High spending Austrians keep flag flying

Newsroom 23/06/2008 | 16:38

The Austrians are here to stay, according to Walter Friedl, Commercial Counselor at the Austrian Embassy in Bucharest. They are now targeting greenfield businesses here, with the country expecting an EUR 7 billion investment from Voestalpine, an Austrian steel producer that plans to set up a plant in Romania and invest in the region.
Foreign investors have not always seen Romania as a safe place to set up a business. In the early 90s, countries in Eastern Europe were still not on the investment map. The Austrians were starting to find opportunities in Western countries – where the labor force and the local costs were getting more and more expensive – harder to come by, so the natural development strategy of Austrian businesses was to look east.
The first Austrian investments in Romania were in the sugar industry. The Austrians become major players in insurance, financing, oil & gas and other sectors. After January 2007, foreign investors started to show more interest in the country and spotted immediately the opportunity of the EU funds pouring into Romania for infrastructure and development projects. Friedl said that the EUR 30 billion of EU funds to be invested in Romania by 2013 will bring an intense trade exchange between the two countries.

Austrians dig major sectors: oil and gas, energy, heavy industry
After OMV became the majority shareholder in Petrom in 2004, the company saw approximately EUR 2.2 billion of investment by 2007, in order to support the modernization and development projects, according to Thomas Huemer, spokesman for OMV Group.
“Recently, due to the high crude context, Petrom marginally revised its strategic objectives for 2010 and increased the annual investment budget for 2008-2010 to EUR 1.5 billion. OMV is now taking its time over a major restructuring program at Petrom which is estimated to unfold its full potential by 2012, as the final restructuring investments in the refining business are scheduled for 2011.” The main directions OMV will take for Petrom, he added, are targeting exploration and production, comprising modernization of oil and gas production facilities, 3D seismic programs, reduction of production costs through the integration of the recently acquired oil field service activities from Petromservice Refining and the expansion of Petrobrazi refining capacity and installation of a hydro cracker.
Also, on OMV's agenda is the construction of 860 MW gas fired power plant at Brazi, following an investment of some EUR 500 million. OMV sees in Rompetrol a strong competitor on the Romanian downstream sector, which is a very fast growing and competitive sector, but the representative said the change of Rompetrol shareholder's structure had had no direct impact on the Romanian oil and gas market. In 2007, Petrom announced it had the largest investment budget in the Romanian energy sector, exceeding the EUR 3 billion allocated to support the company's development strategy by 2010.
The Austrians have been in charge of some of the biggest acquisitions in Romania's history, such as Erste buying BCR and OMV buying Petrom. And these could pale in comparison with a EUR 7 billion potential greenfield investment in Constanta from Voestalpine AG Austria, one of the largest European steel companies. Romania has been shortlisted as a potential investment location and a decision is expected towards the end of the year. Voestalpine is represented in Romania through its British subsidiary Voestalpine Elmsteel which produces steel tubes at a Satu Mare plant operating in Romania since 2004.

Real estate and construction join hands for Austrian investments
For real estate investments, Immoeast has been one of the most quoted names involved in local transactions. According to the real estate company Jones Lang LaSalle, the Austrian investment fund made up 73 percent of the real estate investment market in Romania, followed by the British and Irish funds, according to Charles Krick, associate director of JLL. Immoeast currently controls or is working on 21 real estate projects in Romania, according to reports. Its acquisitions continued this year with Victoria Park, an office building compound developed by Liebrecht & Wood in the Baneasa area. The transaction was worth some EUR 60 million, according to estimates.
Last year, the Austrian investment fund acquired shopping center Armonia Arad from RED Management Capital for EUR 78 million with the expected investment in the commercial center EUR 50 million. Immoeast took over 75 percent in Red Project One, the company developing the project in Arad. As one of the major shareholders in TriGranit, the fund indirectly controls the Esplanada project in Bucharest. Edgar Rosenmayr, chief investment officer at Immoeast, previously told Business Review, “The fund is looking more at retail, smaller shopping malls in smaller towns than the other cities where Immoeast made its first investments.”
He added: “I believe there is still potential for us to invest in Romania. However, the growing competition leads us to take a more cautious approach towards the market before going ahead with investments. The pace of investments might slightly slow down here, but we have not moved the focus away from Romania,” Rosenmayr said.Wienerberger, a major Austrian brick producer set up its first brick in Romania in 1998 through Wienerberger Sisteme de Caramizi and currently has 100 countrywide distributors. In May, the Romanian subsidiary of the company announced its third local investment in a brick plant 60 km from Cluj. Totaling an investment of more than EUR 25 million, Wienerberger's plant is the biggest factory in Romania, with a daily production of approximately 35 trucks, the equivalent of 12 houses' worth, company reps said. “The Tritenii de Jos plant, along with the ones from Gura Ocnitei and Sibiu, will help us manage better the Romanian market demand through national production,” said Daniel Catanas, member of the board at Wienerberger Sisteme de Caramizi.Returning to greenfield investment, Egger, the Austrian company providing wood-based solutions for constructions, started in 2007 one of the largest greenfield projects in Romania with EUR 210 million invested so far in the first construction stage at the company's wood plant in Radauti, Suceava county, which became operational in January.
“In addition to current production facilities, we are considering further extending the production and investing up to EUR 500 million. The final decision will be driven by the economic results of the existing facilities, market demand and the surrounding conditions (infrastructure, legal and political conditions),” said Mihai Sandru, commercial manager of the Egger plant. He added, “The Romanian furniture industry has a good growth potential but retail and building projects also show accrual rates. A lot of projects in the construction industry are ongoing. So we don't think that the market is diminishing, it's just the natural selection all projects have to go through. The sustainable ones will stay and the weak ones will not be realized.” The investment in the Radauti plant is estimated to happen within 10 years, according to Georgios Natsos, financial manager at Egger Romania.
Another Austrian group to make important investments in Romania is BauMit, the local subsidiary of BauMit Wopfinger. At the end of 2007, the group announced over EUR 30 million would be spent on greenfield production capacities in Bucharest and eastern and western Romania.
Some Austrian companies operating within construction and infrastructure, such as Strabag, have become the main contractors for infrastructure works in Bucharest or other real estate projects. In 2007, Strabag Bucuresti announced a merger with local infrastructure company Drumuri si Poduri Buzau, which has as its main shareholder Austrian firm Bau Holding Beteiligungs. The merger will deliver for Strabag an increase in its share capital and the takeover of Drumuri si Poduri. Also in 2007, Strabag acquired another construction company in Romania, Antrepriza Reparatii si Lucrari of Cluj-Napoca, for which it paid EUR 5.2 million. EUR 15.8 million of investments should be made in one year for development plus another EUR 500,000 of environmental-based investments, according to the company. Strabag owns shares in various Romanian companies through its subsidiaries, for example, 41.2 percent in construction company Grandemar Cluj.

Austrian banks flex their real estate muscle on local market
According to Raiffeisen Investment, part of the Austrian group Raiffeisen Zentralbank

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