Electrica is short of cash in spite of record profit

Romania's largest state-owned company, Electrica energy transporter, is facing a severe shortage of liquidities, in spite of a record-high €489 million in gross earnings and €1.6 billion in turnover in 2008.

The company's financial difficulties are due to high arrears for electricity supplies from some of Electrica's top clients, including the state-owned Caile Ferate Romane (CFR) railway company and the Oltchim chemical plant. This is a situation that often occurred in the early 2000s, causing a deadlock in the economy.

Electrica must recover over €110 million from its clients, while increasingly more consumers are demanding lower prices, due to lower electricity consumption because of the economic crisis. Furthermore, four former managers are planning to sue the company, asking for large amounts of money in unpaid salaries.

To cope with the difficult situation, Electrica is preparing desperate measures, including possible sales of assets and layoffs. It has also asked for help from its majority shareholder, the Romanian state, in the form of use of funds obtained after the privatization of some of its branches. "We have a serious problem with liquidity, and with cash-flow. We are affected by the crisis, our sales are dropping, and we have to recover RON 400 million [€97 mln] from CFR alone, and RON 72 million [€17.2 mln] from Oltchim, not including penalties," the company's new General Manager, Ioan Folescu, told Business Standard. Another state company, Nuclearelectrica, had Electrica's accounts frozen for arrears exceeding RON 60 million (€14.4 mln ), but the situation was settled on April 12, according to the company's Chief Financial Officer, Maria Spandonide.

Besides large consumers, smaller clients are also delaying payments, and these debts are becoming very hard to recover, Spandonide added.

Business Standard