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Cee money state firms hold back romanias economy


* Hydro power company highlights problems of state sector* Romania's struggling economy needs more investmentBy Luiza IlieBUCHAREST, Oct 26 Behind closed doors in June, Romania's biggest power producer surprised its only private shareholder by declaring insolvency. The move helped largely state-owned Hidroelectrica to ditch deals under which it sold the bulk of its output at below market prices, causing losses of $1.4 billion over 6 years and prompting an investigation by the European Commission. But the decision will do little to encourage the investment that Romania, ranked as one of Europe's poorest and most corrupt countries, needs to encourage industry and improve living standards. Hidroelectrica's minority stakeholder Fondul Proprietatea had to cut to zero the value of its 20 percent share, initially estimated at 3.3 billion lei ($936 million), or a fifth of its net asset value. Most foreign investment in Romania so far this year is lending between firms, rather than new funds, and the risks deterring local and foreign investors are unlikely to fade away while politicians are wooing votes for a December parliamentary election."The Hidroelectrica ... insolvency will solve some problems but create others - especially in investors' and lenders' perceptions," said Radu Craciun, deputy manager of private pension fund Eureko SAFPP. Five years after joining the EU, Romania remains its second-poorest member, struggling to reform its state-dominated economy and deliver basic services such as running water and indoor plumbing for all its citizens.

The International Monetary Fund, which is leading a Romanian aid deal, has long urged successive governments to privatise transport and energy firms, including Hidroelectrica, or appoint proper managers to boost efficiency and attract the foreign cash needed to unlock economic growth. Governments have faltered on both levels, repeatedly delaying privatisation and falling months behind on efforts to replace politically-appointed managers. DELAYED SELLOFFS Earlier this month, the leftist government scrapped the sale of indebted chemical plant Oltchim. Two preceding governments failed to sell two of Romania's best assets, copper miner Cupru Min and a minority stake in Romania's biggest oil and gas firm Petrom.

Minority listings in big energy firms like Hidroelectrica, nuclear power producer Nuclearelectrica and gas producer Romgaz have been repeatedly delayed, while the timing of a listing for part of gas grid operator Transgaz is unclear. Together with Petrom, these would generate just under 1 billion euros, according to estimates based on data from Fondul, which was set up to compensate Romanians whose assets were seized under communism and holds stakes in various state firms."Progress in this area would encourage investment but this is such a mountain to climb," said Daniel Hewitt, emerging Europe economist at Barclays Capital. "The government would need to set a bargain price at first to get investors."Romania's economy is seen growing by less than 1 percent this year. Foreign direct investment amounted to just 941 million euros in the first eight months, compared with a 2006 pre-crisis peak of roughly 9 billion euros per year.

"Romania remains one of the least economically developed members of the EU," the IMF said in a report this week. "The slow progress in restructuring inefficient firms severely hampers investment and growth."POORLY MANAGED Romania's only successful privatisation under the current IMF deal, a minority stake in power grid operator Transelectrica , has a return on equity estimate of just 2.2 for December 2012. That indicator of corporate efficiency is significantly lower than for most European utilities companies. Italy's power group Enel, for instance, has a 10.7 ROE estimate for this year. Data from independent watchdog the Fiscal Council showed Romania had 645 state-owned companies in 2011, accounting for only 6 percent of the economy but a third of all unpaid debts, or 28 billion lei ($7.9 billion). They employed close to 10 percent of workers, but owed unpaid taxes to the state worth 2.4 percent of GDP. The inefficient management of politically-appointed leaders is one of the main deterrents to investing in state firms. Fondul Proprietatea has recently complained over government delays in appointing private management for Hidroelectrica."Only a few state-owned companies are somewhat interesting," Eureko's Craciun said, "the main problem being the quality of corporate governance." ($1 = 3.5254 Romanian lei)

Do you need insurance for your drone


If a drone is on your holiday shopping list, be sure to check your insurance coverage before you crack open that instruction manual and take flight. Damage from a drone is a bit more complicated than handing your kid a baseball and dealing with the wreckage an errant pitch might cause to a window. There is no official tally of damage caused by drones, yet the roster of high-profile injuries includes musician Enrique Iglesias and Cleveland Indians pitcher Trevor Bauer. And there are internet lists galore, like a database of known U.S. incidents. (here)Even the pros can have problems. A drone operated by Brett Woods, a pilot who co-founded the drone company Aerial Concept Unmanned Systems, was supposed to climb 400 feet, but instead flew into the 27th floor of a building. Luckily, the apartment it breeched was unoccupied, so the damage was chiefly to the drone and the window. Business insurance covered the damage. But hobbyists and others who buy consumer-level drones cannot be so sure of what is covered if one of their flying devices goes rogue. WHAT'S COVERED

For the person who owns the drone, the prevailing insurance coverage would be your homeowners policy or your renters' policy. But not everyone has those. Only about 40 percent of renters in the U.S. have coverage, according to the Insurance Information Institute (III), a nonprofit trade group. The drone itself is covered as personal property, but it might not be worth a claim. The average deductible is $500, which is about what the popular the DJI Phantom 3 standard, with HD video camera, runs right now on Amazon.com. Coverage for damage caused by the drone depends on the circumstances of the accident, especially if negligence is involved, and whose property is damaged. "We evaluate every claim on its own merit," said Justin Herndon, a spokesman for All State, one of the top insurers in the United States. Damage to personal property caused by your own drone would fall under the basic coverage to your structure. However, homeowners insurance does not cover injuries to your own family or pets, according to Loretta Worters, a spokesperson for III. You would have to get coverage for injury through your medical insurance policy.

Coverage for bodily injury to somebody outside your family or for somebody else's property would fall under the liability portion of your homeowners policy. It could also protect you from lawsuits over privacy issues. If a drone drops out of the sky and damages your car (which sounds fanciful, but is actually quite possible), the damage is covered by the comprehensive section of your auto policy, subject to the deductible. Drones over 0.55 pounds are required to register with the Federal Aviation Agency. If the drone's owner can be identified, your auto insurance may file a claim under that person's home or renters policy, should they have one.

NEW POLICIES There are other ways to protect yourself, too. Some drone hobbyist clubs offer a group umbrella policy to members, for instance. A new company, Verifly (verifly.com/), provides on-demand policies for consumer drone enthusiasts and commercial users for about $10 an hour, currently approved in 45 states. The user simply geo-locates through an app. The policy covers a quarter-mile radius for up to $1 million of third-party liability and unintentional invasion of privacy. If known hazards are nearby - like a nuclear power plant or a stadium - prices go up. Verifly user David Baskwill signed up for coverage to film cross country races. "I thought to myself, it would be a good idea to have some protection," says Baskwill, a 57-year-old podiatrist from York, Pennsylvania. "The negativity is very high - and it will be until we all have drones," Baskwill says.