuming strategic investments, such as the bidding for Vidraru with a value of EUR 82 million and upgrading large power plants such as Raul Mare, Retezat and Mariselul. The philosophy behind these investments is based on a holistic vision, that includes as strategic elements the individual performance of each plant, a tight cost control and a strong team to manage these projects.
The trend towards clean energy has been gaining traction in Romania - how do you see this transition unfolding?
Carbon prices have risen and there pressure for these older capacities to be removed. It is difficult, however, to take 3000 MWh out of the system at once, a reliable alternative is called for. Hidroelectrica has, technologically speaking, two large types of power plants. One of them is run-of-river, which is dependent on meteorological variations. The second type are hydro power plants that use a dam, which we typically use as a buffer when needed, both to attenuate peak consumption and in cases of imbalances in the system to provide a quick compensation. However, Hidroelectrica cannot replace the total removal of coal from the system, the transition must be done through a well thought out process.
Hidroelectrica already identifies as a 100% green company. What contribution can it further add to the country’s overall transition to clean energy?
The number one goal we have now is to secure our existing production by giving a new life cycle to our hydropower plants. We see this period as a very good time for investments given the price corrections that happened in recent years. For a while now we have been analyzing previous investment objectives that for various reasons were suspended, to understand which ones could be effectively pursued. We are trying to squeeze every possible MWh from these projects and contribute as much as possible to meet the consumption needs in this transition.
It is not a simple process though, as it involves a high amount of redesign work and new authorizations. Changes in environmental legislation also raise challenges. Paradoxically, although hydro energy is clean energy, we have ongoing clashes with various NGOs trying to block our investments; they have in fact succeeded in the Dumitra Bumbesti case, an unbelievable situation and a dangerous precedent, considering that the legislation has changed after a part of the construction had already been built. Coal is on a downward trend, nuclear is rather controversial and solar and wind power are not sufficient for a working energy system - hydro power is necessary so it is important to find the right balance between environmental impact and community benefits; in this respect we have initiated a partnership with the Ministry of Environment that will hopefully help to align our objectives.
We also aim to diversify our portfolio through the addition of wind and solar power generation capabilities. This will help us mitigate the risks associated with production cycles - for example, on the hydropower side we produce a lot during spring time, but the summer period is rather dry; we can turn this into an opportunity by harnessing solar power. Climate change is also a factor, as the pattern has not coincided with the statistical data we had in previous years, and it is clear that we need to adapt to these changes. To add these new capabilities we are considering the purchase of existing capacities that still benefit from support schemes, because with the increase of our supply activity the need for purchasing green certificates will also be higher.
Quite an ambitious strategy - what are you prioritizing for Hidroelectrica for the next few years?
We have 208 hydro power plants in our portfolio and we have already begun a process of modernization. In addition to this, we want to develop the power supply segment of our business. In 2018 the market has been fully liberalized and this was reflected in the company's financial performance, which reached a profit of about 2 billion RON. We avoid selling high quantities on the spot market because it is very volatile and market participants take on speculative positions. In the past, this led to big differences in pricing between what Hidroelectrica offered and what consumers actually ended up paying.
We have also started an action to identify opportunities for regional expansion. Romania has been and still is a regional hub for energy, and as interconnectivity advances it brings new opportunities for our business. We want to start sowing seeds so that when the time comes we are able to replicate the success we had in the local market and become a real competitor for the big companies in Europe.
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