2013 has been a year which brought to mind the late 1990s, with many urgent enquiries from investors about the Romanian market and a need to manage their expectations and concerns in the face of uncertainty about the investment climate. In the late 1990s the cause was the Foreign Investment Ordinance. This year the cause has been the Emergency Ordinance to change the support scheme for renewable energy.
The similarities are striking: in each case, some good ideas were rushed into publication, but without the detailed regulations on how to apply them. In each case some unwise ideas were mixed with the good ones and the situation was compounded by a failure to provide early, clear and reasoned explanations to investors of what the government’s detailed intentions were.
Even the timings of each piece of legislation appear to be similar: after “headline” measures were introduced by Emergency Ordinance in the first part of each year, we have seen further information emerge over the summer amidst considerable political debate. In the case of the Foreign Investment Ordinance, that sorry story was ended when the application norms were finally published – and the incentive scheme was then totally abolished – at the end of the year. It looks as though greater certainly on renewable energy incentives are also going to need to wait until the end of this year, with parliamentary debate having been postponed from the summer and still not having been completed at the time of writing at the end of October.
Different governments have been involved, but the processes have been very similar. In each case a great deal of interest from investors has been raised, leading to many enquiries to us. Our long experience in Romania has been a considerable advantage to us, as the longer view has allowed us to be able to set investors’ concerns and queries about the renewable energy support scheme in context. We notice that whilst investors are considerably more comfortable about the situation now than they were earlier in the year, investor perception of Romania as a place to do business has been adversely affected by the way the changes to the support scheme have been handled. We reassure them that Romania is still a place to do business.
The effect of all of this on our business in 2013 has been to see fewer transactions being completed in energy in particular, and relating to Romania in general. We have been heavily engaged in the recent acquisition of the TIP Trailer Services transport equipment leasing, rental and service solutions business from GE Capital by HNA Group of China, but Romania is only one of the markets in which this business operates. We expect that many of the other M&A transactions in Romania will similarly be part of larger global transactions.
An exception to this is likely to be in the Romanian energy sector, where we suspect there will be considerable activity once the changes to the renewable support scheme are clarified. We suspect that there are industry investors who are waiting to enter the market, but who are waiting until there is more certainty about how the support scheme will operate in the future. At the same time, we also believe that many existing investors (and their financers) will have been put under severe pressure by this year’s political events and will look to sell their projects as soon as market conditions permit.
We have acquired a number of new clients this year, but all of these clients have already been present in the Romanian market. Discussions have been taking place in Bucharest and in London with a number of potential clients who have not yet made the decision to enter the Romanian market, but we hope that they will shortly make the decision to do so. We do not expect any substantial change from the firm’s traditional focus on energy, shipping, transport and trade during the coming year, although we do expect to be involved in more conventional energy and natural resources matters.
We also expect to see continuing work on capital markets matters and corporate finance. We have advised one of the largest foreign investors in Fondul Proprietatii for a number of years and in 2013 we have been active in issues ranging from corporate governance of Romanian listed companies, minority shareholder rights and the use of depositary receipts by Romanian companies to obtain listings in foreign markets. Hopefully these are signs that the Romanian capital market is beginning to mature.