When Romanians plug their electronic devices into their wall sockets for electricity, they plug into one of the murkiest industries in this country. It's a world where many organizations make huge amounts of money, from God (literally the Romanian Orthodox Church) to the devil (convicted criminals and organized crime).
The people of Romania pay for this world with their energy bills. But increasingly, they are being squeezed by all sides: During 2005, Electrica, the state power company, disconnected 390,000 households, businesses and organizations for nonpayment of bills. Romania is one of the biggest exporters of electrical power in the Balkans but increasingly, they are living in the dark (See Romanian social story) as prices rise and a poor population tries to afford what they've always had.
The situation is the same in the other countries of the region.
The Romanian Center for Investigative Journalism, together with journalists from Bulgaria , Bosnia-Herzegovina and Albania , has been shining a light into the world of electric power. Our investigation has revealed a world where corruption, controversial businessmen and political interests are wired into the electrical power industry.
The Romanian Center for Investigative Journalism, together with The Center for Investigative Reporting in Sarajevo and journalists from Bulgaria and Albania, has been shining a light into the world of electric power. Our investigation has revealed a world where corruption, controversial businessmen and political interests are wired into the electrical power industry.
The reporters uncovered the power games behind the privatization of one of the biggest players on the Romanian market, ALRO Slatina, which gives important insight into how these companies operate.
They also uncovered the involvement of the Orthodox Church in the electric power trade and the presence of trade union leaders among the shareholders of private companies dealing in electrical power.
The Rules of the Game
In order to trade in electrical power on the Romanian market, companies must obtain a license from the Romanian Energy Regulatory Authority (ANRE). There are more than 140 companies approved by ANRE to trade including the state owned companies: Hidroelectrica, Termoelectrica and Nuclearelectrica. The three giants own all the important power generation plants in Romania, such as the nuclear power plant in Cernavoda, and the Iron Gates hydropower plant, on the Danube.
On the other hand, the list of licensed traders also contains private companies that are buying electricity from state owned plants including several private companies that are controlled by controversial figures in Romanian political and economic life.
One of those names is Ovidiu Tender, a businessman who was arrested and is on trial for money laundering and fiscal fraud . Another is Silviu Lucian Boghiu, former manager of the distribution company "Electrica SA", who was arrested on corruption charges. There is Ionel Mantog, former state secretary with the Ministry of Economy and Commerce, who was fired after a scandal related to sales of electric power from two power plants and is currently under investigation by the National Anticorruption Directorate (DAN) in a land fraud scheme. Also present is the family of Dan Voiculescu, the controversial president of the Conservative Party and Ioan Niculaie, Romanian business mogul whose activities are currently investigated by the authorities.
The true owners of many of these companies are hidden behind anonymous companies from Switzerland or Cyprus .
As in the natural gas or oil fields, the electrical power field is a battlefield between companies but nobody looks after the interests of the people - that's the first thing that is sacrificed.
The price paid by the individual consumers is directly influenced by how well employees at state companies take care of state resources. That has been a problem, say some.
Dumitru Costin, the leader of the National Trade Union Association, said energy traders have been given the best deals at the expense of state companies and consumers, including being allowed to buy cheap hydropower and sell it abroad.
"It's not fair that someone could come and buy cheap electric power and then sell it outside the country, making a huge profit," he said. "And all because I, the individual consumer, pay the price for a package containing thermo, hydro and nuclear power. Why should I be left with the expensive power while the cheap power is sold for a profit by somebody else?"
Costin said the regulators pretended to fix the problem but in reality new schemes were being hatched to help favored companies.
"It is very clear what happened here under the fake idea of liberalized markets and the fake idea of competition. The laws that were made up did nothing but favor these middlemen. And I can say that the law still favors them," Costin said.
The electrical power business has attracted the attention of many politicians of all political persuasions. President Traian Basescu has stated on many occasions that he is aware of the problems in the electric power market where "wise guys" make the rules.
A report by the Southeastern Europe Electrical System Technical Support Project says that between 70 percent and 90 percent of the cross border electric power deals are made by private trading companies and questions why state-owned power generators do not develop their own export-import own capacities.
Energy Holding
By far, the most important private company in Romania is Energy Holding, which specializes in international electric power trading. With its headquarters in downtown Bucharest in the back of the Government building, this company of 50 employees had a turnover of 190 million in 2004, according to data obtained from the Ministry of Finance. By comparison, Hidroelectrica SA, a public company with 5,037 employees and owns most of Romania 's power plants sold 380 million in the same year. Energy Holding bought most of its power from Hidroelectrica.
