Bucharest's thermal energy distributor RADET filed for insolvency after a decision made by the Bucharest General Council on Wednesday, September 22. RADET’s main supplier Electrocentrale Bucuresti (ELCEN) may also file for insolvency on Thursday, September 23.

The two state-owned companies have been quarreling over overdue payments in recent years, threatening to stop providing heat to Bucharest’s residents. The local and Government officials hope that insolvency will solve the problem.

Bucharest’s mayor Gabriela Firea said that RADET’s insolvency would not lead to layoffs, but that it was a way to save the company and restructure it. She also promised that the delivery of thermal energy would not be disrupted.

Insolvency means that creditors won’t be allowed to start enforcement procedures to recover unpaid debt from RADET. The debt that can’t be justified won’t be repaid, Firea added.

Energy Minister Vlad Georgescu also said that he supported RADET’s insolvency. The company will thus pay its debts, the minister added.

RADET is controlled by the Bucharest City Hall. In 2015, the company had revenues of EUR 240 million and EUR 96.5 million losses. The company had 3,500 employees, according to official data from the Finance Ministry.

RADET’s revenues come from the utilities bills (intretinere) paid by households in Bucharest, while the rest of its costs are covered by the City Hall via subsidies.

RADET had over RON 3.9 billion (EUR 875 million) worth of debt at the end of 2015, most of it to Bucharest-based thermal energy producer ELCEN, which is owned by the Energy Ministry.

ELCEN may also file for insolvency today, according to sources quoted by the local media. ELCEN operates several thermal power plants in Bucharest, which produce electricity and hot water. ELCEN sells the hot water to RADET, which distributes it to the households connected to the central heating system in Bucharest. RADET provides both heat and running hot water.

ELCEN, which is also one of the biggest electricity producers in Romania, had a turnover of EUR 341 million and a net profit of EUR 24 million in 2015. The company has over 2,000 employees.

ELCEN had over EUR 450 million worth of debt at the end of last year. At the same time, the company had some EUR 536 million to recover from its clients, mainly RADET.

One of ELCEN’s biggest suppliers is state-owned gas producer Romgaz. The gas producer has threatened ELCEN several times that it would no longer supply it with gas until the power producer pays its debt. ELCEN has, in turn, put pressure on RADET to repay some of its debt.

If Romgaz decides to stop supplying gas to ELCEN, the company would have to stop its power plants leaving Bucharest without hot water and heat in the winter. However, as all the companies are state owned, there have been suspicions in the past that the whole situation may have been used for political games and negotiations.

The Social Democratic Party (PSD), which holds the majority in Bucharest’s General Council as well as the mayor seat, has accused the Government of using this situation to turn Bucharesters against the local authorities.

RADET debts may leave half of Bucharest without hot water

editor@romania-insider.com