Business Review Issue 1, January 18-24, 2010

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The beginning of the year brought two deals on a market which didn’t see much M&A

action last year: cable operator RCS & RDS just bought competitor Airbites, while

Slovakian Soitron took over local Datanet System.

See News section, pages 4-9

The beginning of the year brought two deals on a market which didn’t see much M&A

action last year: cable operator RCS & RDS just bought competitor Airbites, while

Slovakian Soitron took over local Datanet System.

See News section, pages 4-9

INTERVIEWFrank Hajdinjak, general manager ofE.ON Romania, tells Business Reviewthe company is keeping a close eye onits main debtors this year

See page 12

STRATEGYAs many as 17,000 companies startedinsolvency procedures last year, includ-ing local retailers Flamingo, Leonardoand PIC

See page 18

BALANCEThe recession and hike in cigaretteprices may prompt many to quit smok-ing as a New Year resolution, but thetrick is to outlast January enthusiasm

See page 20

2010 COULD BE A GANTRY FOR NEW FINANCIAL PLAYERS IN ROMANIA; SEE PAGE 10

RECONNECTINGRECONNECTING

BUSINESS REVIEWROMANIA’S PREMIERE BUSINESS WEEKLY JANUARY 18 - 24, 2010 / VOLUME 14, NUMBER 1

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PHOTO

BY: LAUREN

TIU OBA

E

PHOTOS OF THE WEEK

Romanians rushed in

their droves to be

vaccinated against the

A/H1N1 virus this

week, after the death

of a popular actor

was attributed to the

virus – despite the

protestations of those

close to him that it

was not the full story.

See news on page 7

Week in

NUMBERS

Lender BCR made a EUR 211

million profit last year, half the

figure of the previous year

The Romanian Central Bank

(BNR) has slashed the key inter-

est rate to 7.5 percent from 8

percent

211 million

7.5%

The European currency slipped to

an exchange rate of RON 4.1

per EUR at the end of last week

4.1

Business Review is organizingthe eighth edition of Tax, Law &Lobby, set for February 9 at the Inter-Continental Hotel. Over the years,Romanian Tax, Law & Lobby hasbecome the most important special-ized event addressing the hottest le-gal and financial issues on the Ro-manian business market. Dedicatedto a highly select audience, the annu-al forum, organized by Business Re-view, attracts over 200 participants,top speakers and officials: business

and political leaders, key decisionmakers from the IMF, EBRD, WorldBank, EC Delegation in Romaniaand Central Bank of Romania.

This year’s event will focus onthe new political landscape and whatit means for the business community,taxation issues from a business per-spective and lobbying opportunitiesfor companies active in Romania.

Confirmed panelists include:Robin Barnett, UK ambassador;Blair LaBarge, economic counselorof the United States Embassy; BrianDavies, BRCC president; GabrielSincu, partner at Mazars; Sorin Min-drutescu, Romania country leader atOracle Romania & AmCham presi-dent; Laura Florea, managing partnerat Point Public Affairs; Gilda Lazar,corporate affairs director at JTI;Oana Nastase, corporate affairs di-rector at Rompetrol; and RazvanNicolescu, corporate affairs directorat Petrom.

For more information about the event, go to www.business-review.ro/events. !

Business community prepares for the lowdown on tax and law

BUSINESS REVIEW FORUM

LAUREN

TIU OBA

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The event regularly attracts over 200 industryprofessionals

N E W S

BUSINESS REVIEW / January 18 - 24, 20104

Cable operator RCS & RDS hasbought Airbites Romania, the local di-vision of Swiss company Swisscom.Airbites had several tens of thousandsof television and internet subscribersin Romania. The value of the deal,which was announced by Airbites onits official site, has not been madepublic.

In 2008, Airbites launched IP tele-vision in Bucharest and Iasi, which itintended to expand to four other citieswhere it had developed its network:Roman, Bacau, Onesti and Barlad.However, the company has been look-ing for a buyer since 2008 when it posted a turnover of EUR 2.9 million and a net loss of EUR 8.5million.

RCS & RDS has over one millionunique internet users. The operatorended 2008 with a turnover of EUR387 million.

It has an aggressive takeover andpricing policy and is currently ex-panding its mobile internet network,which should be functional all overthe country in December.

The RCS & RDS shareholders areCable Communications Systems fromthe Netherlands with 88.9 percent ofshares, RCS & RDS with 5.04 per-cent, businessman Zoltan Teszari whoholds 2.03 percent and Csaba IanosLudescher, with 1.1 percent, as wellas other individuals with participa-tions of less than 1 percent.

Otilia Haraga

Insurance giant AXA announcedlast week the acquisition of Omni-asig Life. With this operation, thecompany enters the Romanian lifeinsurance market, in line with itsobjective of accelerating the devel-opment of its activities in emergingcountries, notably in Central andEastern Europe.

After the buyout of the minorityinterests of its Hungarian, Czechand Polish subsidiaries held by theEBRD in December 2009, the ac-quisition of Omniasig Life givesAXA an opportunity for develop-ment in what it sees as the highgrowth potential market of Central

and Eastern Europe. The Romanian market, with its

low life insurance penetration ratecompared to the rest of the Euro-pean Union, offers AXA significantgrowth potential, the company be-lieves.

Created in 1997, Omniasig Lifesells protection products, represent-ing premiums of EUR 12 million in2008, through a network of about1,400 agents.

The move will be sealed subjectto regulatory approval, among otherfactors, and is expected to takeplace during the first half of 2010.

Anda Dragan

AXA enters the Romanianlife insurance market

RCS & RDS takes over Airbites

AG

ERPRESS

Alexandru Oprea, general manager of RCS & RDS

COURTESY O

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AXA believes that the Central and Eastern Europe insurance market has great potential

LAUREN

TIU OBA

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BCR will use the funds to finance SMEs

BCR gets EUR 75 mlnfor SME lending

Austrian-owned lender BCR hassigned up for a EUR 75 million loanfrom the European Investment Bank(EIB) which will fuel lending for smalland medium enterprises, according tothe bank. The maximum amount whichcan be lent through BCR under theSMEs program is EUR 12.5 million,with the total cost of eligible projectsreaching EUR 25 million. Eligible proj-ects must be from agriculture, tourismand services, as well as manufacturingand the food industry. EIB has providedsimilar financing to Piraeus Bank andAlpha Bank, which borrowed EUR 50million each. Loans from the EIB canonly be for the co-financing of projectswhich are also attracting Europeanfunds. Over 75 percent of the projectspreviously financed through EIB loanshave also received EU funding, accord-ing to BCR.

Corina Saceanu

2009 in

NUMBERS

Romania has signed up for aEUR 20 billion loan packagefrom the International MonetaryFund, European Commission andWorld Bank

20 billion

Up to EUR 4 billion of foreign

direct investments (FDI) were

directed to Romania last year,

50 percent down on the previous

year

4 billion

The Bucharest Stock Exchange

(BSE) capitalization last year was

EUR 1.2 billion, down on the

EUR 4 billion peak reached in

2007

1.2 billion

There were 700,000 unem-

ployed people in Romania at the

end of last year after the eco-

nomic crisis sent a wave of lay-

offs and collapses hurtling

through the country

700,000

As many as 17,000 companies

started insolvency procedures last

year, in the wake of the financial

crisis, according to data from the

Registry of Commerce

17,000

The first 42 kilometers of the

Transylvania highway were

opened to traffic in December

last year

42

N E W S


US generic drugs producerAlvogen has opened an office inBucharest, which will be run byLaurentiu Scheusan, former countrymanager of fellow pharmaceuticalfirm Actavis, the company has an-nounced.

The Romanian market entry ispart of Alvogen’s expansion plans inEastern Europe. Alvogen Romaniawill primarily focus on sales andmarketing to support several newproducts scheduled for introductionduring 2010.

The company also will employregulatory and pharmacovigilanceexpertise within the newly formedbusiness.

In his role as managing directorof the new entity, Scheusan, wholeft the helm of Actavis mid lastyear, will lead more than 60 newemployees.

“We see great opportunities for

our business in Eastern Europe, andthe creation of Alvogen Romania isintegral to our development strate-gy. Through registration of our ownproducts, portfolio acquisitions andstrategic partnerships, we aim tobuild a strong presence in the mar-ket with a targeted product offer-ing,” said Robert Wessman, execu-tive chairman of Alvogen. Wessmanis the former chief executive of Ac-tavis and now owns 30 percent ofAlvogen, the company he has setup.

The firm aims to be among thetop pharmaceutical companies ac-tive locally within the next fiveyears.