Energy Holding came under scrutiny in 2006 by the National Anticorruption Directorate because of its power dealings with two state-owned power plants in Turceni and Rovinari. A Ministry of Economy report said Energy Holding, together with other companies, allegedly bought electricity from the two plants at prices below the production cost. The management of the two plants has since been fired, along with Ionel Mantog, state secretary with the Ministry of Economy. Mantog was the Government's representative for the Turceni and Rovinari complexes.
In a response to questions from CRJI, Energy Holding denied having bought electric power from Turceni and Rovinari at preferential prices and considered the Rovinari and Turceni deals as fair.
An Anonymous Company
According to ownership documents, Energy Holding is 95 percent-owned by the Swiss company Energy Consult SA ECSA, while the rest of the shares are owned by an off-shore company from Cyprus called Atell Investments.
"I am not telling you who the shareholders of Energy Holding are. They are anonymous Swiss companies and I won't tell you who owns them. I am no longer involved with these companies anyway," said Nicolae Bogdan Buzaianu, one of the most controversial characters in the Romanian power market.
Buzaianu resigned from the position of sole administrator of Energy Consult at the end of June 2006. His seat was taken by a Swiss accountant named Beat Eugene Corpataux, a Tentlingen-born Swiss resident.
Company documents show Corpataux and Buzaianu have switched jobs before at Energy Consult - in fact several times over the last few years.
Corpataux is also the president of another Swiss company: BC&M Business Consulting and Management, a company dealing with corporate management consulting. BC&M offers representation services for people who want to start an anonymous business in Switzerland .
"As interlocutors of foreign but also local clients, we manage the companies according to their instructions," mentions the company's website.
BC&M is also involved with the Swiss company Valclair Societe Anonyme, which lists Buzaianu as its director. This company was founded in the autumn of 2005 in Switzerland for the purpose of buying three buildings worth 2.4 million.
Just a few days after CRJI reporters met Buzaianu in Bucharest in late August, Energy Holding announced it had changed ownership and was now owned by Societe Bancaire Privee (SBP), another Swiss anonymous company. However, this change has not been yet recorded with the authorities in Switzerland or Romania .
According to documents obtained by CRJI, the SWX Swiss Exchange began a formal investigation in June 2006 against Societe Bancaire Privee S.A. on the grounds of a possible breach of the listing rules in a case involving the disclosure of management transactions.
Iavorski and the Beginnings
Pictures taken by CRJI show that BC&M shares an office with a company called Aspell Magnus. Both Buzaianu and Corpataux are administrators of Aspell Magnus. This company changed its name five times in the last seven years. In the past, it has also been called HT Swiss Hydropower Technologies and Energy Consult International SA, two important names in the history of energy trading in Romania .
While it was called HT Swiss Hydropower, the company was a co-owner of Seven Trust Company along with two companies called Unicom Holding and Romelectro.
Pressure to Postpone Order
Unicom Holding was owned by Constantin Iavorski, former minister in the Republic of Moldova and an employee of a company belonging to the Russian oligarch Roman Abramovich. Iavorski was the Minister of Energy in Moldova, and his company Unicom Holding was investigated some years ago by the Romanian authorities regarding their deals with state-owned Termoelectrica.
Iavorski's Unicom Holding and another company he started called Marc Trust are considered the creators of the energy trading market in Romania and were trading years before the birth of the liberalized market.
Iavorski's companies bought electric power from the Government and then sold it back to what were then state-owned companies, including Autodacia Pitesti, Romcim, Astra, the Constanta and Galati Shipyards, Automobile Craiova and Electrica Fieni.
Buzaianu stated that his involvement in business with Iavorski is not important.
"Iavorski is finished in Romania . I don't think he has any business here anymore," said Buzaianu.
However, documents at the Trade Registry show that Iavorski is still involved in no less than eight Romanian-based companies.
Romelectro SA, another owner in the Seven Trust Company with Buzaianu and Iavorski is currently on the ANRE list of companies owning power supplying licenses. It is headed by Viorel Gafita, who used to be a direct shareholder with Seven Trust. Besides Romelectro, Gafita also owns another company on the ANRE list of electric power traders: Power Consult. Romelectro was another of the companies investigated in the Rovinari-Turceni scandal.
On the other hand, Romelectro is in a partnership with Electrica SA, the State-owned company to which households consumers pay their electricity bills, in a company called Electrica Soluziona SA.
Romelectro headquarters are in the same offices where Seven Trust used to operate, on 60 Calea Dorobantilor, in downtown Bucharest .
The Extended Power Network
The network of business connections that link from Corpataux and Buzaianu extends well beyond Romania and Switzerland .
The Swiss accountant is the representative of INET AG, a company that owns the UCM Resita (Resita Industrial Machinery Factory), a huge industrial compound in the Western part of Romania . INET took over the industrial giant from the Romanian Government in 2003.
UCM is currently on the list of the biggest debtors to Romania 's public budget although the owners claim the situation will soon be sorted out soon. They claim that their privatization agreement will erase all debts incurred from when the company was state owned.
After taking over the industrial compound , INET AG established several satellite companies with UCM Resita as the majority owner: UCM Trading, UCM Energy, a company also listed on the ANRE list of electric power dealers, and Hydro Engineering SA.
Hydro Engineering SA links UCM Resita and INET AG with another Swiss company, International Consulting Engineering, which is represented in Romania by Dragos Dan Moldovan. Moldovan is, according to documents issued by the Bulgarian Trade Register, one of the members of the Energy Partners company, founded in Sofia at the end of December 2005. Energy Partners is 95 percent-owned by Energy Holding.
UCM Energy was established when Energy Holding was about to lose one of its main clients on the market: ALRO Slatina.
In the Shadow of the Kremlin
Another company created around UCM Resita in the beginning of 2005, was called until recently "Romcar Russian Buses Production SA". This company changed its name and became "Robus Resita". Its shareholders are UCM Resita SA and Boris Golovin, a Romanian citizen born 57 years ago in Soroca in the Moldavian republic.
In an interview with CRJI, Golovin told us about his plans to build buses in the UCM compound.
"The plan is a little bit delayed but we're working on it. We are producing here reliable buses of many kinds: school, urban and interurban," said Golovin, a former member of the special forces in the Soviet Military.
Boris Golovin is also the representative of the Russian company ZIOMAR Engineering Company in Romania, a company that is part of the consortium called EM Alliance-Atom, a Russian giant active in the nuclear power field. The Russian Government owns 51 percent of the shares of this company through the company TVEL Atomoenergomash.
Ziomar is a company based in Podolsk , near Moscow , and in the past it obtained through Golovin contracts for modernizing the power plant in Mintia, Hunedoara County . Golovin said the modernization has been done in exchange for an old debt from the Soviet Union . However, adds Golovin, the new equipment brought for Mintia is still not in use for reasons he wouldn't comment on.
Golovin and Ziomar are listed in the ownership of the Romanian company Global International 2000. One of the shareholders of Global International 2000 is Horia Constantin Bejan, a former manager with the Ministry of Industry. Bejan was also an associate of Iavorski in the company Ex Imp Minerva SA, a company founded in 1994.
But Golovin's name is also connected to a huge scandal in Romania : the Sunoil affair. The Sunoil Group started its businesses on the oil market in Romania and went bankrupt after Constantin Liviu Nita, administrator of the company, was sentenced to jail for issuing false bank checks worth 60 billion lei. It turned out that Sunoil group was also a sponsor of political groups in Romania . After a short term in jail, Nita was pardoned by former Romanian president Ion Iliescu in 2004, by a presidential decree.
According to company records, Golovin was also directly involved in the Sunoil Group. But he claims only his name was involved with the company.
"I didn't even know what the business of the company was," said Golovin.
Also included in the Sunoil consortium was SUNOIL Racing Team. Romanian boxer Mihai Leu was a partner in Sunoil Racing Team. He is now the member of the UCM Resita car racing team, and he wears on his racing car the flag of Energy Holding.
Governmental Decisions
UCM Resita together with VA Tech Hydro, a company represented a few years ago by Buzaianu, have benefited from the Romanian Government's clemency. In 2001, the then- government issued a governmental decision exempting UCM and VA Tech from paying custom duties and value added taxes in connection with a contract with Hidroelectrica SA. Va Tech, an Austrian company, was to upgrade the Iron Gates hydropower plant on the Danube while UCM Resita was a subcontractor.
In the spring of 2006, the Romanian minister of economy, Codrut Seres, stated in front of the Senatorial Commission for the Investigating of Abuses that his Ministry will hire a law firm in order to sue VA Tech over damages worth 4 million. The Ministry of Economy said the work of VA Tech was delayed and had multiple problems.
Most of these countries share not only the same small connected group of owners, but also a tendency to be investigated and a proclivity to make lots of money from the poor management of state company management.
In the end, it is the Romanian energy user who pays.