February 28, 2008 / 12:09 AM / 10 years ago

Once militant, Romania's miners seek investment

PETRILA, Romania (Reuters) - Romanian coal miners once rampaged through Bucharest, storming parliament and toppling a prime minister. Their battle now is for investment.

<p>A miner gestures at the entrance of a hard coal mine in Lupeni, Jiu Valley, west of Bucharest October 24, 2007. Miners hope to attract foreign cash to the coal industry, which could help Romania, with its mix of coal, hydro and nuclear power, become a major source of energy exports to southeastern Europe. REUTERS/Mihai Barbu</p>

With gas and oil prices soaring, they see a chance to safeguard their livelihoods. The miners’ once-feared political power eroded as many mines were shut down in restructuring around a decade go.

Miners hope to attract foreign cash to the coal industry, which could help Romania, with its mix of coal, hydro and nuclear power, become a major source of energy exports to southeastern Europe.

Their worry is that new EU environmental standards, combined with government indecision on privatization, are holding them back.

Coal fires almost 40 percent of the European Union newcomer’s power and government documents show it will continue to do so until 2020 as renewable and nuclear energy take time to develop. Lignite, which is softer than hard coal and dug in open pits, accounted for over 90 percent of Romania’s total coal output of 35.1 million tonnes in 2006.

Major foreign companies have shown they are keen to join partnerships with the state to manage and upgrade coal-fired power plants to meet environmental targets, but analysts say government delays could put them off.

“Energy reform has slowed down and it is a pity,” said Doina Visa, a World Bank operations officer in the sustainable development sector.

“The worry is that privatization of coal-fired power plants has already been delayed. I don’t think the state has all the funds needed to make the upgrades itself and a lot of them may end up shut down.”

Miners in Olteanu’s Jiu Valley, in Romania’s mountainous southwest, suffered in the industry’s restructuring in the late 1990s: burning through severance pay, unemployment was rampant and their attempts to run small businesses often foundered, with doughnut shops typically appearing and then vanishing overnight.

Massive layoffs and environmental degradation left towns desolate and desperate. Many left, seeking jobs abroad. Two years ago, local people wrote “discarded town” on buildings in Petrila before officials painted it over.

But Bucharest’s centrist government hopes coal, in particular lignite, will help fire Romania’s growing energy needs and could turn into a much-needed source of exports.

PAST AND FUTURE

Romania has drawn up ambitious plans to boost power generation through privatizations -- listings, sell-offs and partnerships. Two more units are proposed at its nuclear power plant in Cernavoda.

But privatizations were put on hold last year when Prime Minister Calin Tariceanu announced plans to set up a mammoth energy company -- which he likened to Czech giant CEZ -- that would incorporate state-owned power producers and distributors.

From hard coal and lignite mines to the antiquated power plants that guzzle the coal, the entire industry needs to speed up improvements to keep up with Romania’s growing energy demand.

<p>A miner gestures at the entrance of a hard coal mine in Lupeni, Jiu Valley, west of Bucharest October 24, 2007. Miners hope to attract foreign cash to the coal industry, which could help Romania, with its mix of coal, hydro and nuclear power, become a major source of energy exports to southeastern Europe. REUTERS/Mihai Barbu</p>

The government, which has forecast power demand will rise by 3 percent annually, has drawn up plans to modernize and attract private partners for remaining viable mines, as well as ensuring they sign sustainable supply contracts with coal plants.

But it has ruled out privatization plans for the industry this year, saying it needs more time to analyze potential solutions. It plans to merge viable Jiu Valley hard coal mines with two power plants to create an energy holding similar to three highly coveted lignite firms.

Czech company CEZ, a major investor in Romania, has been vying for the lignite-fired energy holdings not far from Jiu Valley and has bid to upgrade and manage power plants. Also interested were Germany’s RWE and E.ON, Italy’s Enel and Spain’s Iberdrola.

The Czechs complain about Bucharest’s indecision over privatization, saying it complicates investment plans.

Other countries in eastern Europe are also dragging their feet on privatizing energy sectors, but analysts warn Romania stands to lose a potentially leading role in the region.

“Privatizations by definition are prone to delays because they are political animals,” said Bram Buring, analyst with Wood & Company in Prague.

“If you haven’t made the investments somebody else will make them ... and sell you the power.”

LAST CALL FOR CASH

In the hot damp tunnels 400 meters below ground in Lupeni, a Jiu Valley hard coal mine, miners wish each other ‘Noroc Bun’ -- good luck. However, many of them doubt their luck, despite officials’ hopes the industry will recover.

The need for funds is particularly marked for hard coal mines, which must become self-sustainable by 2010 when the government will end subsidies.

“If you asked me five years ago I would have said ‘shut down hard coal.’ Now, I am not so sure, given the oil and gas trend. Maybe some cash should be put in upgrades to boost productivity at the mines with good resources,” the World Bank’s Visa said.

Mining, once a thriving industry employing almost half a million people including jobs above ground, has in the period 1995-2000 cost Romania roughly $6 billion, mostly in subsidies.

Jiu Valley miners were once bound together by strong unions, a feared political force in the 1990s. Their violent riots have been blamed by many for Romania’s slow transition to democracy in the early years after the 1989 fall of communism.

In September 1991, thousands of miners stormed into Bucharest and invaded parliament, setting fire to government buildings and forcing reformist Prime Minister Petre Roman to resign. Former President Ion Iliescu denied engineering the protests to tighten his grip on power.

“If money is found, hard coal may have a future,” said Sorin Olteanu, a gaunt 42-year-old miner with shoulder-length hair and an earring.

Editing by Charles Dick and Sara Ledwith

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