The Romanian pharma marketgenerates annual sales totaling USD3 billion, according to Alvogen,which believes the market will seestrong growth as Romanian health-care infrastructure improves.

Alvogen joins other internation-al meds producers on the Romanianmarket, as well as local ones, in-cluding Zentiva, Terapia Ranbaxy,

Actavis, GlaxoSmithKline, Eli Lil-ly, Merk, Novartis, Sandoz, Ozone,LaborMed and Antibiotice.

Corina Saceanu

US drug maker Alvogenopens local office

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The local pharmaceutical market generates annual sales of USD 3 billion, says Alvogen

N E W S


Ministry of Financetries to add stardustwith celebrity hires

Television anchor Andrei Gheo-rghe and singer Dan Bittman areamong the latest appointments thatthe minister of finance, SebastianVladescu, has made to complete histeam.

Gheorghe has been appointed tohead the ministry’s communicationdepartment. One of the most out-spoken political commentators inRomania during his time at Reali-tatea TV, he hosted political talkshows on which he invited nationaldecision makers in Romania to ex-plain their actions.

According to the minister, Ghe-orghe has been “overwhelmed” bythe volume of work at the ministryand is making “physical and psy-chological efforts to cope.” Bittman,who is also a television personalityand a member of the rock bandHolograf, has been appointed coun-sellor on population issues. Vlades-cu said Bittman had been hired forhis “celebrity” and his job would be“to establish direct contact with thepublic.”

Vladescu said that contrary topublic opinion that the Ministry ofFinance was “a fortress populatedby monsters,” the people who workthere are very good at what they do.Vladescu promised that Bittmanwould not use his artistic abilitiesand start singing “the anthem of tax-es.”

Otilia Haraga

COURTESY O

F KAN

AL D

TV anchor and new Finance Ministry recruit Andrei Gheorghe

Local pharmaceutical companyA&D Pharma is planning to tap intothe private medical services marketwith a new dedicated division, Ani-ma Specialty Medical Services, ac-cording to a recent announcement tothe London Stock Exchange, wherethe firm’s shares are traded. Animawill offer medical services to bothcorporate clients and individualsand is planning to develop a net-work of medical services and facili-ties throughout Romania. A&DPharma joins several existing play-ers which offer private medicalservices, such as CMU, MedLifeand Euroclinic.

The company has been active indrug retail, through the Sensiblupharmacy chain, distribution withMediplus and the sales and market-ing of pharmaceutical products andcosmetics. It runs the largest chainof pharmacies under the Sensiblubrand in Romania, with 220 units in 51 Romanian cities. The firm has re-

cently acquired several pharmaceu-tical companies in Bulgaria, Poland,Hungary, Slovakia and the CzechRepublic for a total of EUR 23 mil-lion. The companies, most of whichare under the Ozone Laboratoriesbrand, were affiliates of the A&DPharma group, as the foundingshareholders of A&D Pharma werealso founding shareholders of theseentities.

A&D Pharma has recently madechanges to its management struc-ture, after Claudiu Opran, the for-mer chief executive officer of thegroup, stepped down. He was re-placed by CEO Robert Popescu,who will also be COO of the Sensi-blu retail chain.

The pharmaceutical companyposted EUR 364 million in turnoverin the first nine months of last year,down 3 percent on the same periodof the previous year.

Corina Saceanu

A&D Pharma plans privatemedical services market entry

Swedish furniture retailer Ikeasaw its annual sales fall by 9 percentlast year on the previous year, whilethe number of visitors to itsBucharest store was also down, at

2.5 million compared to 3 million in 2008, the company has an-nounced.

Ikea sold EUR 83.2 millionworth of furniture and food in its

Bucharest store last year. “Despite adrop in the numbers of visitors andsold products, the Bucharest store isstill in the top third of Ikea storesworldwide based on 2009 sales,”said Cornel Oprisan, retail managerof Ikea Romania.

The firm sold 10 million prod-ucts last year, three million fewerthan in 2008. Furniture made up 60 percent of the sold products, therest being accessories and decora-tions.

“The fact that total salesdropped by a lower percentage thanthe fall in the number of visitors orsold products means fewer productswere sold, but the value per productincreased, which reflects the movetowards planning acquisitions ratherthan buying on impulse,” saidOprisan.

In 2008 the company saw its lo-cal sales rise by 50 percent.

In Romania, Ikea is run under afranchise held by Moaro TradingSRL.

Corina Saceanu

Ikea sees lower sales, less impulse buying

LAUREN

TIU OBA

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Visitors to Ikea’s Bucharest store fell from 3 million to 2.5 million last year

COURTESY O

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Robert Popescu, CEO of A&D Pharma

N E W S


The number of people in Roma-nia infected with A/H1N1 flu hasreached 6,470, and the death toll102, according to the Ministry ofHealth.

The number of new cases con-firmed over the 24 hours prior to thestatement on Friday was 84, withtwo deaths.

Most of the cases were inBucharest (36), followed by Boto-sani (18), while other cities had fouror fewer confirmed cases.

Apart from the Matei Bals Insti-tute, where there are three medicaloffices for vaccination, two othercenters were opened in Bucharest atthe Public Health Institute and theCantacuzino Institute.

New vaccination centers were

also opened at Lahovary hospitaland Colentina hospital.

In the days following the deathof actor Toni Tecuceanu at the be-ginning of January, apparently as aresult of the virus, vaccinationpoints in the city were crowded withpeople wanting the jab.

Adrian Streinu Cercel, state sec-retary in the Ministry of PublicHealth, said the actor’s medicalrecords included the A/H1N1 virusalong with various other complica-tions.

However, the actor’s brother andsome of his colleagues came for-ward to say that the published deathresults were mere spin, intended toscare people into buying the vac-cine. Paul Tecuceanu said his broth-

er’s death might not have been theresult of A/H1N1 and that officialpapers did not cite the flu as thecause of the death.

Moreover, none of the peoplewho had come into contact withToni Tecuceanu had subsequentlycome down with the virus.

Meanwhile, at European level,there are doubts that A/H1N1should even be classified as a pan-demic.

The Health Committee of theEU Parliament has unanimouslypassed a resolution calling for an in-quiry into the matter.

The motion was introduced byDr. Wolfgang Wodarg, former SPDmember of the German Bundestagand now chairman of the European

Parliament Health Committee. The text of the resolution, which

was just passed by a sufficient num-ber in the Council of Europe Parlia-ment, states, “In order to promotetheir patented drugs and vaccinesagainst flu, pharmaceutical compa-nies influenced scientists and offi-cial agencies responsible for publichealth standards to alarm govern-ments worldwide and make themsquander tight health budgets on in-efficient vaccine strategies andneedlessly expose millions ofhealthy people to the risk of an un-known number of side effects of in-sufficiently tested vaccines.”

Otilia Haraga

Public flocks to get vaccine as controversy surroundsA/H1N1 ‘pandemic’

Slovakian company Soitron,leader on the Slovakian communi-cation solutions and IT infrastruc-ture market, has acquired a majorstake in Romanian companyDatanet Systems.

The value of the transaction hasnot been made public. Through thetransaction Soitron has acquired 51percent of the shares of DatanetSystems with the remaining 49 per-cent split between four Romanianshareholders who are also members

of the Datanet Systems manage-ment board: managing directorVasile Velicu, executive managerGabriel Musat, Dragos Stroescu andDaniela Clementina Velicu.

The Datanet Systems takeover ispart of Soitron’s strategy to expandits regional development.

It already has a stake in two oth-er companies, in the Czech Repub-lic and Slovakia.

“Datanet now has the opportuni-ty to develop its business in Roma-nia by expanding its portfolio of so-lutions and services offered to Ro-manian clients with the complemen-tary solutions offered by Soitron,”said Velicu.

Soitron has over 750 employeesand annual revenues in excess ofEUR 47 million.

Datanet Systems currently has astaff of 35 and annual revenues ofover EUR 15 million. It was estab-lished in 1998, having as its mainactivities consulting, technical as-sistance and sales of data, voice andvideo networking equipment in Ro-mania.

Otilia Haraga

Slovakian firm Soitrontakes over Datanet Systems

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Soitron is taking over Datanet Systems as part ofits regional expansion strategy

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The highest drop in FDI was of 90 percent in November last year

FDI sees record fall at endof last year

Foreign direct investments (FDI) inRomania reached EUR 3.8 billion in thefirst 11 months last year, 56 percent lessthan in the same period of 2008, accord-ing to recent data released by the Ro-manian Central Bank (BNR). The vol-ume of FDI dropped even more in No-vember last year, when it reached EUR105 million, down 90 percent on the al-most EUR 1 billion in November 2008.

