Privatization status of the economic agents from the energy utilities sector Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry Thessaloniki, Greece September 8, 2004

OBJECTIVES OF THE PRIVATIZATION PROCESS ensuring the transparency and honesty of the privatization process removing the accent from quantity to quality in the matter of the privatization ensuring continuity in supplying the utilities domain providing new jobs management’s modernization technologies modernization increasing exploitation security developing a stimulating investment environment infrastructures modernization ensuring competitiveness, strengthening financial viability and competitive capability of the companies on the market ensuring consumers protection avoiding private sector monopolyservice quality increase Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

ROAD MAP for energy sector of Romania Needs of electric power, on short, medium and long term Market model structure of the market, improving of the legal and regulatory framework, reforms Reform of the public energy enterprises, finalization plans Harmonization of the market mechanisms with the EU Directives Accelerating privatization in the electricity and gas distribution, as well as on the electricity generation side Defining of the needed investments as public investments and/or private The Road Map approaches: Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Scope of privatization Attracting the necessary capital for strengthening the companies Avoiding the unnecessary increase of the electric power, gas and oil tariffs Financial and operational strengthening of the companies Protecting the consumers over the possible effects of an uncontrolled privatization, through a regulatory system similar to that existing in the EU Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Accelerating the privatization process - Principles Ensuring the transparency of the privatization process Sale on the market price resulted from the ratio between demand and supply Ensuring the equal treatment between the buyers Implementation of restructuring programs, before privatization Setting up the special administration in the period of privatization Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

ROAD MAP The need of investments Need of investments In the natural gas sector – about 4,498 mil. USD, until 2010 In the energy sector about 10,485 mil. USD – on medium and long term Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

THE PRIVATIZATION METHODS For the companies in the energy sector: Combined method Sale of a stake of shares Increase of the share capital Fulfilling the investment programs, the modernization of the companies concomitant Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

ACTIONS TAKEN IN VIEW OF PREPARING THE PRIVATIZATION Initiation of normative acts which will comprise some measures for increasing the attractivity of the commercial companies, in view of stimulating the interest of the potential investors Clarification of the legal situation of the goods of the commercial companies and of the companies which form the public domain of the state Stimulating the interest of the potential investitors, through initiation of some specific restructuring and privatization strategies, which will provide for attractive measures for the buyers. Setting up the procedure of special administration and financial surveillance Issuing the land certificates and registering the value corresponding to these lands in the share capital of the commercial companies. Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Portfolio of economic agents The patrimony value of the Ministry of Economy and Commerce is about EURO 4,410 mil. (ROL 181,370 bill.) and comprises economic agents from very important fields of activity for functioning the economy: energy, oil and gas, mining, defense industry. Currently, this portfolio is formed by: - 15 national companies; - 48 commercial companies; - 2 regies autonomous; - 7 national institutes for research and designing; - 64 subsidiaries of the economic agents. Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

PRIVATIZATION OF THE UTILITIES Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Consultant Selection Approval of Privatization Strategy Privatization Announcement Expressions of Interest Preliminary Bids Final Bids Execution of Contract Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

The energy sector – the energy complexes  Setting up the energy complexes – through G.D. no. 102/2004 and G.D. no. 103/2004, there have been set up 3 energy complexes, respectively: - S.C. Complexul Energetic Rovinari S.A., - S.C. Complexul Energetic Turceni S.A. and - S.C. Complexul Energetic Craiova S.A. where the mining sites have been integrated within these complexes as cost centers of the power plants.  Submitting the Letters of Intent - for S.C. Complexul Energetic Rovinari S.A. there have been submitted 9 Letters of Intent, for S.C. Complexul Energetic Turceni S.A. 10 companies have expressed their interest and for S.C. Complexul Energetic Craiova S.A., 5 companies. In addition, we can mention the intention to participate besides the investors of EBRD and IFC. Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

The energy sector – Production of power  Attracting of capital for investments in new objectives (green-field), in case of power stations from Iernut and Bucuresti Sud  Attracting of capital for investments in case of power stations from Braila and Borzesti  Sale of the shares owned by Termoelectrica at TERMOSERV Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

The energy sector – S.C. Hidroelectrica S.A.  Attracting the financing for 7 projects of retechnologization and for 7 unfinished projects  Privatization of the micro-hydropower stations – the initial list of 242 stations which have been transferred to Hidroelectrica S.A. There have been submitted 10 Letters of Intent for 67 micro-hydropower stations, by Romanian and foreign companies. For a number of 54 micro- hydropower stations, there have been finalized the evaluation reports. Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Privatization on the capital market Offering on the capital market, at different intervals, of some stake of shares of the following companies:  C.N. TRANSELECTRICA S.A. – 5% from the share capital  S.C. ELECTRICA TRANSILVIANIA NORD S.A. – 10% from the share capital  S.C. ELECTRICA MUNTENIA NORD S.A. – 10% from the share capital  S.N. ROMGAZ S.A. – 5% from the share capital  S.N. TRANSGAZ S.A. – 5% from the share capital Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry

Ministry of Economy and Commerce Office Of State Ownership and Privatization in Industry CONTACTS:  Constantin NEDELCU – Deputy Head of the Office Ph: ; Fax:  Eugen ZVIRJINSCHI – General Director –General Division of Coordination Activities and Programs, Relations with Investors and Institutions Ph:  Alexandru ALEXE – General Director – Privatization General Division Tel: Office of State Ownership and Privatization in Industry 152, Victoriei Ave., District 1, Bucharest, ROMANIA Ph: ; Fax: web: