Romania's hydropower group Hidroelectrica could pay some 55% higher royalties for the water it uses, under amendments promoted by energy minister Virgil Popescu and environment minister Tanczos Barna, currently under debate in the Chamber of Deputies.

The company will pay RON 33 (nearly EUR 6.8) for each MWh of electricity produced in its hydropower plants if the Parliament passes the amendments.

Currently, the company pays a royalty calculated based on the amount of water used - resulting in an average level of RON 21 (EUR 4.3) per MWh produced, according to Fondul Proprietatea (FP), Hidroelectrica's minority shareholder with a 20% stake.

FP says it is "deeply concerned" with the "unnecessary and unreasonable increase" that pumps money in the pockets of "another state institution" - Apele Romane (ANAR), which "has not improved its services" therefore does not deserve the money.

"We ask the Chamber of Deputies not to approve the proposed level of fees and to allow further analysis of the appropriate level," said Johan Meyer, CEO of Franklin Templeton Bucharest and Portfolio Manager of Fondul Proprietatea.

According to Fondul Proprietatea, the water royalty paid by Hidroelectrica will increase from about RON 350 million (EUR 72 mln) to almost RON 528 mln (EUR 108 mln) in an average hydrological year, under the new royalty regime.

Fondul Proprietatea's manager also argues that Hidroelectrica's activity is already burdened by several legacy ongoing investments whose main purpose is the rational and safe management of water resources, which used to belong to ANAR.

In 2020, Hidroelectrica reported RON 3.5 billion (EUR 718 mln) revenues and a net profit of RON 1.45 bln (EUR 298 mln), resulting in a net profit margin of 41%.

Hidroelectrica prepares to list its shares on the Bucharest Stock Exchange in the next year. Thus, any decision with a negative impact on its financial results could also lead to a lower valuation for the company (and for Fondul Proprietatea's stake). Hidroelectrica's main assets are the big hydropower plants built during the communist regime that, from an economic perspective, are natural monopolies. 

(Photo: Octav Ganea/ Inquam Photos)

andrei@romania-insider.com