Romania Infrastructure Report Q4 2009

We continue to forecast a fall in construction sector output in Romania during 2009. In fact, we have revised our forecast slightly this quarter, to a real contraction of 4.3% in construction output for the year as a whole, compared with the previous forecast for a 3.2% annual fall. Aside from concerns about the impact of the recession on the availability of public funds for infrastructure spending, this revision also reflects the effect of the recession on private business demand (including demand for office and warehouse space) and residential property demand.

For 2010, we continue to expect near zero real construction sector growth (0.2% for the year as a whole), as the recession - and the strain on public finances - will take time to ease, according to our core scenario.

This quarter we update our analysis of regional construction giant STRABAG SE and Transelectrica, the Romanian transmission and system operator. STRABAG, the parent company of STRABAG SE, is being weighed down by acquisitions made at the top of the market last year. Transelectrica is in a relatively good position, having continued to generate a profit in Q109, despite Romania entering a sharp recession during the quarter.

E.ON Romania announced that it will slash investments in electricity and gas networks in Romania by 26% to RON245mn (US$81.7mn) in 2009 compared with the earlier planned amount of RON331mn (US$110.4mn), reports NewsIn (June 2009). The company has taken this decision because of the ongoing global financial crisis. The company's earlier plans for 2009 included replacement of about 40% of its pipeline web, adding to the 850kms of pipeline that were repaired during the past four years, and to the 1,450kms that were replaced earlier.