Chinese capital conquers Europe step by step: Romania, on the energy sector investors’ route
- Written by Adrian Stoica
China has managed to be one of the big winners of the economic crisis commenced in 2008. The Chinese companies’ investments in the European Union Member States have experienced an upward trend after that year, succeeding during 2010-2014 to increase from USD 6 billion to over USD 27 billion. Romania hasn’t been eluded by the Chinese investors’ money, although the major projects announced several years ago by former Prime Minister Victor Ponta, after paying a visit to Beijing, continue to linger or have been forgotten. However, there are signs that the Chinese investors’ interest towards our country has revived lately.
Last year, China’s GDP increased by 6.9%, registering the lowest growth in the last 25 years, a figure that has sparked a series of speculations worldwide. Some were worried that China’s economic growth model would be unsustainable, while others doubt that the fluctuations recorded by the Chinese stock markets and by China’s monetary market will lead to the destabilization of the global economy. As the second world economic power, the Chinese economy has already exceeded USD 10 trillion, and an increase of 6.9% will bring an increase of over USD 800 billion.
In 2015, China’s contribution to world economic growth exceeded 25%, the total import volume was of USD 1,680 billion, continuing to rank on the second place in the world. FDI amounted to USD 127.6 billion, up by 10% against the previous year, China still representing an important engine of world economic growth.
Russians turn to the Chinese banks
The big Russian energy companies have turned to the Chinese financial institutions to get cash to support their projects. Recently, giant company Gazprom has borrowed EUR 2 billion (USD 2.2 billion) from the London branch of the Bank of China, according to international media. Gazprom has not announced what the money is for, but it may be used to implement the agreement signed with China on the annual supply of 38 billion cubic meters of natural gas by the end of this decade. This year alone the expenditures for the project are of 168 billion rubles (USD 2.3 billion).
Also, other Russian companies are interested in obtaining loans from Chinese banks, among them are Norilsk Nickel, Sibur, AFK Sistema, VEB Bank, Megafon and Novatek. Novatek, having both Russian and foreign capital, is developing the Yamal LNG project which aims the gas exploitation in the Siberian area and the building of storage and liquefaction capacities in warehouses of 30 bcm. However, Novatek is on the list of companies sanctioned by the US, and this leads to some financial problems. In this project, besides China and Russia, also participates France, and the investments made by specialized companies from the two countries have already reached nearly USD 9 billion.
CEFC takes over Petromidia
The most spectacular arrival of the Chinese in Romania took place late last year when CEFC China Energy took over the Petromidia refinery and 500 fuel stations by buying the majority stake of the KMG International group (former Rompetrol Group) from the Kazakh state company KazMunayGas. China CEFC Energy is involved in various business areas, such as transport, infrastructure, real estate, hotelier industry, logistics, sports, beverages, forestry, ranking on the sixth place among the Chinese private companies. CEFC has a visible presence in the Czech Republic, where last year bought 10% of the Travel Services shares, the SmartWings airline operator, has become the main shareholder of Pivovary Lobkowicz brewery Group subsequent to taking over 79.4% of the shares for USD 78.46 million, has doubled its participation in the investment company J&T Finance Group to 9.99% and intends to increase it to 30%, it has acquired a 60% stake in football club Slavia Prague and plans entering the media segment.
Energy projects on standby
Announced several years ago as China’s large investments in Romania the projects in the energy area have not yet materialized. Some are still under negotiations, such as the construction of reactors 3 and 4 at Cernavoda nuclear power plant in Cernavoda with China General Nuclear Power Corp (an investment of approximately EUR 6 billion) and the building of a 600 MW group in Rovinari, at the Energy Group Oltenia, with China Huadian group (about EUR 1 billion), but others are put on hold. We could mention the building of the hydroelectric plant Tarniţa (an investment estimated to EUR 1.1 - 1.3 billion), where the Chinese have expressed interest to participate, but no company has been selected for the project, the construction of a new energy group at the Hunedoara Energy Complex, which meanwhile became insolvent and is on the brink of bankruptcy, the building of a 300 MW group at the Nuclear Activities Autonomous Admnistration (RAAN) Turnu Severin, also insolvent.
In Jimbolia, together with the Russians
Another noteworthy entry of the Chinese capital in Romania took place recently (in February this year) with the acquisition of 30% of Zeta Petroleum by Golden Meditech Holdings Limited. The acquisition was made through an investment fund owned by the company. Zeta Petroleum owned a petroleum block in Jimbolia, where the Chinese will henceforth be partners with the Russians from Gazprom, as the latter have common ownership on the block. In August 2012, Zeta Petroleum had yielded 51% of the rights on the perimeter in Jimbolia to NIS Gazprom Neft, the latter will continue to fund research the explorations in the area.
Earlier this year, GM Investment & Co Limited, a subsidiary of Golden Meditech Holdings Limited, has approved the acquisition from Zeta Petroleum of the entire capital of Zeta Romania Group, which holds interests in three oil blocks in Romania (Bobocu, Suceava and Jimbolia ). Those stakes are to be transferred to GMI, the main shareholder of Zeta Petroleum, in exchange for erasing debts amounting to GBP 1.9 million.
Junlun remains in the race for Oltchim
Petrochemical plant Oltchim Ramnicu Valcea is in the focus of Chinese company Junlun since last year. According to the receiver, Junlun Petroleum has submitted a letter of intent for participation in the privatisation process. “Junlun Chinese company has not lost interest to acquire Oltchim. They know very well the plant’s situation and what happens here. But they need an investor, we believe, they haven’t taken a final decision yet. On the other hand, the Chinese prefer not to disclose too many issues before something concrete happens. But interest is still there,” said Nicolae Balan, the BDO Business Restructuring representative, in late January, the firm which, together with RomInsolv, ensures the plant’s judicial administration. For 2016, the plant estimates to obtain a turnover of EUR 168 million (up by 0.5%) and an operational EBITDA profit of EUR 12.2 million (up by 27%).
Kerui, Chinese leader of global oilfield comprehensive solutions
Kerui Petroleum Group (Shandong Kerui Petroleum Equipment Co., Ltd) is a complex company that provides leading solutions in research, development and manufacture of equipment for the oil industry, providing integrated services and turnkey technology projects. Kerui Petroleum is the largest manufacturer and supplier of services and equipment for the oil and gas sector in China. The company has over 8,000 employees and is located in Dongying, close to the most important oil field in China - Shengli.
GN Solids Control, more and more popular in oil & gas industry
GN Solids Control is becoming more and more popular in oil and gas solids control and drilling waste management. And it’s all thanks to cooperating with Aegean Oil Consulting (AOC). GN is the 1st API certified solids control company in China, also certified by: Europe DNV CE, HSE, ISO9001, Russia TP&TC. GN Solids America is the first & biggest China owned, USA based Solids Control Company. GN Solids Control has a facility area of 700,000 square feet and exports to more than 60 countries.
Xinda Group, an extended offer of anti-corrosion solutions
Xinda Group is one of the largest Fibreglass Reinforced Products (FRP) manufacturers in China, focused on composite materials and anti-corrosion processing. Currently, Xinda has 2,000 employees and seven industrial parks in China, being the most powerful FRP product supplier in China for SINOPEC and CNPC. Part of its shares is held by SINOPEC.
Xinda has an international market covering all over the world. It has a European branch, which is based in Romania, and intends to provide the best service to the local companies through AOC. Xinda is an anti-corrosion program/solutions supplier with its service & products, FRP pipes, tanks, liner tanks, casing, anti-corrosion coating, HDPE liner, Ceramic Epoxy, etc.
Sino-Romanian cooperation is in line with China’s and European Union’s development strategies. Currently, China promotes the implementation of “The Economic belt of the Silk Road and of the Maritime Silk Road in the 21st century”, expands its cooperation in international production capacity and implements new concepts of development on innovation, harmonization, openness and sharing the results of the development process.
