The creditors of power and heating producer Elcen on June 11 will select a legal consultant to file a court action against the Bucharest municipality for RON 3.7 billion (EUR 790 mln), which is the volume of bills not paid by the City Hall, according to documents consulted by Economica.net.

The situation could have been avoided through the merger of Elcen with the municipality’s heating distribution firm Radet, which failed amid the uncertain legal status of the municipality’s utilities companies.

The municipality covers about half of the heating costs for Bucharest residents, but the unpaid bills have piled up. As a last effort, the city borrowed from the State Treasury some EUR 100 million at the end of May to prevent disruption in hot water supply.

Bucharest mayor Gabriela Firea admitted last week that the municipality is “unofficially bankrupt,” blaming this on the Government, which reportedly cut the transfers to local administration this year compared to 2018. She said the municipality needs RON 1 billion (EUR 210 million) to keep running.

However, MP Nicusor Dan, the founder of Save Bucharest Union NGO dedicated to municipal development, claims that the drop in transfers from the central Government accounts for a small part of the money the municipality needs: some RON 2.37 billion (EUR 500 million) according to an official document he consulted. Nicusor Dan claims that the lower transfers can explain a deficit of only RON 460 million (EUR 100 million) while the remaining RON 1.9 billion (EUR 400 million) comes from the over-estimation of revenues included in the municipality’s budget, according to News.ro. The only way to avoid major cash flow problems is by cutting all the unnecessary expenditures, Dan argued.

editor@romania-insider.com

(Photo source: Facebook/Primaria Municipiului Bucuresti)