The Bridge over the Prut, version 2.0

Yesterday we launched in Chisinau, together with our Moldovan colleagues from Expert Grup, the report “The bridge over the Prut, version 2.0: electricity interconnection between Romania and Moldova”. Participants included representatives of the EU Delegation in Chisinau, companies, embassies, international donors, experts, media.

The main findings of the conference:

The interconnections with Romania, both on gas and electricity, make sense only as long as Romanian suppliers are confident that they can participate in a transparent and competitive market, and that there are no companies benefiting preferential treatment.
The first priority is to ensure ANRE’s effective independence, as well as transparency for the tenders on electricity imports, beyond the adoption of laws or procedures on paper; the actual implementation would be the first signal that there is real political will to develop a well-functioning market within the next few years, in which new players, such as Romanian suppliers, can compete on level play with the incumbents.
In the case of ANRE, a strong signal would be to ensure the selection and appointment for the vacant position as director through a transparent and competitive procedure, as was done in the case of the governor of the Central Bank. Today, January 20, is the deadline to submit CVs. The selection criteria are not restrictive enough, but it is good that at least there are foreign observers to the process. Interviews should be broadcast live, as are, for example, the elections for the leadership of the Supreme Council of Magistrates in Romania (another “technical” sector in which people show however a very strong interest).
In the case of the tenders for imports of electricity, the Energy Community Secretariat prepared guidelines for the tender procedure. The Economy Ministry adopted an Order (4/2017) – which is not published in the Official Gazette, and in theory, not legally binding, though it is likely it will be implemented this time due to international pressures. The Order translates the guide, with the notable exception of the provision which says that participants must not have debts to suppliers. It seems plausible that the provision was omitted strategically to allow again the participation of Energokapital, the offshore company that siphons off money paid by the Moldovan consumers, while gas debts increase.
The government apparently wants to separate Transnistria’s gas debts (which are about 90% of Moldova’s debts for Russian gas) from the debts of the Right Bank. This is possible, as the two consumption regions are metered separately. However, 70% of the gas consumed in Transnistria is for the electricity production, meaning Cuciurgan and / or Energokapital; the gas consumed on the right bank goes through pipes that cross Transnistria; so it is unclear to what extent the gas might be cut only for Transnistria without leaving the Right Bank with no gas and in the darkness. Interconnections with Romania become even more urgent.
Breaking news: EU became interested to provide a grant for the Southern electricity interconnection, just as it did in the case of the gas pipeline (probably the amount would be 10% of the whole project value, as in the case of gas).
Even if the gas and electricity interconnections are partly funded by the grant, the construction would still require repayable loans. For gas it must be clarified how the value could be recovered, as the project is not economic (it will not recover the investment from tariffs, as it is mainly meant to provide a “just in case” alternative for the Moldovan consumers, for example, if Gazprom decides to turn off its gas supply). The loan repayment would be done either through taxes or through a balanced tariff across gas pipelines (cross-subsidy using same tariff for the interconnector and the national network). On electricity, the prices in Romania are far lower than in Moldova and there is actually strong interest from electricity producers in the congested Dobrogea area to have quick physical access to the Moldovan market. The project would therefore be economically viable. However, whether projects are financed through grants, private investments or loans, they would still make sense only if suppliers from the West really have access in Moldova on a level play with the incumbents. Similarly, if Moldova wants to attract private investment in domestic production of electricity, investors would want fair market rules and a powerful regulator to ensure everyone complies with the rules of the game. We thus come back to the first urgent priorities: the appointments in ANRE and competitive and transparent electricity tenders as a first signal that reforms in the energy sector are moving in the right direction.
We do not want to substitute one dependence with another, from suppliers in Eastern Europe with suppliers in the West. Moldova should be accessible to all players in equal technical and commercial conditions. Moldovan electricity system remains coupled with that of Ukraine for technical reasons. The two countries can either decide to connect together synchronously with the European system and install back-to-back stations on connections to the East, or connect asynchronously and need back-to-back stations on connections with the West.