This was the highest fall throughoutlast year, as the month-on-month de-clines were usually 50 percent. It cameafter a period of year-on-year FDI in-creases, with Romania among the in-

vestment hot spots in the region. For-eign investors, who lack funding fornew projects and are trying to cut backmarket exposure, could be deterred by apossible increase in local taxes, in thegovernment’s attempt to swell the statecoffers. So far, a social contribution taxon intellectual rights contracts has comeunder discussion, but the actual measurewas postponed. The tax, which wouldhave benefited workers who earn theirliving through intellectual rights only,could have meant higher expenses foremployers.

Corina Saceanu

N E W S


The Ministry of Finance is plan-ning to issue bonds on foreign mar-kets in order to finance this year’sbudget deficit, according to the cur-rent finance minister SebastianVladescu.

“We hope to launch the first eu-robonds issuance this year in thefirst quarter, but it depends on themarkets. We are thinking about aEUR 1 billion issuance. The proce-dure takes around one week. Wehope the yield will be better than itwas with the previous issuance in2008,” said Vladescu.

The budget deficit estimated inthe draft plan is 5.9 percent of theGDP for this year. The eurobonds

issuance is necessary although Ro-mania will soon receive EUR 2.3billion from its financial aid pack-age from the IMF, World Bank andEBRD.

The Finance Ministry had previ-ously said a new eurobonds is-suance would be launched this year,having already selected DeutscheBank, EFG Eurobank and HSBCBank as intermediaries for the is-suance. Initially the state was plan-ning the move for October last year,but delayed it after the previousgovernment led by Emil Boc suf-fered a vote of no confidence in Par-liament.

Corina Saceanu

Gov’t plans to issue eurobondsto cover budget deficit

LAUREN

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The bonds should have been issued in late 2009but were delayed due to political instability

Romania should follow othercountries in Central and Eastern Europe in offering facilities to in-crease its share of the outsourcingmarket, said Dan Iancu, partner ofadvisory, performance improve-ment, at PricewaterhouseCoopersRomania.

A new survey of 514 outsourc-ing service providers in 50 countries

found that the industry is transform-ing due to the emergence of newproviders around the world and theefforts of existing outsourcers to ex-pand into new markets.

The survey was carried out byDuke University’s Offshoring Re-search Network and Pricewater-houseCoopers.

Outsourcing companies in NorthAmerica and India, which have longdominated the industry, are being challenged by competition from Latin America, Eastern Europeand Asia, in service areas such as contact centers, business process outsourcing and IT out-sourcing.

“The economic slowdown in de-veloped countries, which put pres-sure on companies to reduce costs,as well as the relatively low cost ofthe Romanian labor force, couldgenerate opportunities for local out-sourcing services providers,” saidIancu.

“We should not ignore the factthat there is a global competition toattract investments and that govern-ments and local authorities world-wide are providing facilities, fiscalor otherwise, to the serviceproviders,” he added.

Otilia Haraga

State should help Romania fight for biggerslice of outsourcing pie, PwC study says

COURTESY O

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Dan Iancu, partner at PwC

LAUREN

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The IMF is coming to review the stand-by agree-ment for Romania’s EUR 13 billion bailout loan

IMF mission comes toBucharest to reviewstand-by agreement

A new International MonetaryFund (IMF) mission will come toRomania on January 20 for a weekin order to review the stand-byagreement so Romania receives twomore loan installments, worth someEUR 2.3 billion in total.

The new mission comes soon af-ter the Romanian parliament man-aged to approve the 2010 budgetlast week, which was one of themain conditions for receiving thenext installments of the EUR 13 bil-lion bailout.

The expanded loan agreement,some EUR 20 billion in total, include funds from the EuropeanCommission, the World Bank and the European Bank for Recon-struction and Development(EBRD).

IMF representatives, led by Jef-frey Franks, will meet representa-tives of the Finance Ministry and ofthe Romanian Central Bank (BNR).The IMF mission was supposed tocome to Romania for a second re-view of the stand-by agreementeven late last year, but delayed thevisit due to the political instabilityand decided to make the second and third reviews after the budgetapproval at the beginning of thisyear.

Corina Saceanu

E-commerce increases 75percent in 2009 but averagetransaction value falls

Electronic commerce consisting ofonline payment by bank card increasedby 75 percent in 2009 compared to 2008to reach EUR 92.8 million, according todata from RomCard. The number oftransactions registered in 2009 reached1.2 million, twice the number in 2008.Some 1.1 million transactions wereprocessed through the ePayment system,with a volume of EUR 88 million.

“E-commerce was not that badly af-fected by the crisis and continues to re-main an industry with growth potentialover the next year. The unfavorable eco-nomic situation drove companies tochoose more efficient solutions with eas-ily measurable results and which involvelower costs, so many of them went on-line,” said Carmen Sebe, CEO ofGECAD ePayment. The transaction val-ue per quarter amounted to EUR 16.9million in Q1, EUR 23.5 million in Q2,EUR 25 million in Q3 and EUR 22.2million in Q4. In 2009, the average val-ue of a transaction was EUR 79, similarto the figure in 2007 but below the EUR85 in 2008. There was little change inwhat kind of items shoppers bought online over the past two years. Telecomproducts make up 45 percent of the number of transactions processedthrough ePayment, tourism 38 percent, services 10 percent and e-tail 7percent.

Otilia Haraga

C A L E N D A R / W H O ’ S N E W S


EVENTS, BUSINESS AND POLITICAL AGENDAJANUARY 20é 11.00 Visa Europe organizes press conference to announce its financial

results for 2009. The event takes place at the Hilton Hotel. By invita-tion only.

é 11.00 Centerra, the developer of the Coresi project in Brasov, organizesa press conference to announce its plans for 2010. The event takesplace at the Centro Bar & Lounge in Bucharest. By invitation only.

JANUARY 21é 8.30 PwC in partnership with its corresponding law firm D&B David si

Baias organizes its annual conference on fiscal and legal topics. Theevent takes place at the JW Marriott Grand Hotel, Constanta Hall. Byinvitation only.

é 18.30 CEU Business School organizes a free MBA Master Class withIstvan Otto-Nagy, partner at Ernst & Young Hungary and adjunct seniorlecturer of marketing with the school. The event takes place at the JWMarriott Grand Hotel.

FEBRUARY 9é 9.00 Business Review organizes the 8th edition of Tax, Law & Lobby.

For more information and registration details please see www.business-review.ro/events.

WHO’S NEWSFRANCOIS RANTRUA is the new country

manager for theWorld Bank in Ro-mania. Rantrua,who was previouslycountry manager forWorld Bank in Mau-

ritania, took the helm after BenoitBlarel, former country manager forthe WB, ended his mandate in Sep-tember last year. Arntraud Hart-mann was interim manager of thelocal office in the meantime.Rantrua graduated from HarvardBusiness School and started work-ing for the World Bank in 1997.

IAN GEARING, currently general direc-tor of FrieslandCampina Romania,will be leaving the company inApril in order to dedicate himselfto other professional projects.Kostas Maggioros, who is current-ly FrieslandCampina’s general di-rector for Central Europe, willhenceforth hold the positions ofgeneral director of FrieslandCamp-ina Hungary and FrieslandCamp-ina Romania.

PAVEL STANCHEV will step down as CEOof KANAL D Ro-mania, a position hehas held since Feb-ruary 2009, andleave the companythis January. Haluk

Kurcer, executive member of theboard of directors, will be the TV station’s new CEO

and lead the current managementteam.

VLAD TUDOSIE has joined the Intact Me-dia Group as head ofTV sales after hav-ing previouslyworked for the Dis-covery Corporationwhere he was direc-

tor for ad sales. Overall, Intact Me-dia Group has announced a focuson working with advertisers to de-velop bespoke TV packages, andthat the traffic department will beintegrated into the sales team for amore streamlined approach.

ADRIANA GRECU is the new marketing di-rector of Halewoodgroup. She graduatedfrom the Academy ofEconomic Studies inBucharest, specializ-ing in marketing.

Grecu started her career in the wineindustry in 1995, when she joinedVinexport. In 1999 she moved toHalewood.

GILLES ZEITOUN has been appointedgeneral manager of Cetelem Ro-mania, replacing Daniel Boaje,whose mandate has expired.Zeitoun, former VP of the Roman-ian subsidiary, graduated from theEcole Polytechnique in Paris. Hejoined Cetelem France in 1994 andhas held several management posi-tions at the firm since then.

