BUCHAREST, July 21 (Reuters) - Romanian state-owned hydro power producer Hidroelectrica posted a gross profit of 509 million lei ($154.7 million) in the first half of the year, driven by cost cuts, despite falling market prices and a new tax on buildings, it said on Monday.
Hidroelectrica, the European Union state’s biggest power producer, was pushed back into insolvency for the second time earlier this year, and is being run by a court-appointed manager. The firm first had to declare insolvency in 2012 after severe drought and a string of loss-making contracts.
It underwent restructuring, cancelled the deals and exited insolvency late last year while turning a profit. But contract holders challenged their cancellation and a court ruling pushed the firm back into insolvency, where it is expected to stay until May or June 2015.
The firm said its profit was due to strict cuts in costs for wages and third-party service providers, as well as fewer interest rate costs, as the company’s indebtedness to banks fell to 2016 million euros at the end of June, from 841 million euros a year before.
The cost cuts offset a tax on special buildings introduced this year by the leftist government, which will shave 150 million lei from the company’s earnings this year. The tax slaps a 1.5 percent charge on the value of all buildings owned by companies, from oil wells to warehouses to electricity poles.
The firm also said its profit would be hurt by having to deliver more energy to the regulated market at prices fixed by the country’s energy regulator ANRE. The regulated price fell 8 percent on the year, Hidroelectrica said.
Under the terms of Romania’s 4 billion euros aid deal led by the International Monetary Fund, Hidroelectrica must sell a 15 percent stake on the bourse as soon as it exits insolvency. ($1 = 3.2899 Romanian lei) (Reporting by Luiza Ilie; Editing by Sophie Walker)