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Romania: Developer chooses to dismantle EUR40m project and cut losses

Once one of Europe's most promising new markets, Romania's regulatory framework is stopping developers from progressing ready-to-build projects. One firm is going further.

Romanian renewable-energy firm Monsson Group is dismantling turbines at its 27MW Targusor wind farm in Constance county, a sign of just how bad things have become in the country's once booming wind business.

Targusor's nine 3MW Vestas V90 turbines were scheduled to be removed by the end of September, according to Sebastian Enache, business development manager at Monsson. The firm so far has no plans to use or sell the turbines, so they will be put into storage.

The original project investment came to a total of more than EUR40 million, working out at around EUR1.6 million/MW. But the wind farm was never commissioned as the Romanian regulatory backdrop went from bad to worse, and expected income for wind projects slumped. "During the different construction stages, legislation changed three times," said Enache. Expected income from the project - the sum of revenues from the sale of power and green certificates - would now stand at about EUR45-EUR55/MWh, compared with EUR120-EUR140/MWh in 2012 when construction started.

Construction was completed at end-2013 but the final, minor permit needed to operate was only received in mid-2014 as project approval slowed amid increasing regulatory uncertainty. To comply with Romania's grid code, Monsson reached a point when it had to turn the turbines on or take them down. "The important thing now is that we're not commissioning the project," said Enache. "It's one thing to lose money you've already lost, but another to know you're about to start losing money for the next 25 years."

Rise and fall

Monsson operates around 100MW of additional wind capacity in Romania, which it will continue to run. It is turning to places like Turkey and South Africa for wind business, entering both countries through its operations and maintenance business.

Romania's wind energy capacity jumped from 14MW in 2009 to 2,954MW at end-2014, although growth already began slowing in 2013. Only about 50MW is expected to come online this year. Monsson developed some 2.5GW in Romanian wind projects and sold about half of these, including the 600MW Fantanele-Cogealac wind farm operated by Czech utility CEZ. The other half, at the ready-to-build stage, is now on hold.

Other companies have also frozen growth plans. "Banks will not finance," said one international developer. A major problem is that wind producers are not guaranteed to find a buyer for their green certificates, he said. A green-energy sourcing requirement for energy suppliers, which can be satisfied with the purchase of the certificates, has been set too low, resulting in a chronic oversupply. There is no buyer of last resort.

The Romanian government in 2013 decided to scrap the requirement for suppliers to source a progressively higher proportion of energy from renewable sources. The quota is now decided on a year-by-year basis. It also cut green certificate compensation for wind farms commissioned from 2014 and deferred the payment of half the green-certificate compensation for other producers until 2018. "It's a bit dangerous to develop projects in Romania now," said Ciprian Glodeanu, a partner at law firm Wolf Theiss. The green certificate system only applies to wind farms commissioned by the end of 2016, he added.

The market framework is unlikely to improve any time soon. Romania is holding parliamentary elections in November 2016, and no politician is expected to dramatically alter the current system before then.

Regulatory instability has scared away investors, but Romania has strong wind resources, and there are opportunities to export power to adjacent energy-hungry countries, said Glodeanu. Developers that remain in the market are waiting in the wings, many with fully permitted projects, should it improve in the medium term.

Back in Targusor, Monsson is keeping the substation and roads in place and has not ruled out one day restarting the project.


Projected revenues compared with EUR120-130/MWh at start of build

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