|
| |
|
 Romania
the awakening giant of Europe |
 Company
Profile
 Activities
Production of lignite.
Strategy
Interview with
Mr. Gavril Baican,
General Director of CNLO
Question: Mr. Baican, there is no doubt that your company is a leader in your sector. Could you give to our readers a brief historical background of your company, as well as your professional experience?
Answer: Our company exploits the most important reserves of lignite in Romania, reserves which are estimated to be over 2 billion tones and this insures a continuity, at a production level of 40 million tones per year, for 50 years. Our technology is modern, comparable with the technology that you can find everywhere in the world. Over 80 % of our production is obtained in surface quarries and the rest of 20 % is obtained in underground mines. We insure about 40 % of the raw material used in the energy production in Romania. In the last 4-5 years, our company faced some structural changes and the year 1997 was for us the year of the deep restructuring of this company.
Q: Which are the main aspects of this restructuring plan?
A: The concentration of our activity only in those areas which are profitable, the separation of the main activity from the service activities, the transformation of all units in profit centers and the closure of the unprofitable mines. Besides these, the program also contains a modernization process and the acquirement of new technology for the profitable zones. I consider that in 1997, our company made the deepest restructuring in the entire state sector in Romania and if we keep in mind that we are talking about the mining sector, one can see that this was a very complex process, but which permitted us to work without Government subsidy and to obtain profit in 1997. If at the beginning of the year we had 51000 employees, today we have
21500.
Q: Was there any social protection for the people which were laid off?
A: Yes, it was a simple social protection method. When they were laid off, they benefited of compensation payments, after the English system. In the same time, about one week ago it was setup an agency for the development of the mining areas, which creates the premises for new work places outside the mining sector. Of course, the process is very complex, with social problems that affect me. In a normal economy, a director must run a company so that it can obtain profit. In the communist economy, the director of a company had to do everything: to obtain profit, to insure social protection and so on, and the local and central officers weren’t involved in the creation of alternatives. We hope that this creation of alternatives will be real by the setup of this development agency, because the pressure of the people continues to be on the management of the company.
Q: Which were the financial results of last year?
A: We have an approximate estimation of 5 million $ net profit, but we must keep in mind that the last year was a very difficult one for us, we realized this restructuring process and for about 8 months we worked with 51000 employees. We hope that this year we will do better.
Q: The restructuring process is not over. How will you manage to obtain the necessary funds for the new technology that you told us about?
A: The restructuring process is a permanent process of adapting the company to the demand. This year we must close 11 big mines and this supposes some costs. But, in the same time, we already started a modernization process for that equipment which is the proper one for the new conditions, to bring it to the technology of the year 2000. For example, we have a contract with Krupp for modernizing six excavators from their own production line. This process will cost us about 30 million DM and it will be realized half here and half in Germany. I said that the modernization process is not finished because gradually we will remove all the equipment which is no longer useful and I’m talking about excavators with small productivity, with big energy consumption. I would like to synthesize the effects of the restructuring in 1997 and to tell you that the work productivity grew with over 30 %, but this should be permanently improved.
In the same restructuring program, we simplified a lot the organizational structure and finished by having each unit like a profit center. We made also an evaluation of our costs and we saw that we obtained last year 12.2 $ per tone and the average in the world was 13.2. we also had some units which were over this average, but they are now in a closure program, they are not functioning anymore, but we still have to recover the equipment from them, to introduce those areas in the agricultural circuit and to improve the ecological environment. Our idea for the future, to resist in a market economy, is to insure the coal only for the power stations which are around us, because in the present we supply with coal power stations which are very far from us and this makes our costs very high. We will concentrate upon 6 power stations which are very near and which have a big installed power, about 4000 MW.
Another problem that we faced was the situation of our service activities, where there were about 12000 employees. In the present, the service activities are separated in 15 commercial companies and we want all of them to be privatized. Normally, this year they should be included by the State Ownership Fund on the privatization lists. Because of the organization in profit centers, what remained in the system can be privatized gradually on different forms, either together with the power stations, either separately.
|
Q: Which are your main advantages against your competitors and which are those competitors?
A: Our main advantage is the fact that we can obtain this product at a price which is below the import price. The second advantage is that near our quarries, at 1 to 20 kilometers, there are very big power stations. For example, in the center of the mining area, there is the Rogojelu power station, with 1600 MW power. The biggest power station in Romania is at about 20 kilometers, with a power of 2200 MW. Another advantage is the fact that these coal deposits can insure a constant supply, on long term, in any geo-political conditions.
