Termocom looks worse than in 2001

Analysis of Info-Prim Neo The heat distributor S.A. Termocom looks worse than in 2001, when it was declared insolvent. At least this conclusion can be drawn from the report of the heat distributor, presented to the special commission of the Chisinau Municipal Council, entitled to consider Termocom’s condition. The councillors started the research requested by the present administrator, Dionisie Antocel, who had warned the heating company was in a critical state. Thus, apparently, neither the Creditors Council, which after November 29th 2001 overtook the management of Termocom, to enable it pay off debts worth 1.1 mlrd lei, managed to improve the situation. The debt reimbursement schedule is neglected, and to the debt provided in the insolvency decision (1.1 mlrd lei) a new one in amount OF over 600 mln lei added, towards Moldovagaz, CET-1 and CET-2. And that’s but the beginning Termocom is in a precarious condition not only in terms of debts, but also in terms of technical capacities (the heat transporting grid.) Out of those 239.5 km of networks only 31.5 km have modern isolation. Yet, out of all heating networks (main, neighbourhood, hot water transporting) 70% are worn out. The administration explains the situation through the lack of money - yearly they build only 14-17 km of grid, instead of the required norm of 32 km. As a consequence, now 96.5% of the heating networks are badly thermally isolated, and the energy losses in the grid are rather high. At the same time, because of the worn state, only in 2005, there were recorded 519 breaks. The Termocom representatives say the situation could be otherwise in case the heating tariff had been adjusted to actual expenditures. The present tariff, approved of 7 years ago, hinders the company from putting money aside for capital investments. According to certain official calculations, as back as in 2002 the tariff should have been 301 lei/gigacalory, in 2003 – 331 lei and in 2005 – 352 lei. And as a result of the natural gas rise, the tariff should have amount to 370-380 lei this year that is 1.6 times more than the actual tariff of 233 lei. Not adjusting the tariff to the real expenditures causes the heating provider yearly losses of up to la 150 mln lei. As a consequence, in order to improve the technical situation, Termocom asks funds from the municipality: in 2006 – 32.8 mln lei, for 2007 – 26.7 mln lei, 2008 – 42.4 mln lei, 2009 – 42.1 mln lei and in 2010 – 25.0 mln lei. Insolvency procedure – a gaffe Concerning the increase of the tariff, the opinions are divided. Municipal councillor Oleg Cernei, a member of the special commission entitled to consider Termocom’s situation, believes the issue with the insolvency procedure was mistaken from the very beginning, as they went the way of the political conflict between the Government and the capital’s city hall. „Now it is very difficult to say whether the Creditors Council did it well, as the Commission did not have the possibility to make controls at Termocom or to employ the Financial management and intern audit Direction of the city hall to make an analysis,” Cernei says. As a result, more councillors say the information presented by Termocom had not been verified and, thus, is not credible. Oleg Cernei also points out the situation has got worse following the precarious management, a part of the guilt should be shared by the Council of Creditors. „Termocom cannot say the situation has got worse because of the small tariff, as it has not shown the Municipal Council any matter-of-fact calculations in this sense or a report on its financial situation.” Consumers are to be blamed On the other hand, the municipal councillor Mihai Severovan heading the special commission considers the situation has aggravated because the consumers do not fully pay for Termocom’s services. In this case, the company cannot cover up its expenditures and cannot function. That is why Severovan has voiced namely for adjusting the tariffs to the real expenditures. „The population who will not be able to bear the new tariff will submit an application to the city hall, and the Council will decide on helping them,” Severovan suggests. The debates regarding Termocom’s fate go on. On the other hand, in July this year the term for the insolvency procedure expires, and the Economic Court of Appeal is to decide upon prolonging the insolvency procedure or on returning Termocom under the Municipal Council’s management. Now, the only thing that can be said for sure is that Termocom’s fate is much worse than 4-5 years ago. Also there are no clear prospects both for the short and long terms regarding the one-million-people capital city in terms of insuring with thermal heating.