The cooperation between China and Central and Eastern European countries has witnessed rapid development. The bridge over the Danube in Belgrade, built in cooperation by China and Serbia, has already been completed and is open to traffic, and the railroad Hungary-Serbia will be completed in two-year’ time through the cooperation between China, Hungary and Serbia and will become a important component of rapid land and sea route China-Europe.
“The long-term cooperation plan between China and Central and Eastern Europe” on the direction and priorities during 2015 - 2020 was developed in November 2015 and aims to further capitalise the cooperation potential and to boost efficiency and the quality of the ‘16+1 cooperation’ mechanism.
The Chinese are interested in contracting large projects in Romania. Companies as China General Nuclear Power Corporation, Huadian, Huawei, ZTE, China Development Bank and others have already opened offices or subsidiaries in Romania. The Sino-Romanian cooperation is currently in a promising accelerating period.
Projects in the field of nuclear energy, hydro energy, thermal energy, highways, etc. under negotiation between the Chinese and Romanian parties reach a total value of several billion EUR.
The development of Romanian-Chinese relations, on the CCIB agenda
Univ. Prof. PhD. Eng. Sorin Dimitriu, the President of the Bucharest Chamber of Commerce and Industry (CCIB), has recently had a meeting with a delegation led by Zeng Wengao, Head of the Longgang District Organizing Council, administrative division of the Shenzhen city (P.R. of China). Opening the meeting, the CCIB President spoke about the Chamber’s foreign relations strategy and the priority given, since 2008, to the economic and trade cooperation development with partners from P. R. of China. “We know the potential of the Shenzhen metropolis, especially in the field of developing the advanced branches of economy. In turn, CCIB promotes the new, with a strong department for research, development and innovation. So here is a possible area of cooperation between Bucharest and Shenzhen, a base of we could achieve by agreeing and signing of a Cooperation Agreement,” President Sorin Dimitriu said.
Zeng Wengao has given appreciation to the Bucharest Chamber’s concerns in terms of boosting Sino-Romanian economic and trade relations and stressed that Romania, a country with a significant growth potential and with special geo-strategic positioning, is interesting both for Chinese businessmen and for those in science technology and for academia.
China is an important economic and trading partner for Romania. In 2015, the upward trend of Romanian-Chinese commercial exchanges has increased, reaching USD 3.4 billion, up by 17.1% against the previous year, becoming thus the 10th trade partner of our country and the first from outside Europe.
For more than half a century, regardless of the international or domestic changes in the two states, friendship and cooperation have always been the basis of relations between China and Romania. Just five days after the establishment of the P.R. of China, China and Romania established diplomatic relations. By mid of the past century, Romania exported to China locomotives, cars and assembly lines, providing a strong support for a first phase industrialization of the New China. Today, China brings gradually to Romania equipment, technology and capital, adding a new impetus to the development of Romanian economy.
Currently, the relations between China and Romania have entered a crucial period of development. Positive progress has been registered in cooperation in energy projects, as well as in bilateral trade and other projects. It is expected that the ‘Belt and Road’ initiative proposed by China and the cooperation mechanism between China and Central and Eastern European countries to bring more closely China and Romania.
Romanian-Chinese Business Club
The Romanian Chinese Business Club was founded by a group of businessmen from Romania and China and has as main goal the development of economic and trade relations between China and Romania, and to stimulate bilateral investments. The club’s members are important decision-makers and leaders of opinion in their field: diplomats, investors, businessmen, institutions, non-governmental organizations, natural persons. In order to achieve the club’s objectives and to facilitate the exchange of projects between China and Romania, the meetings are held in Romania and in major cities and/or provinces in China, as events organized by the club members. The Romanian Chinese Business Club is also represented in Hong Kong!
The benefits of the Romanian Chinese Business Club members include: membership of an elite group made up from both countries; establishing business relationships in a conducive Romanian-Chinese environment; exchanges of experience between the two countries; facilitating bilateral investment; development of economic and trade relations; access to Chinese classes (private sessions/group meetings). Further details on the work of the club can be offered by its President, Gigi Rizescu.