ELCEN will move to the Capital City Hall, the Government decided. What does this mean for heating in Bucharest
On Thursday, the government approved a memorandum aimed at starting the procedures to transfer the stake held in ELCEN by the Ministry of Energy to the Municipality of Bucharest through a transaction at the Capital City Hall. “The value of the transaction will be determined by the market evaluation that the Ministry of Energy will make in the next period,” announced the Executive.
- The heating system in Bucharest now operates through two different companies: ELCEN, which produces the heating agent, and Termoenergetica, which handles the transport and distribution of heat and hot water to the population.
The memorandum, initiated by the interim Minister of Energy, Ilie Bolojan, aims at an agreement in principle regarding the takeover by the Bucharest City Hall of the shareholding held by the state through the Ministry of Energy in Societatea Electrocentrale Bucharest (ELCEN), for the establishment and organization of the public thermal energy supply service in a centralized system.
How is the takeover of ELCEN by the Capital City Hall motivated
The document states that approximately the entire thermal energy production for Bucharest is provided by ELCEN. At the same time, the administration of the public centralized thermal energy supply service in Bucharest, previously provided by the Autonomous Thermal Energy Distribution Authority (RADET), was taken over in December 2019, following RADET's entry into bankruptcy proceedings, by Termoenergetica, a company in which the municipality of Bucharest is the majority shareholder.
- “In order to streamline and reduce, including in the long term, the payment burdens of the Municipality of Bucharest, it is necessary to restructure the way in which the Municipality of Bucharest supports Termoenergetica and Elcen.
- In the absence of payment solutions or possible other legal/contractual restructuring and in the absence of the completion of the transaction based on GEO no. 61/2017, the level of Termoenergetica's debts can increase even more and it carries the risk that insolvency proceedings will be initiated against it, followed by bankruptcy and liquidation, or even directly the bankruptcy procedure, which can ultimately lead to the termination of its activity and major damage to the public thermal energy supply service.” it is specified in the memorandum.
The thermal energy produced by ELCEN depends on the distribution by Termoenergetica
The thermal energy produced by ELCEN is delivered to the fence of the company's power plants, from where it is distributed through Termoenergetica.
The production activity of ELCEN is dependent on the distribution activity of Termoenergetica, ELCEN being a component of the Centralized Thermal Energy Supply System from Bucharest (SACET), the document states.
“The capacities installed in ELCEN are over 40-50 years old (70%), between 20 and 35 years (15.5%), the newest energy capacity being put into operation in 2009. The thermal energy produced is delivered through the transport and distribution network operated by Termoenergetica, to approximately 2 million Bucharest consumers and over 5000 public institutions. ELCEN provides 93% of the capacity the SACET system from Bucharest., the memorandum also states.
What are the next steps
The decision regarding this transaction takes into account the request of the General Council of the Municipality of Bucharest and the stages provided by law in this regard, the Government announced on Thursday.
The steps necessary for implementation will be carried out under the coordination of the head of the prime minister's chancellery. “The government will be informed monthly about the implementation stage and, if legislative changes or measures are needed by the government, they will be subject to approval or analysis with speed”, says the Executive.
The Memorandum also proposes that the Ministry of Energy, the Ministry of Development, the Ministry of Finance, the Municipality of Bucharest and the National Regulatory Authority in the field of Energy to develop and present to the Government an analysis with proposals to modify the primary, secondary and tertiary legal and/or contractual framework (contracts concluded between Termoenergetica and consumers, the management delegation contract, the contract for the sale of thermal energy) in order to make the payment and/or guarantee mechanisms more efficient or any other clauses/provisions to avoid the continued accrual of late penalties as currently and historically in relation to RADET.
The elaboration of the analysis will be coordinated by the Head of the Chancellery of the Prime Minister.
The General Mayor, on the takeover of ELCEN: The idea is for production and distribution to be coordinated in a unitary system
The general mayor of the Capital, the liberal Ciprian Ciucu, announced last week that he discussed with the interim Minister of Energy, Ilie Bolojan, about the next steps to implement the SACET system in Bucharest.
“It is about the taking over of ELCEN by the Capital City Hall in order to end once and for all the division of responsibility and the throwing of blame between M. Energiei and the Capital City Hall. Previous steps were taken for this, but they were not completed. We want to put into practice decisions taken previously, then procrastinated for years,” said Ciprian Ciucu on Facebook.
“The idea of ELCEN being taken over by the Capital City Hall is for production and distribution to be coordinated in a unitary system, in order to facilitate investments and the modernization of the network,” stated Ciucu.
He also said that it was agreed that the Ministry of Energy should evaluate the assets of ELCEN, an evaluation that the ministry “has been forgetting for several years”.
“Obviously, the takeover process will be able to be blocked again by the future government. Let's see… The correct decisions must not have a political color, the heating system must not have a political color because those who suffer are the people of Bucharest”, said the general mayor.