Business Review welcomes information for Who’s News from readers.Submissions may be edited for length and clarity. Feel free to contact us at [email protected]

German retailer Metro Group, thebiggest retailer in Romania by sales,will open a new Metro Cash & Carrystore in the capital this year, the com-pany has announced.

This will be the retailer’s 25th out-let in Romania and will be located ineast Bucharest, said the firm, withoutspecifying the precise location or re-quired investment.

This is the second store MetroCash & Carry has opened in the lastthree years, after expanding nation-wide.

The latest was in Deva, where the

firm opened a 9,000-sqm unit at a costof EUR 20 million. The new branchwill start trading in the first half ofthis year, the company said. MetroCash & Carry already runs four storesin Bucharest.

Metro Cash & Carry entered theRomanian market in 1996, being thefirst modern retailer to expand in thecountry.

Another brand in the group’s port-folio, Real hypermarket, joined themarket in 2006.

Most of Metro’s investments sincehave focused on expanding the Realhypermarket chain throughout thecountry. Metro Cash & Carry has also invested in upgrading several ex-isting stores at an outlay of EUR 36million.

In 2008, the group posted EUR2.3 billion in sales on the Romanianmarket.

Metro did not specify its 2009sales in Romania, but said its EasternEuropean sales had fallen by 13 per-cent last year compared to the previ-ous.

Corina Saceanu

Metro Cash & Carry to openanother store in Bucharest

Former agriculture minister DacianCiolos is the new European Union com-

missioner on agriculture, after unani-mously winning a vote of approval inEuropean Parliament hearings late lastweek.

The future of the Common Agricul-tural Policy after 2013 and its budgetaryaspects, use of direct payments, volatili-ty of prices in the food markets and on-going international negotiations wereamong the topics raised by MEPs duringCiolos’s hearing.

“I'm a reformer”, said Ciolos at hishearing. “The Common AgriculturalPolicy (CAP) needs to be reformed, andreform does not mean reducing financialsupport but adapting it to tackle the newchallenges.”

Corina Saceanu

Dacian Ciolos gets agriculture commissioner chair

COURTESY O

F EUROPEA

N CO

MM

ISSION

Dacian Ciolos, EU commissioner on agriculture

COURTESY O

F METRO

The new store in Bucharest will be the Germanretailer’s 25th in the country

M O N E Y


Despite the current downturn,

Romania continues to be attractive

to large financial players. Although

last year lenders preferred to

exercise caution and avoid making

any significant moves, 2010 could be

a gantry for launching operations

next year.

Anda Dragan

For the local banking market 2009was a time when players took a cautiousapproach in their strategies for Romania.It was bereft of major moves, withlenders focusing more on products andservices than on expansion. Extendingbranch networks nationwide was not apriority, be it through banks’ own forcesor as a result of an acquisition. But theend of 2009 was notable for the transac-tion between Banca Transilvania andBank of Cyprus. The latter bought 9.7percent of the shares in local lender Ban-ca Transilvania for some EUR 58 mil-lion, a hint that the market may be mov-ing again.

But while many remain skepticalover 2010, likening it to 2009, the localbanking market is not expected to freezeup again. Even if lending starts to growslowly and gradually and banks remaincautious, mindful of the current down-turn, the first green shoots of recoveryshould still sprout. In this context, couldnew players venture onto the market?And if so, how are they likely to do so –greenfield investment or through an ex-isting financial institution? Cezar Furtu-na, audit partner at consultancy and au-dit firm KPMG, says “New entries areof course possible, but we can’t say ifthey are probable. First, because no onereally knows for the moment how 2010will look for the banking sector.” If newentries had been planned, it is likely thatthey have been suspended until the wa-ters become calmer again. “Some bank-ing groups might see this as a chance to

make direct acquisitions of existingcredit institutions at good prices. Wehear rumors on a daily basis,” says Fur-tuna. In his opinion, for institutions thatenvisage the recovery beginning now,making a greenfield investment or trans-formation that goes through the wholeBNR authorization process might be op-portune. “They could use the whole of2010 to put together a well establishedbusiness plan, proper systems andprocesses, hire skilled staff and startafresh in 2011,” says the audit partner.

As for the type of potential entries,there are four main ones: greenfield in-vestments, the transformation of an ex-isting financial institution (non bankingfinancial institution), acquisition of acontrolling stake in an existing bank andEU passport entry as a branch. But re-gardless of how entry is made, it is dif-ferentiation that is a crucial factor in de-termining future success. “A bank offer-ing the same services as the other morethan 40 existing credit institutions haslittle chance to grow and perform well ifit doesn’t offer or do something differ-ently – be it innovative products or serv-ices, competitive pricing, fit-for-purposesolutions or actively managing its risks,”says Furtuna. This is true even in good

economic conditions, with the currentparlous state of the banking sector mak-ing any kind of entry even more chal-lenging.

LIGHT AT THE END OF THETUNNEL

According to Furtuna, who citesBNR data, the return on equity (ROE) ofthe entire Romanian banking sector wasapproximately 18 percent for the yearending 2008. “Based on our estimations,the boost resulting from the sale of Asi-ban in 2008 was around 7-8 percent ofthe total. This gives the base perform-ance of the overall banking system aROE of 10-11 percent,” says the partner.He adds that 2009 will probably lookworse, with many credit institutionsposting losses, mostly due to the deteri-oration of their credit portfolio, irrespec-tive of the reporting framework beingconsidered. But despite this, “the Ro-manian banking sector is still attractive,not for its current state, but for its yet un-tapped potential that can be released inthe next three-five years,” says Furtuna.Moreover, comparative studies of finan-cial intermediation at EU levels showthat Romania is still a long way fromeven approaching average EU levels.

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The market may have taken a downward direction but rumors of acquisitions continue to swirl

Market scours the horizonfor new banking entries

Greenfield bank set-up – advan-tages:é less documentation requirements

per National Bank of Romania(BNR) regulations;

é modern IT systems can be imple-mented;

é new brand concept properly mar-keted could amass more customersin search of better services;

é overall strategy/product mix canbe drafted from scratch, out of thebox, not biased by past actions;

é group level business intelligenceand/or previous experience ingreenfield banking projects maybe a plus.

Greenfield bank set-up –disadvan-tages:é higher overall investment needed;é recruitment of appropriate staff is

highly time consuming;é no previous communication chan-

nels opened with BNR, scrutinyof shareholders/management isrelatively higher;

é choosing the proper sub-marketwill be a complex process. Beingin the right business/market ex-plains 80 percent of performance;only 20 percent is a result of man-agement skill;

é business model risk is high.Transformation of an existing fi-nancial institution – advantages:lower overall investment needs;é existing customer base can be

used as a platform to launch newproducts and services (current ac-counts, insurance, payments,ATMs);

é accounting and reporting systemsare already in line with majorBNR requirements;

é branch/agency network alreadyset up, new channels can be de-veloped faster;

é Target market already set up andtested, decision to transform mightbe a result of preliminary valida-tion of an appropriate strategy.

Transformation of an existing fi-nancial institution – disadvan-tages:é additional documentation require-

ments for transformation with re-gards to the existing business;

é restrictions on the quality of theloan portfolio at the date of appli-cation (loan risk ratio in the lastfour quarters must be above theannual banking system average);

é change management process is akey challenge;

é data and system transition costsmight be significant;

é existing management and branchstaff need to be intensivelytrained to provide full bankingservices;

é Rebranding process is consumingresources.

Greenfield bank set-up vs.transformation of an existingfinancial institution

SOURCE: KPM

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E N T R E P R E N E U R


A project developed under theumbrella of consultancy firmFinancial View – despite theeconomic crisis – the creators ofinternet portal efin.ro hope it hasgreat potential for the future.DRAGOS CABAT, managing partnerat Financial View, intends hiscompany to post EUR 300,000turnover this year, with efin.romaking a significant contribution tothis result.

Anda Dragan

It was his extensive experience in fi-nancial consultancy services that per-suaded Dragos Cabat to set up his ownbusiness in the field. He is not afraid ofthe current crisis, instead focusing on itssilver lining. Cabat has even decided toextend his business online, through thewww.efin.ro financial portal, which waslaunched in early January. “I have four-teen years of experience in investmentcompanies and banking, working forcommercial banks such as UniCredit,OTP and Citi. Over the years I haveworked as branch manager, trainer, chiefeconomist and risk manager,” says Ca-bat. His significant experience in the fi-nancial field seems to have been a keyfactor in his decision to start his ownfirm. The move from employee to entre-preneur is these days a common one formany professionals, and providing con-sultancy services is an obvious choice.Along with his colleague, Catalin Du-mitrescu – who had over ten years expe-rience in the financial sector at that time– Cabat decided to start operating as Fi-nancial View in 2008. They chose theirniche carefully: SMEs. “Our short-termobjective was to provide financial bro-kerage services to small and mediumcompanies in order to help them obtainthe best financing solution on the Ro-manian market,” says Cabat. Accordingto him, their business plan also includedtraining services for medium-sized fi-nancial institutions in areas such as: fi-nancial analysis, risk management, fi-

nancial and management consultancy.The business concept initially drawn upby the two entrepreneurs includedlaunching a financial portal. The aimwas to present both to individuals andcorporate customers – SMEs and largecompanies – the current range of finan-cial institutions active in Romania. Ad-ditional services such as those providedby valuators and consultants were alsoincluded in Financial View’s activities.

