According to the World Bank, there are approximately 1,200 state-owned enterprises (SOEs) in Romania, of which around 300 are majority-owned by the Romanian government.  There is no published list of all SOEs since some are subordinated to the national government and some to local authorities.  SOEs are governed by executive boards under the supervision of administration boards. The 2016 Corporate Governance Code (Law 111) improved implementation of corporate governance in SOEs. However, the government exempted several SOEs from the Code in 2017, and implementation of the Code remains incomplete.

SOEs are required by law to publish an annual report.  Majority state-owned companies that are publicly listed, as well as state-owned banks, are required to be independently audited.  The Corporate Governance Code (enacted through Emergency Ordinance 109 / 2011 and revised through Law 111 / 2016) does not have language requirements for SOE executive and non-executive board members.  Enforcement of the Corporate Governance Code has been uneven; many SOEs are currently managed by interim boards, often with politically appointed members that lack sector and business expertise. The March 2019 EU Country Report for Romania noted that corporate governance legislation applicable to SOEs is robust but only sparsely applied.  Appointments of interim boards are a recurrent practice, departing from the spirit of corporate governance laws.

Privatization Program

The Ministry of Energy oversees energy generation and distribution assets, and uranium and coal mining.  The Ministry of Economy has authority over state-controlled natural gas carrier Transgaz, national electricity carrier Transelectrica, national salt company Salrom, national waters company SNAM, and copper mining company Cuprumin.  The Ministry of Transportation (MOT) has authority over the entities in the transportation sector, including rail carrier CFR Marfa. Romania’s privatization law permits the responsible authority to hire an agent to handle the entire privatization process, though ultimate decision-making authority remains with the government.  Joint ventures between state-owned energy companies and private investors for electric power production have been stalled due to decreasing energy consumption and declining energy prices.

The terms of Romania’s 2013-2015 precautionary stand-by agreement with the IMF included the sale of minority stakes in several state-owned energy companies through initial public offerings (IPOs) and secondary public offerings (SPOs) on the Bucharest Stock Exchange (BVB).  To date, successful transactions have included a 15 percent SPO for natural gas transmission operator Transgaz in April 2013 (following a 10 percent IPO in November 2007), an IPO for 10 percent stake in nuclear power producer Nuclearelectrica in September 2013, an IPO for a 15 percent stake in natural gas producer Romgaz in October 2013, and an IPO on the BVB and London Stock Exchange for the majority privatization of state-controlled electricity distributor Electrica in June 2014.  Privatization has stalled since 2014. The government has repeatedly postponed IPOs for hydropower producer Hidroelectrica and integrated coal mining and coal-fired power production company Oltenia Energy Complex.

Romania has implemented the Electricity Directive and the Gas Directive of the EU’s Third Energy Package, introducing a structural separation between transmission system operator activities, and generation, production and supply activities.  Ownership unbundling rules apply to investors with participation in energy transmission, generation, production, and/or supply activities. According to the Third Energy Package directives, the same entity cannot control generation, production and/or supply activities, and at the same time control or exercise any right over a transmission system operator (TSO).  Furthermore, the same entity cannot control a TSO and simultaneously control or exercise any right over generation, production and/or supply activities. Consequently, the Ministry of Economy oversees the national natural gas carrier Transgaz and national electricity carrier Transelectrica, while the Ministry of Energy has authority over state-controlled electricity producers.  Prospective investors are strongly advised to conduct thorough due diligence before any acquisition, particularly of state-owned assets.

As a member of the EU, Romania is required to notify the European Commission’s General Directorate for Competition regarding significant privatizations and related state aid.  Prospective investors should seek assistance from legal counsel to ensure compliance with relevant legislation. The state aid schemes aim to enhance regional development and job creation through financial support for new jobs or investment in new manufacturing assets.  The Ministry of Finance issues public calls for applications under the schemes. GOR failure to consult with and then properly formally notify the EC has resulted in delays and complications in some previous privatizations.

Private enterprises compete with public enterprises under the same terms and conditions with respect to market access and credit.  Energy production, transportation, and mining are majority state-owned sectors, and the government retains a monopoly on electricity and natural gas transmission.

Investors receiving state aid, whose investments have been affected by the global economic crisis, have found renegotiation of their state aid agreements to be cumbersome, in part due to local authorities’ failure to acknowledge that market conditions have changed.  Some investors have experienced problems due to the occasional failure of GOR entities to fully honor contractual obligations following conclusion of privatization agreements.

Romanian law allows for the inclusion of confidentiality clauses in privatization and public-private partnership contracts to protect business proprietary and other information.  However, in certain high-profile privatizations, parliamentary action has compelled the public disclosure of such provisions.