The dependence of our country on the Russian methane gas is very high and to increase even more this dependence it would be a big risk. As in the past the power stations based on coal insured around 45 % of the energy, I consider that in a market economy, with a free price, this thing can be also realized for no on, on a long term basis. Another important thing is that the coal and energy fields insure more than 300000 work places. There is a study made by an English consulting company, IMC, which shows that the lignite quarries field must remain for a long time a source for electric energy production in Romania, because it can be profitable. Comparing with other mining fields, the lignite field is not subsidized. The measures which must be taken in this field and also for the power stations have to be oriented on the ecological aspects and in this area our expenses must be increased.
Q: What is your program to improve the ecological environment?
A: First of all, I want to tell you that in the last
40 years, since the coal is extracted from this area, 12000 hectares were affected, from which 2600 hectares of forest. During Ceausescu regime, parts of the Danube Delta were transformed into agricultural regions with money collected from the mining areas, so there weren’t money to take care also of the environment in these mining areas. In the last three years, we started a rapid and complex process for the rehabilitation of the mining areas. We had discussions with the representatives from the World Bank and they enjoyed the idea of giving us a credit for speeding up the pace of this process. We intend to rehabilitate about 500 hectares per year and this will have a double effect: the recovering of these areas and new work places.
Q: I have understood that you are using American technology in some areas of your activity and that you have relations with Cater-Pillar. What sort of relations do you have with them?
A: We have relations with several other American companies, like Motorola. Our entire IT system is based on Motorola technology. We have 50 thirty tones tip-lorries from Cater-Pillar and other equipment, and the entire contract with Cater-Pillar is of about 15 million $. In the future, as we will be able to step out of this financial blockage, we want to insure every quarry with the necessary equipment, especially from Cater-Pillar equipment, which we found to be very competitive.
Q: Our readers are interested in business opportunities. In which areas of your activity are you interested to attract foreign investors?
A: First of all for the modernization of the excavators, of the transport bands. The Romanian technology is different form the American one, because we developed our technology after the German system. If in the United Stated quarries there are big capacity tip-lorries, we have big capacity excavators and the transport is made on bands. To realize the size of our company, I would like to tell you that we have 360 kilometers of transport bands, with a width varying between 1.4 meters to
2.2 meters.
Q: As we say in the united States, contacts mean often contracts. What are you doing in order to encourage greater contracts?
A: We would probably obtain foreign contracts, but first of all we must define some strategies inside the country. We are waiting with impatience the restructuring of RENEL because our situation depends on what will happen at RENEL. We are a restructured company and RENEL isn’t. If the power stations, which are around us and which have lower costs than the average in RENEL, 32-34 $ per MW, will be separated, we will have an insured future and we will be able to realize a development program and a program for contacts with all the companies which can be involved in the modernization of our equipment. In 1992 we had a credit of 35 million $ from the World Bank and we used this amount of money for the modernization of 3 quarries, which are now profitable. After we will clarify our strategies for medium and long term, we will decide how we will develop our activity.
Q: I think that your restructuring went very well, you are very advanced, you are in a way a model for Romania and you are very interesting for the foreign investors.
A: In Romania, our restructuring program and our present situation are not very well known. I presented our situation to Mr. Minister Ciumara, two weeks ago, when he was here, but, unfortunately, we are judged in the ensemble of the mining sector, where the things are very complex. If we analyze only this area, we did exactly what we had to do according with the program made with the International Monetary Fund and the World Bank for 1997. For this year, we hope to start the privatization process, to be on the stock exchange market, even to find partners for forming joint-ventures, but all of these depend on what will happen in Romania. There are many foreign investors who would put their money in our sector, but for the moment they are staying back because of the present political environment in Romania.
Q: How confident are you in the future of Romania?
A: From my point of view, there is only one way: the restructuring and the privatization of all the activities. When we will have a political class who will put the interests of Romania before their own interests, the things will go on the right way, because there is economical potential, there are resources, there are big consumers and all we need is a coherent politic, focused on changes.
Q: Now, a more personal question. What has been your most satisfying personal achievement since you are General Director of this company?
A: The satisfactions were few, there were a lot of problems. My only satisfaction is the fact that I can hope that this company will resist in the future, because what has been done in the restructuring program certifies us a future and the measures that we have in mind will absolutely insure the competition on an open market.
Q: As a final question, what will be your final message to them?
A: I want to tell your readers to be confident in the human and material potentials of this country. We passed through a very difficult period of time in which the mentalities were changed by the communism.
For those who remained with this communist mentality it’s very difficult to change it, because the mentality changes are the most difficult to do. But, the young generation is coming and they will surely change the face of this country, who is a very interesting place for anybody. Before the war, Romania was a country with many American, English and German investments and right now we need support, because, on itself, Romania will not be able to make all the necessary changes. My opinion is that if serious business people would come here, the process through which we are passing right now would be easier. |
© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Romania
published in FORBES
Magazine's enriched with complementary information,
such as full interviews, detailed company files and more.
June 1 st 1998 issue
Developed by AgenciaE.Tv |
|
|
|
|
|
|
|
|
|
|
|
