Who Captured the Moldovan Electric Power Industry

Another major European investor has left Moldova, and the supply and distribution of electricity in the country is now under the control of offshore structures. On April 12, Spanish energy company Naturgy announced the sale of its assets in Moldova. These are the largest companies in the country for the supply and distribution of electricity: Red Union Fenosa and Gas Natural Fenosa Furnizare Energie (members of the Gas Natural Fenosa group). These enterprises currently serve 900 thousand individuals and legal entities, distributing electricity to 2/3 of the country, including Chisinau. The Spanish investor came to Moldova in 2000 and has since invested more than $ 326 million in the renovation and modernization of Moldovan electricity networks. The official press release of Gas Natural Fenosa says positively that the sale agreement is concluded with the international group Duet Private Equity Limited based in London, which “has a wide range of investments in various types of assets and growth strategy in the region”. It also says that until June 2019 the control over the assets will be fully transferred to the buyer. Although the official sales price is not provided, the specialized resource gives the figure of 141 million euros. Expulsion of the investor If you look at the situation in which the company has been in the last three years, you can easily understand: the Spanish investor was purposefully forced out of Moldova. Suffice it to say that the sale price was half the amount that Gas Natural Fenosa has invested in improving the energy network of Moldova. The attack on the company began in mid-2016, when the National Agency for Energy Regulation (ANRE) of Moldova began to work on new methods for calculating tariffs. It led to a change in the procedure for reimbursement of expenses of operators in case of losses in networks by means of tariff. One stroke of the pen of Gas Natural Fenosa has significantly reduced the profit margins. Then the company signed an agreement with the Moldovan regulator on compensation of losses, but six months later the ANRE changed its decision and approved new amendments. Gas Natural Fenosa also had to pay for financial losses incurred in the period from 2012 to 2015 due to the leu devaluation and the delay in the approval of new electricity tariffs. Structures of the European Union stood up for the Spanish investor, but meetings of European diplomats with the leadership of the government, calls of the IMF and messages of international structures were ignored. Moldovan officials referred to the provisions of the new law on electricity, adopted in the summer of 2016, and talked about the priorities of consumers. In November 2017, the EU Energy Community Secretariat publicly criticized the amendments adopted in Moldova to the methodology for calculating electricity distribution tariffs, considering it a deliberate step that infringes on the interests of market operators. The latter was exactly Gas Natural Fenosa. The Energy Community Secretariat considered that these changes are contrary to the Energy Community legislation, doubting that an independent regulator as ANRE could make such a decision. At the end of 2017, the profit of Gas Natural Fenosa Moldova fell by half, and in January 2018 the Spanish press started talking about plans to sell the Moldovan company. ElEconomista newspaper wrote that the investor intended to ‘part’ with toxic assets in Moldova. It even gave the approximate cost of the transaction – 500 million euros. Gas Natural Fenosa first denied the information published in the Spanish media, but on February 7 confirmed plans for the sale. The company did not make claims to the authorities of the Republic of Moldova, and the intention to sell the business explained by the “new strategy of asset allocation and optimization of the business portfolio”. However, the diplomatic language barely concealed the true motives of the investor, who probably decided to stop fighting with the Moldovan political system and leave on favorable terms. However, serious investors were not going to buy the business, which the Moldovan officials turned from highly profitable to illiquid. Only a year later, after 19 years of work in Moldova, the Spanish group announced the sale of its “non-core asset” for an amount much less than expected. Offshore again? The deal itself, which is very important for Moldova, raises serious questions from experts. If you look at the buyer, you can easily draw parallels with the sale of other strategic companies and enterprises of Moldova, for example, Chisinau airport. Instead of the previously used and recommended by the European Union practice of attracting large and well-known foreign investors to Moldova, the authorities of the country shifted to little-known structures associated with offshore companies. At the same time, the sale of assets was preceded by the creation of unfavorable business conditions and a decrease in its value. The new owner of energy companies in Moldova is Duet Private Equity Limited. Officially it is an investment company, which is part of the international Duet Group, founded in 2002 by businessman Henry Gabay. The head office of the company managing large investment packages in Africa, Asia and Europe is in London. At the same time, the latest annual report reads that exactly Duet Private Equity Limited is a subsidiary company registered in Hong Kong. According to media, it is controlled from offshore in the Virgin Islands. Sale of Gas Natural Fenosa energy companies, apparently, is one of the first signs of the future redistribution of property, which previously wrote the experts of the RTA. Consistent forcing out of the European investor, unscrupulous ways to bring down the price of assets on the eve of the sale, sold through state institutions, leave no doubt: the main beneficiary of all such transactions is well known and is not in the Virgin Islands. Another strategic sector of the Moldovan economy comes under the control of the Moldovan oligarchy and now is unlikely to see new investments.