Launching www.efin.ro was a natu-ral step forward for the duo. “We wereinspired by our experience in the bank-ing sector. We knew that both the cus-tomers – individuals and companies –and financial institutions couldn’t meeteach other’s needs in an optimal way,because of the market’s failure to pro-vide accurate information,” says Cabat.He adds that neither individuals norcompanies know the full range of serv-ices provided by financial institutionsand often choose “the best offer” basedon an incomplete analysis and wrongcriteria. Likewise, financial institutionscannot promote their products to all theirpotential customers or simply do not usethe most effective information channelsto do this. “Moreover, smaller financialinstitutions can’t reach customers even if

they have very interesting offers forthem – which they often do,” says theentrepreneur. The next step was to con-duct some market research, especially asthe time seemed right for such a busi-ness. Cabat and Dumitrescu believe thatthere is still plenty of space in Romaniafor their internet service, as long as pow-erful international companies struggle topromote their similar services becauseof the gap between the Romanian finan-cial market and the international one.These differences take the form of of-fers, the legal framework and cus-tomers’ needs. “We decided to launchthe internet portal www.efin.ro, andrushed to do so because of the fall in thelocal market during 2009,” says Cabat.

The current downturn is a double-edged sword for Financial View. Bothindividuals and companies are showingless interest in the company’s services asa result of the lending drought and few-er financial products on offer. But thecrisis is not all bad news. The economicrecession has lowered the costs oflaunching a start-up and improved ac-cess to highly qualified IT workers (whohave been both thin on the ground andexpensive to hire over the last fewyears). “This has enabled us to imple-

ment our business plan in a shorter timethan we initially anticipated and at alower cost. I think that this was the besttime to launch this internet portal, but itdepends on the pace at which the localeconomy in general and the financialmarket in particular recover to accept-able levels,” says Cabat. According tohim, the most difficult moment inlaunching the project was when the part-ners needed to ‘translate’ the concepts ofsite design and functionality into a moreunderstandable form for programmers.“It was also an effort to adapt ourselvesand to put ourselves in the shoes of theusers who often don’t have any great fi-nancial knowledge, in order to build auser-friendly interface that also meetsthe requirements of financial institu-tions,” says the entrepreneur.

The efin.ro business model includedsome innovative and fresh elements, ac-cording to Cabat: the locator of financialinstitution branches; customized andcomplex rate computing that takes intoaccount all associated costs of the prod-ucts offered by lenders; and a simpleway to understand the presentation of fi-nancial products. The portal also pro-vides some powerful tools to help usersvisualize and evaluate financial markettrends. And it offers simplicity and speedin finding the best financial offers tomeet customers’ needs. “We also keepour customers informed about the localand international market, generating richfinancial content – news, articles, inter-views and advice.” But building such aportal needed a massive team effortfrom specialists in different fields. “Ourteam is made up of IT specialists, webdesigners, account managers and ven-dors,” says Cabat. As for the future, theFinancial View managing partner saysthat his strategy is two-pronged. “In themonths to come we will focus on im-proving the quality of the site, by addingnew tools, enriching the content andeliminating the potential bugs. The sec-ond approach consists of adding new fa-cilities for financial institutions and theiremployees, including new services witha higher added value,” concludes the en-trepreneur.

Taking the long view: Dragos Cabat, managing partner at Financial View

A portal into a profitable world

é 2010 estimated turnover: EUR300,000

é Total estimated investment:EUR 250,000

é Number of employees: 12

Financial View

I N T E R V I E W


E.ON Romania is starting 2010 withits main objective to keep a positivecash flow and keep up its annualinvestment strategy. FRANKHAJDINJAK, GM of E.ON Romania,told Business Review that animportant target this year is to keepa close eye on its main debtors: theCETs and CFR.

Dana Ciuraru

What are E.ON Romania’s expec-tations for its relations with the author-ities, following the presidential elec-tions?

After the presidential elections, whatwe hope is that we get a period of stabil-ity and a strong government, which mustdevelop and bring the country out of theeconomic and financial crisis. Regard-ing the price increase we requested fromthe Romanian Energy Regulatory Au-thority (ANRE) starting January 1,2010, all our requests are justified. Weexpect an open and fair dialogue withthe ANRE to find a solution which suitsthe economy, the customers and the op-erators in the market, allowing the lattera reasonable return on their investment.

What are your main arguments forthe price increase?

Starting with the electricity, we havea loss carry forward from the previousyears and out of this we should get aprice increase of 12 percent. In addition,we can see additional pressure from ris-ing prices of production for captive cus-tomers. On the gas side, we have a losscarry forward that justifies a price rise of15 percent. It very much depends onhow the big consumers like Interagro,Azomures and ELCEN react during theyear, how much gas they ask for, whichcould increase the gas import quota inthe gas basket, leading to additional

price pressure. We hope to have a slightincrease of about 1 percent in consump-tion this year. We also estimate that theimport gas price will increase in stagesover the year, creating further pressure.We estimate that the import gas pricewill rise by 25 percent by the end of theyear, compared with the price level fromthe end of 2009.

Who are your main debtors?On the electricity side we have a loss

carry forward from the previous years ofRON 86 million and on the gas sideabout RON 700 million, using data fromthe end of 2009. These sums also in-clude a volume correction which is partof the regulation, because what we de-liver to the ANRE is cost-based on thevolume. Of course, if the volumechanges there has to be an adjustment,and if the volume falls it must be a vol-ume adjustment which is foreseen in theregulatory framework. We have beensuccessfully managing our bad debts,even during the crisis, and we have alsoincreased our efforts to daily monitor

certain customers with cash flow prob-lems.

Where we have come a cropper iswith state-owned companies. So, on thegas side it is mainly the CETs (thermalpower plants) with ongoing paymenttrouble, while on the electricity side themain debtor is CFR. Outstanding debtamounted to RON 133 million at the endof last year, which of course greatly af-fects our cash flow and the situation andstability of our company.

What is the status of E.ON Roma-nia’s energy production projects?

Regarding the renewable energyprojects, we are securing land and set-ting up some wind measuring spots inthe Moldavian area, so the projects areimminent. We will definitely see somevisible results in 2011. We are aiming fora project of some 72 MW to 100 MW.

As for the cogeneration project incollaboration with Termoelectrica inBraila, it has been slightly delayed ow-ing to some problems with the land, sothe project company will probably be

founded in the first half of this year. Thetotal investment for Braila, an 800 MWproject, is about EUR 1 billion to EUR1.2 billion. We haven’t yet discussedwith E.ON shareholders what the struc-ture of the financing will be. However,one thing is clear to us: if we cannotguarantee a decent return on investmentit will be very difficult to convince ourshareholders to put fresh money into theRomanian market to build a new powerplant. Also, we are analyzing some gasdeposit projects in collaboration withRomanian partners.

What is E.ON Romania’s budgetstrategy, given the crisis?

Our investment budget for 2009 wasreduced by 40 percent mainly due to thefinancial crisis and of course the pres-sure we have come under from the regu-latory office, which forced us to cut ourinvestment. But we expect similar in-vestment for the coming years, amount-ing to EUR 60 million for electricity andgas distribution alone.

However, there is a huge pressure inthe market: for instance if nothing hap-pens by way of the recovery of signifi-cant debts, such as CFR’s for instance,then we will have to cut our investments.We will have to cut further jobs with im-mediate effect. This reorganization andrestructuring will continue this year aswell. Since we first came to Romania in2005 we have reduced our work forceby 5,000. As for the company’s 2009 re-sults, let’s say we will have positive re-sults in the group but they will be far be-low the shareholders’ expectations.

How does E.ON Romania try tolimit energy theft?

It is a big issue. In fact, we started aproject last year, in Bacau county, be-cause we realized that technological andnon-technological losses were extreme-ly high. To be exact, we have so far iden-tified 800 cases, some households, but inparticular many business installationsnot in line with the legal framework. Wehave already found around 6GW/h oflost energy consumption. We will con-tinue this type of project and we will al-so take all legal measures to recover ourmoney.

