Hidroelectrica Case: Why insolvency was not a solution and who might win from it

Jean Constantinescu

Hidroelectrica is by no doubt the most valuable company of the Romanian state. Without Hidroelectrica, the national power system would not be able to operate, and its simply presence in the market may descourage any price speculation. Besides electricity, the company supplies vital water - related public services.

Unfortunately, Hidroelectrica is the largest rent and state aid supplier as well. Under a distorted public policy and regulatory framework, the company's management has concluded contracts on the free market with "clever boys" (CB). The request for insolvency was understaood as a preparation to deny the BD contracts. The inslvency price: minor gains, major losses. Judging from national interest, the author thinks that this was not an appropriate decision. It has thrown doubt on the reform of state corporate governance, and undermined the firm's reputation and the hydro investment programs. Serious risks were thrown on the back of Romania's national economy as well.

Key words: Romania; Hidroelectrica; insolvency; electricity; energy reform; electricity market; state aid; preferential contract; state corporate governance.

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