Romania’s Hidroelectrica unveils four-year, €280mn investment plans

Romanian hydropower group Hidroelectrica aims to spend RON1.4bn (€281mn) over the next four years on upgrades, modernisations and acquisitions, the company announced at its first investors meeting since its listing on the Bucharest Stock Exchange. 

The investments may end up being even higher (which doesn’t bode well for investors’ dividends), as the state of the equipment may require unplanned refurbishment works – as was recently the case with Hidroelectrica’s main hydropower plant.

The company projects RON10.67bn revenues this year, 12% down y/y on base effects and amid adverse natural conditions this year.

While part of Hidroelectrica’s investments may increase the company's generation capacity and improve its operational efficiency, some of the expenses are needed simply to secure proper functioning of the existing capacities, most of which were developed during the communist regime.

For instance, on October 14 the company announced that its largest power generation plant Portile de Fier 1 (Iron Gates 1) on the Danube needs refurbishing works after ″serious problems in operation were reported [at three of its six generation blocks], with a behaviour that indicates defects in the system for adjusting the position of the turbine rotor blades (so far the exact cause has not been identified)".

The price of the company's shares dropped by 1.6% over the past week, as of October 16. Hidroelectrica’s market capitalisation is RON56bn, after the price of its shares increased by 5.2% y/y, compared to the 23% y/y of the blue chip index BET.

The six generation blocks at Portile de Fier 1 that need refurbishing were put into operation in 1970 and 1971 and later refurbished in the period 2000-2007 (under a contract that prompted controversy at that time), when they were brought to the current installed power of almost 195 MW per unit.

The company announced that the current state of the generation units requires the planning and start of a new modernisation stage. The hydropower plant will keep operating partly during the modernisation, which is planned to ensure its safe functioning for another 30 years. 

The cost of the works will be established after a feasibility study is carried out.

Hidroelectrica, which is the largest energy producer and most profitable state-owned company in Romania, said that that the investments will not only add megawatts to the installed power but also improve operational efficiency.

"The consolidation of the company and the plan we have in place is what gives us long-term value. We need to continue investing in retooling, maintenance and modernisation. Certainly, diversifying the production portfolio through the acquisition of renewable projects and, of course, in storage is very important," said Karoly Borbely, CEO of Hidroelectrica, on October 15, during Capital Markets Day, the first meeting with analysts and investors since the company's listing in July 2023.