[email protected]

LAUREN

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E.ON Romania keeps its eye onmajor debtors and energy thieves


P R O P E R T Y

Real estate developer RED hassecured financing from Austrian Im-morent for a shopping center to bebuilt in Husi, north-east Romania, un-der the Cadran brand. The developeris negotiating financing for anothersuch outlet in Marghita. The Husiproject, which will be finished inJune this year, will be the first of aplanned network of proximity shop-ping centers. The project in Husi willfeature 20 stores on 4,500 sqm and

The Japanese government willlend Romania around EUR 315 mil-lion to build the metro connection toHenri Coanda (Otopeni) airport, ac-cording to the Japanese ambassadorto Bucharest, Natsuo Amemiya. Theline will connect downtownBucharest to the international air-port, providing a much needed alter-native to driving through the crowd-ed city center. The solution shouldalleviate traffic congestion in thecapital and reduce air pollution, ac-cording to the Transport Ministry.

The new metro line will requireEUR 1 billion of investment in total.Works are expected to last six years.The 16km link will be entirely un-derground, with 19 stops and a de-

pot. Some 21 trains will run on thenew line, which could transport50,000 people an hour each way.

This is not the only new metroline planned for Bucharest. Anotherwill connect the Drumul Tabereiarea south-west of Bucharest – oneof the few remaining neighborhoodswithout any metro connection to thecity – to downtown. The line will re-quire EUR 883 million, out ofwhich around half will be coveredthrough a loan from the EuropeanInvestment Bank (EIB), while therest will come from the state budg-et, according to data released at theend of last year. The 9km line willfeature 14 stations.

Corina Saceanu

RED gets financing from Immorentfor Husi proximity retail center

The first Cadran center will be built in Husi

COURTESY O

F RED

Edit Vesser has taken the helm of the firm

COURTESY O

F BNP PA

RIBAS REA

L ESTATE

will be anchored by Penny Market.So far half of it has been rented.

Cadran shopping centers will bebuilt in secondary cities with 25,000to 75,000 inhabitants. Each will com-prise a shopping galleria and will beanchored by a supermarket.

RED is trying to move in to meetconsumer demand in such towns,which are not yet well catered for.The move comes after its activitybuilding and opening larger retailparks under the Armonia brand inbigger Romanian cities such as Aradand Braila. These projects average50,000 sqm of retail and are anchoredby Carrefour units. However, REDclosed down the Armonia project inBraila in July last year, nine monthsafter the opening. The developer saidit was trying to reposition the project.

RED is owned by US investmentfund Warburg Pincus and SpanishGED. So far, it has invested EUR 700million in retail projects across Ro-mania. The developer is managed byreal estate professionals AndrewStear and Teodor Pop.

Corina Saceanu

The airport metro line should ease the traffic in downtown Bucharest at a cost of EUR 1 billion

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Edit Vesser replaces Ioana Momiceanuas GM of BNP Paribas Real Estate

Ioana Momiceanu has partedcompany with the local office ofBNP Paribas Real Estate, and willbe replaced as general manager byco-founder Edit Vesser, the compa-ny has announced. Vesser is now re-sponsible for the organization’sbusiness administration and the im-plementation of its local strategy.

Wipro Technologies signs EUR 7 mlnleasing contract for Timisoara offices

Outsourcing firm Wipro Tech-nologies Romania has leased 4,500sqm in the City Business Center office

Her main objective will be tostrengthen BNP Paribas Real Es-tate’s role in Romania as a top fiveplayer.

Vesser began her real estate ca-reer in the US and Hungary beforebeing appointed to head up thelaunch of Colliers Romania in 1995.In 2001 she was involved in the de-velopment of the current local teamat BNP Paribas.

“In 2010 BNP Paribas Real Es-tate in Romania will be focused onthe business lines in which we havethe best expertise: office letting andsales, valuation and top residentialbrokerage. The past year has alsoshown us that, in addition to broker-age, our clients need increasingamounts of real estate advice, whichwe deliver. I look forward to work-ing with our team to help our clientsnavigate and take advantage of themany new opportunities that thisfast-changing market offers,” saidVesser.

Corina Saceanu

Japanese money to fuelairport metro line

The value of the contract reaches EUR 7 million

COURTESY O

F CBC

compound in Timisoara, according toJones Lang LaSalle, co-exclusiveagent on the deal. Wipro will occupymost of the C building, which is stillunder construction and will be fin-ished in the fourth quarter of 2010.The contract runs for 10 years, withan average rent of EUR 13 per sqmper month, putting its value at aroundEUR 7 million. The project is beingdeveloped by ModaTim Investment.

City Business Center will cover34,000 sqm of class A office space, aswell as 8,000 sqm for retail and serv-ices. The project will be developed infive phases, each comprising a build-ing. So far the first two buildings havebeen completed and fully let.

Corina Saceanu


P R O P E R T Y

Local real estate developerImotrust Arad has sold a land plot toa retail operator for EUR 7 million,the company has announced in a re-lease to the local stock market.Imotrust is traded on the Rasdaqmarket of the Bucharest Stock Ex-change.

The company has not revealedwhere the land plot is located or towhom it was sold.

The company has alreadycashed in 62 percent of the saleprice.

The announcement mid-lastweek fueled increased trading in thecompany’s shares, which led to arise in its market value. However,

when the EUR 7 million deal was sealed, the firm’s stock marketcapitalization was below thisthreshold.

Imotrust Arad is controlled byRomanian businessman AlexandruBercea through Grup Codlea.

According to the company,Imotrust Arad owns over 550,000sqm of land in built-up areas, over 1million sqm of land outside built-upareas, 110,000 sqm of industrialhalls and 6,000 sqm of office and re-tail space.

It has built several residentialprojects, including Cesarom and ViaCarmina.

Corina Saceanu

Imotrust Arad sells EUR 7million land plot

REGIONAL NEWSMGPA FUND BUYS EUR 187MLN SHOPPING CENTERS INPOLAND

MGPA, the private equity realestate investment advisory compa-ny, has bought two new shoppingcenters in Poland and taken an op-tion over a third from DTC FinanceBV.

The three centers have been de-veloped and managed by MaylandReal Estate.

The acquisitions were made onbehalf of MGPA Europe Fund III,which closed in June 2008 with commitments of USD 5.2 bil-lion to invest across Europe andAsia.

The fund itself raised USD 1.3billion and has already made invest-ments in the UK, France, Italy,Greece and Poland. It currently re-mains largely uninvested.

The two shopping centers ac-quired initially, Karolinka andPogoria, are located in the Silesiaregion near the German and Czechborders.

The acquisition price was EUR 187 million or EUR 1,765 per sqm. Karolinka is an out-of-town regional destination shopping center of 70,000 sqm, with a primary catchment area of455,000 people.

Pogoria is a 36,000-sqm two-level center in a prime location with a catchment area of 1 million people. Both centers are let with occupancy above 98 per-cent.

DEUTSCHE BANK LEASES7,000 SQM IN MOSCOW

Deutsche Bank has leased 7,000sqm of office space in BegovayaNordStar Tower in Moscow, with aseven-year lease.

The leased floor space will pro-vide more than 700 workstations foremployees of Global InformationServices - Capital Markets, Russia,to accommodate the 600 current de-partment employees and allow forbusiness expansion.

NordStar Tower offers 147,000sqm of floor space.

Global Information Services -Capital Markets of Deutsche Bankhas been operating in Moscow since2000.

It develops software used to im-prove the operating activities of theDeutsche Bank Group on interna-tional financial markets includingthe New York, London and Tokyostock exchanges and DeutscheBoerse.

S T R A T E G Y


The painful learning process of

insolvency did not spare Romanian

companies last year, after hitting big

international names. Although

Romania has not had its own version

of the Lehman Brothers collapse,

some local firms teetered on the

brink of bankruptcy, and were either

obliged to or decided themselves to

apply for insolvency to try to put

their affairs in order.

Corina Saceanu

Local companies involved in re-tail, either as producers or retailers,were the worst affected due to thedrop in consumer spending. Punditsexpect more tough times to comethis year, which may increase thelist of insolvencies in Romania. Sofar, in the first ten months of lastyear, up to 20,000 companies wereinvolved in insolvency procedures,with an increasing percentage de-claring insolvency voluntarily.

