With new GM and plan to re-start production, Romania's Oltchim wants new privatization attempt with strategic investor

After the failed privatization of its main chemical producer Oltchim, Romania named a new general manager at the helm of the company and wants to re-start production, pay salaries and re-start the privatization, this time via direct negotiation, rather than public auction.

The Government wants to get approval from the International Monetary Fund, with whom the country has a financial agreement, and privatize Oltchim via direct negotiation with a major investor, avoiding the public auction route that recently failed. The new GM of Oltchim, Mihai Balan, named shortly after the privatization with Romanian investor Dan Diaconescu was canceled, said he would talk to banks to unblock Oltchim's accounts, re-start production and pay salaries. Balan was previously the head of electricity and thermal energy producer CET Govora. Oltchim employees have been protesting ever since the privatization process started a couple of weeks ago. Oltchim's failed privatization, which placed the spotlight on Romania due to the media debate and the circus created around it, comes a couple of months after another failed privatization of an industrial producer in Romania. Cuprumin, the Romanian copper maker, was subject to a failed privatization process back in May this year, under a different Government, formed by the Democratic Liberal Party (PDL) and led by Mihai Razvan Ungureanu. The Oltchim privatization process, started during the PDL – backed Government and continued in the Social Liberal Union's (USL) Government, led by Victor Ponta, failed because the investor, Dan Diaconescu, did not pay the EUR 45 million within 10 days of winning the auction. On Monday (October 1 ), the Government canceled the privatization and said it will re-start it in early 2013. Meanwhile, Oltchim will have to regain lost contracts, but will not make layoffs in the next six months. The new GM sounds optimistic: “We have to re-analyze contracts, which were lost as production was stopped, we will renegotiate and we will win back markets which were temporarily lost,” said Balan. Once the privatization process is re-started, the Government wants to negotiate with a strategic investor, which would also pledge to take over Oltchim's debt, which is close to some EUR 400 million, according to latest data. The investor would also have to make investments and start negotiations to take over Oltchim's raw material supplier Arpechim, which is now owned by OMV Petrom. PM Victor Ponta's wish before the failed privatization was for a Russian investor to take over Oltchim, but none of the offers submitted for Olcthim came from a Russian company. The direct negotiation would allow the Government to screen who takes part in the privatization and to avoid having a new scandal like the one involving Dan Diaconescu, the now famous TV owner and politician. Pundits speculate Diaconescu got involved in the privatization only for media attention ahead of general elections in December, and he threatened to get involved in the upcoming Tarom airline privatization too. We reported about the failed Oltchim privatization