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August 17, 2022
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After a 967-day lawsuit energy traders lose challenge against Hidroelectrica’s insolvency procedure

After keeping the sentence pending on 14 January 2015 and postponing it 4 times, the Bucharest Court has rejected today as unfounded all the challenges filed by energy traders and labour unions against the decision to open Hidroelectrica’s insolvency procedure.

The challenge registered at the Bucharest Court under number 26502/2012 was initially rejected as deprived of interest through sentence number 6218, issued on 19 June 2013. The sentence was scrapped by the Bucharest Court of Appeals, which admitted on 25 February 2014 through decision number 459 the appeal filed by labour unions and energy traders and sent the case back to the Bucharest Court.

In the retrial, the Bucharest Court rejected as baseless the challenges filed by Alpiq Romindustries, Alpiq Romenergie, Alpiq AG and the Petrom Energy National Labour Union against the decision to open the insolvency procedure in Hidroelectrica’s case, a decision taken on 20 June 2012.

At the same time, the court has forced challengers Alpiq Romindustries and Alpiq RomEnergie to pay RON 29,469.05 to Hidroelectrica and RON 29,516.71 to the Property Fund in legal expenses.

Hidroelectrica became insolvent on 20 June 2012, owing more than RON 2.6 bln in debts outstanding for less than a year and RON 1.5 bln in debts outstanding for more than a year. When the insolvency procedure started Hidroelectrica was involved in 11 bilateral contracts signed with energy traders, contracts through which electricity was sold below production costs and at 50 per cent of the market price. Hidroelectrica was registering losses from historic investments and also from contracts for the technological upgrading of some production capacities, and half of its annual production was sold on the regulated market at a third of its production cost.

“It was a tough fight. The trial was arduous and obstinately delayed by the 3 Alpiq traders. They filed recusal motions, filed complaints against the judges, asked for the case to be transferred – absolutely all of them were rejected, countless postponement requests, evidence requested in ill faith and false registration requests.

On the other hand however the solution was predictable, because Hidroelectrica was truly in a desperate financial situation from which it could have been saved only through a set of drastic, correct and brave measures with immediate effect, measures capable of covering the losses of more than EUR 170 M registered in the 2011-2012 fiscal years. Restructuring the company and saving it from bankruptcy was not possible without denouncing the contracts with energy traders, or without renegotiating 487 disadvantageous contracts and identifying electricity sale strategies that would ensure profit for the company. By implementing a set of measures meant to optimize cost, flows and production process and to maximize revenue, Hidroelectrica registered a profit of EUR 202 M in 2013 and a record profit of approximately EUR 300 M in 2014, thus managing to lower its debt by 82 per cent, namely from RON 4.3 bln to RON 775 M.

The court’s decision confirms that declaring Hidroelectrica insolvent was a correct decision and it implicitly validates and consolidates all the measures taken by the Euro Insol trustee in bankruptcy, including the denouncing of the 11 bilateral contracts that caused financial losses of over EUR 1.1 bln. Admitting the challenge would have had catastrophic consequences for Hidroelectrica and for Romania. It would have sent the parties back to the situation registered prior to 20 June 2012. It would have upheld all the contracts denounced by the trustee in bankruptcy, some set to run until 2019, it would have cancelled all the company restructuring measures taken during the period of insolvency, with the irreversible consequence of bankruptcy,” Doctor of Law Remus Borza, Euro Insol practicing coordinator, stated.

Euro Insol and Hidroelectrica were represented in court by Borza & Associates and Stanescu, Milos, Dumitru & Associates, while the Alpiq companies were represented in court by Schoenherr & Associates.

 

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