IT&C retailer Flamingo strug-gled under the specter of bankruptcythroughout last year. It tried to re-structure a loan with ING Bank but,having failed to do so, finally filedfor insolvency in December. Thecompany, which has a EUR 17.5million credit line with ING Bank,is now under the judicial adminis-tration of RVA Insolvency Special-ists. The retailer also owes money toUniCredit Tiriac Bank and to BRD.

Flamingo was taken over by Ro-manian businessman Dan Adames-cu last year through several stockexchange transactions. The retailerhad started a bonds issuance to at-

tract EUR 7 million of financingwhich would have kept it afloat. Theissuance should have been complet-ed by now, but was canceled by theNational Securities Commission(CNVM) until the firm’s affairswere settled. Its shares were alsosuspended from trading on theBucharest Stock Exchange (BSE).

Flamingo saw its sales fall byaround 55 percent in the first ninemonths of last year, according to themost recent data. In 2008, the firmposted EUR 200 million in sales andwas among the top three IT&C re-tailers in Romania. Some of thecompany’s stores are still opera-tional but the retailer closed down22 in 2009 and downsized its staffto 700 at the end of last year.

Nor was it a good year for localretailer PIC. The hypermarket oper-ator saw 6,000 employees and salesof EUR 150 million in 2008 slumpto a single opened store with 1,000workers at the end of last year and adebt of EUR 60 million. The last op-erational store was to be closed

down at the beginning of this year,according to the firm’s manage-ment.

PIC, owned by Cornel and IliePenescu, had to suffer the arrest ofCornel Penescu last year on briberycharges. Penescu is also the ownerof FC Arges soccer club and his ar-rest was linked to the allegedbribery of a soccer referee as well asemployment inspectors.

PIC owns five hypermarketsacross Romania but has decided toquit the retail business altogether fora while. The group is also active inconstruction, food production, taxis,printing and distribution.

Elsewhere, K Tech Ultra Pro,which used to run the Ultra ProIT&C retail network, has amassed aEUR 28 million debt and closeddown its stores, trying to restruc-ture. The company is under the judi-cial administration of BDO Busi-ness Restructuring and the nextstage of its bankruptcy trial is inMarch this year.

While IT&C retail seemed worst

hit, fashion did not escape un-scathed. Footwear retailer Leonardowas made insolvent in October lastyear. The company, owned by Ro-manian businessman Florin Panea,is trying to reorganize to get backinto the black, despite falling saleslast year. Although it closed down30 shops which were not profitable,it continued opening planned newstores. Leonardo had run up EUR100 million in debt and is workingwith Casa de Insolventa Transilva-nia to restructure its liabilities. Atthe end of 2008, the shoe firm had200 stores in Romania, Hungary,Bulgaria and the Republic ofMoldova.

The retailer has been greatly af-fected by the economic crisis, withsales dropping by 30 percent in2008 on 2007. In previous years,Leonardo had expanded aggressive-ly. To supply stores, it bought moremerchandise, which led to signifi-cant debt to suppliers, according toEnsight Management Consulting,which was in charge of reorganizingLeonardo last year.

Another firm hit by the lack offinancing and by sinking sales wasmeat producer Medeus. Its ownershad applied for insolvency to reor-ganize and re-schedule payment.Medeus’s debt reached EUR 15.3million, with a bank loan of EUR 6million. The lack of liquidities topay suppliers was the main reasonfor the firm’s difficulties.

Meanwhile, local copper pro-ducer Cuprom has been insolventsince the end of 2008 and through-out last year tried to resolve its fi-nancial problems.

Retailer Spar applied for insol-vency mid-last year. The local net-work, which is owned by Ioan andFloare Cuc who bought the licenseto run stores under the internationalbrand in Romania, had been opera-tional since 2006. In 2008, Spar Ro-mania reached a turnover of EUR44 million, after a period of aggres-sive expansion, while its debtreached EUR 30 million.

The real estate sector felt thelack of cash keenly. Among themost prominent insolvencies lastyear was that of developer MivanKier, which built the Liberty Centermall and the New Town residentialproject. The developer had run up adebt of EUR 20 million.

[email protected]

STOCKEXCHA

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As many as 20,000 local companies went the way of Lehman Brothers in the first ten months of 2009

From boom to bust: Romanian firms bite the dust

B A L A N C E


Many a heavy smoker will say onNew Year’s Eve: “That’s it! Startingnext year, I quit.” It is the smoker’sparadox: promising to quit while atthe same time lighting up anothercigarette and vowing it will be thelast. Unfortunately, the road to hellis paved with good intentions andmany lose the fight to be free ofnicotine. Whether you go theconventional way of medication oran alternative route such asacupuncture, the end is the same ifyou are really determined to quit.Better make an appointment soon:the recession and the hike in theprice of cigarettes will soon pack outthe doctor’s office.

Otilia Haraga

A study carried out in August-Sep-tember 2009 found that 27.9 percent ofRomanians over the age of 15 smokeevery day. “Romania is one of the fewcountries in the European Union wheresmoking is much more common amongpeople with higher education and onhigh incomes,” says Dr. MagdalenaCiobanu, coordinator of the SmokingCessation Center at the Marius Nasta In-stitute of Pneumology. She is also aMinistry of Public Health expert on to-bacco control for the European Com-mission and World Health Organization.

Many people who decide to quithave already experienced some healthproblems, a disease or nagging symp-toms such as exhaustion or a morningcough. Either that or they are afraid ofgetting ill, often after something badhappens to someone dear to them. How-ever, smoking has become a luxury thatfewer and fewer can afford. “Since Sep-tember-October last year, the financialincentive has become more and more

compelling: absolutely all patients Ihave seen since the beginning of the yearhave started by saying ‘I cannot afford tosmoke anymore,’” says Ciobanu.

The first two months of the year areusually a peak time for wannabe quit-ters, due to New Year resolutions. Thisyear, however, there has been a hike inthe number of patients. In the first twoweeks of 2010, the number of smokerswho made an appointment at the MariusNasta Institute increased threefold com-pared to the previous year. “I estimatethat nationwide, as part of this program,around 5,000 people have made an ap-pointment so far,” says Ciobanu.

To come to the aid of would-be non-smokers, the Ministry of Health is fi-nancing the National Program for thePrevention of Tobacco Consumption,hosted at the same location as the Mar-ius Nasta Institute. As part of this pro-gram, smokers who want to follow acourse of treatment to become clean re-ceive aids such as vareniclin, bupropionand nicotine patches free of charge –provided they have no other health prob-lems. There are various offices wherepatients can make an appointment, acomplete list of which can be found onthe site www.stopfumat.eu or by callingthe toll-free telephone number08008STOPFUMAT (0800878673).

The length of the treatment is twomonths (with bupropion) or threemonths (with nicotine patches or vareni-clin). The patient must see the doctoronce every two weeks for a check-upand to receive the medication. “Medica-tion reduces the symptoms of addiction.This is mainly a medical condition – ad-

diction to nicotine is categorized as adisease, according to the internationalclassification of diseases,” saysCiobanu. The prescribed medication isaccompanied by counseling. “Psycho-logical therapy helps smokers find be-havioral alternatives to the gestures as-sociated with smoking, but also dealwith some cognitive problems that quit-ting smoking sometimes causes,” saysCiobanu.

However, neither medication norcounseling can compensate for lack ofwillpower. “The main reason why pa-tients do not manage to quit smoking isthat, in reality, they don’t want to. Thencome the excuses: that they don’t havethe willpower, that it is too hard, thatthey would gain too much weight, that‘cool people smoke,’ that they don’twant to do what the government tellsthem, that even doctors smoke, and thelist could go on,” says Ciobanu. “Theyalso give the real reason: that they like itand do not feel like giving up a pleasurethat is easy to procure, affordable when-ever they want and cannot be comparedto anything else other than anotherdrug,” she explains.

Many smokers choose alternativemethods to beat their addiction. One ofthese is acupuncture, carried out by spe-cialized doctors. Acupuncture sees ad-diction as an imbalance between Yin andYang in the body. Through it, the ener-gies are harmoniously replaced on theroute of the meridians. To mobilize theseenergies, the acupuncture specialist in-troduces needles into some specificpoints on their routes. The needles arelike small antennas that re-charge and

gather or disperse the accumulated ener-gies. Smoking is the result of an imbal-ance in the energies, explains Dr. MariaStirbu Teianu, an anesthesiologist spe-cialized in acupuncture, from MedicalCity Center.

Many of the smokers that ask forTeianu’s help are businesspeople, mostof them men. Many are motivated byfear of disease. Statistics indicate that ifa smoker gives up by the age of 60, therisk of developing lung cancer is 16 per-cent. If he or she gives up by 40, the fig-ure falls to 1 percent. Apart from thethreat of lung cancer, smokers areplagued by minor lung afflictions. Manydislike the fact that they and their homesmell of cigarette smoke, and that theirhabit damages their teeth.

Another reason is that smokingcauses impotence. “Nicotine influencesblood vessels that have a fundamentalrole in this mechanism. Throughacupuncture, this function can be im-proved,” says Teianu.

Before the first session of acupunc-ture, the patient undergoes a thoroughconsultation that lasts about 20 minutesin order for the doctor to establish theperson’s physical and psychological pro-file as well as health background. “It is atthis point that we establish the place andintensity of the imbalances in the bodyand the degree of stress accumulated,and devise the treatment plan, choosingthe points on which to act,” says Teianu.After all the needles are in place, the ses-sion lasts for about 20 minutes.

“In the treatment of nicotine addic-tion, ear acupuncture is best. It is be-lieved that the entire body is projected atthe level of the external ear, and there arepoints that influence ‘bad habits’,” saysTeianu.

The cost of an acupuncture sessionat Medical City is RON 60. Patients ini-tially undergo two-three sessions aweek, for up to ten sessions. After this,the patient takes a break for a month andthen returns less frequently for a longerperiod.

Generally, acupuncture patients areinformed, intelligent, and have an ideaabout what acupuncture does. “In myexperience, if patients are motivatedfrom the start and come of their ownwill, the success rate is 100 percent. Ofcourse, there are those who give up ear-ly or are sent by their family or children.I had a case in which a 12-year-old-girlcame with her father to acupuncture sothat he would succeed in quitting smok-ing. He managed it after ten sessions.”

LAUREN

TIU OBA

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Stubbing it out: January is a popular time for nicotine addicts to try to kick the habit

How to stay smoke free in 2010

C I T Y


Although 2010 has already been tipped as yet another tough financial yearin Romania, hopefully you will manage to put aside some money for theconcert gems that have been announced so far. No doubt there will be more,but for now 2010 has four not-to-be-missed concerts in store.

Otilia Haraga

!Guitarist and singer Chris Rea willopen the series of big concerts in Febru-

ary with a gig at the Palace Hall on Feb-ruary 6. It forms part of the European legof Rea’s Still So Far to Go – The Best ofChris Rea tour, which will accompanythe release of a new album. The disc willbe launched in Great Britain on October5. Classics such as Josephine, The Roadto Hell (Part 2), Auberge and Julia willfeature alongside two new songs, ComeSo Far, Yet Still So Far to Go andValentino. Rea broke into the musicscene in 1978 with the album WhateverHappened to Benny Santini? which hefollowed with other successful releases.The 1980s heralded the start of his mostsuccessful period, with eight studio al-bums including the famous The Road toHell (1989) and Auberge (1991). Reahas sold over 30 million albums so far.Tickets for the concert can be acquiredonline at Myticket.ro or from Divertastores for RON 100, 150, 200, 300 and500.

! French electro-band Air will playin Bucharest on February 11 at the Poli-

valenta Hall. The concert will be organ-ized by One Event. Air – a duo made upof JB Dunckel and Nicolas Godin –made their debut on the music scene in1998 with the album Moon Safari, andcite Jean Michel Jarre, Vangelis, Pink

Floyd and Serge Gainsbourg as their in-fluences. The album sold 2 millioncopies and earned the act the accolade of“the French definition of cool.” Air arewell known for the soundtrack they cre-ated for the film The Virgin Suicides, thedirectorial debut of Sofia Coppola. Theband’s latest release, Love 2, came out atthe beginning of October 2009. Ticketsfor the concert cost RON 95 and can bebought from the Diverta, Germanos andVodafone networks, Muzica, the PalaceHall box office and Control Club, or on-line at MyTicket.ro, Eventim.ro andTicketPoint.ro

! Arguably the most eagerly await-ed concert of the year is AC/DC, whowill play Bucharest on May 16 as part oftheir Black Ice World Tour 2010. SinceRomania still lacks a stadium capable ofhosting a show of this magnitude (thenational stadium having been undergo-ing renovations for a number of years),Constitutiei Square is the only locationavailable that can accommodate the ex-pected crowd of 60,000-80,000. Theconcert will be organized by D&D EastEntertainment and Marcel Avram.AC/DC will come with their own stageand production as well as opening acts.The Australian band’s concert was an-nounced previously, but that proved tobe a hoax. On that occasion the band de-nied it was going to play in Romania,while this time the information is con-firmed on its official site. Tickets costRON 127.2 (for the first 20,000 tickets,after which the price is RON 148.4),RON 265 (Golden Circle tickets in frontof the stage) and RON 477 (VIP seats).

! Faithless is the first confirmedname for B’Estfest 2010, which will

take place this summer from July 16-18.This will be the third edition of the mu-sic festival, which is organized byEmag!c Entertainment, and the second

How is the 2010 year in music shaping up?

A prospective Bucharest City Hallproject could make life easier for cy-clists in the capital. If carried out, theproject will designate special cycleroutes, thereby reducing the likelihoodof accidents. The City Hall initiativeaims to encourage cycling as a means toreduce the number of cars on the streets,congestion and pollution.

City Hall proposes installing propertraffic signals for bikers on the mainroads and at intersections. Cycle laneswould be marked with special adhesivebands and new and modern traffic lightsfor cyclists placed at intersections.

The total surface area of the project,which would be completed in 12months, is 62,280 sqm. The projectwould be carried out with an investmentof approximately EUR 5.7 million, VATincluded.

In numbers, the project would see

the modernization and upgrade of 51traffic control devices, and the installa-tion of 548 traffic lights for cyclists, an-other 234 traffic lights for vehicles, 60CCTV cameras and 22,760 sqm of traf-fic signs demarcating cycle lanes.

Otilia Haraga

City Hall Bucharest project gets on its bike

STOCKEXCHA

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Wheely good: cycling cuts pollution and traffic

The latest film from Palme d’Orwinner Cristian Mungiu, Tales fromthe Golden Age, will return to the bigscreen with English and French subti-tles between January 22 and February4. Screenings with English subtitleswill take place at the Horia BerneaStudio of the Romanian Peasant Mu-seum while those with French subti-tles will be held at the Elvira Popescucinema in the French Institute. For afull program, check the www.busi-ness-review.ro site.

Tales from the Golden Age is aproduction made up of two separatefilms – Tales of Authority and Tales ofLove – which offer a humorous ac-count of life under the communistregime in Romania, depicting urbanlegends that flourished in the 1980s.

The film combines the directorialefforts of several Romanians who ex-pressed their vision under Mungiu’scoordination.

It was the most viewed Romanianmovie in 2009.

SCREENINGS WITH ENGLISH SUBTITLESROMANIAN PEASANT’S MUSE-UM, HORIA BERNEA STUDIO

Tales from the Golden Age –Tales of Authorityé Friday January 22 – 8.30 pmé Saturday January 23 and Sunday

January 31 – 6.30 pmé Saturday January 30 – 4.30 pm

Tales from the Golden Age –Tales of Loveé Sunday January 24 – 4.30 pmé Tuesday January 26 and Friday

January 29 – 8.30 pm

SCREENINGS WITH FRENCH SUBTITLESELVIRA POPESCU CINEMA

Tales from the Golden Age –Tales of Authorityé Friday January 22, Wednesday Jan-

uary 27 and Thursday January 28 –6.00 pm and 8.00 pm

é Saturday January 23 and SundayJanuary 24 – 4.00 pm / 6.00 pmand 8 pmTales from the Golden Age –

Tales of Loveé Friday January 29, Monday Febru-

ary 1-Thursday February 4 – 6.00pm and 8.00 pm

é Saturday January 30 and Sunday é January 31 – 4.00 pm / 6.00 pm /

8.00 pm

Tales from the Golden Age to run withEnglish and French subtitles

Coming in the Air tonight: Dunckel and Godin

On the Road to Bucharest: Chris Rea

time Faithless will play the festival, aftertheir first performance in 2007. Faithless– made up of Maxi Jazz, Sister Bliss andRollo Armstrong – is a well known bandin Romania, having spawned hits suchas Insomnia, God is a DJ, Bombs and

We Come 1. The style mixes electro,dance and hip-hop, and is therefore dif-ficult to pin down to one musical genre.Faithless are now preparing to launchtheir sixth album, Calling all the Faith-ful.

Can’t get no sleep: Faithless

Business Review Issue 1, January 18-24, 2010

Documents

business reviewsearch

business reviewthe company

business review

romanian business market

new year resolution

yearsee page

enthusiasmsee page

robusiness review