"The supply chains of Habau Romania, disrupted by the war in Ukraine"

Recorded by George Marinescu
English Section / 4 martie

"The supply chains of Habau Romania, disrupted by the war in Ukraine"

Versiunea în limba română

(Interview with Karl Leidenfrost, Managing Director of HABAU Romania - one of the builders of BRUA)

Construction companies have faced numerous problems in the past two years following the illegal start of the war in Ukraine by the Russian Federation, among the most serious of which was the disruption of traditional supply chains that were located in the eastern part of the European continent.

That is why some of the companies that manage large infrastructure projects in the energy field had to reorient themselves to other areas of the globe in order to create new supply chains with the raw materials and semi-finished products needed to carry out the production activity and carry out the planned constructions.

Among the companies that, through the prism of the experience accumulated in almost 24 years of activity, quickly reoriented themselves in the market to ensure the necessary materials in terms of the continuation of infrastructure projects, is Habau Romania, which is one of the builders of the BRUA pipeline , but also of the gas interconnector between Serbia and Bulgaria.

Learn more about the difficulties and challenges of recent years, but also about the completed and ongoing projects from the interview I conducted with Karl Leidenfrost, managing director of the Habau Romania company.

Reporter: How did 2023 end for the company you lead? What were the estimates at the beginning of last year and what are the results at the end of last year?

Karl Leidenfrost: 2023 was a successful year for our company, with notable achievements in the energy infrastructure sector. We have contracted and delivered a considerable volume of local and regional projects and, although the financial year is due to close in March, we estimate a turnover of between euro100 and euro200 million. The results obtained were in line with the proposed growth objectives, consolidating Habau Romania's position as a regional leader in infrastructure construction for the oil and gas industry.

Reporter: If you were to do a retrospective of the Habau Romania company, what are the most important projects carried out in the strategic infrastructure in the almost 24 years since its establishment? In all this panoply of projects, where would you place the works carried out on the BRUA pipeline?

Karl Leidenfrost: In its 24 years of activity, Habau Romania has accumulated a vast portfolio of large-scale projects, playing a key role in the development of the European strategic energy infrastructure. Among the projects of regional importance, I mention the construction of the BRUA gas corridor (Bulgaria-Romania-Hungary-Austria), a project that gave us the opportunity to grow exponentially. Our company was the main constructor for two of the three segments of the natural gas transport pipeline on the territory of Romania, totaling almost 300 kilometers, working in partnership with the main construction companies in Romania. As part of the BRUA project, we also built the Jupa compression station, which has the role of compensating for pressure losses in the natural gas transportation process. Recently, we completed another strategic project in the Balkan region, namely the construction of the gas interconnector between Serbia and Bulgaria. By carrying out these projects, Habau Romania contributed to the opening of eastern markets to alternative sources of natural gas, such as those from the Caspian Sea region, thus improving regional energy security.

Reporter: What projects have you carried out nationally?

Karl Leidenfrost: In addition to the regional projects listed above, we have been involved in numerous local projects that have contributed to the development of natural gas transport infrastructure in Romania. In the north-east of the country, we participated in the Transgaz project, building the Gherăiesti compression station, improving the gas supply in the region and ensuring the transport capacity to the Republic of Moldova. We also built the Sighetu Marmaţiei - Vişeu de Sus - Borşa gas pipeline, which connects approximately 45,000 users to the network. This gas pipeline is to be connected to the Câmpulung Moldovenesc - Vatra Dornei pipeline, facilitating the connection of gas transport systems from Maramureş with those from Bucovina. In Arad County, we implemented an intelligent gas distribution system in the Socodor, Graniceri and Pilu areas, equipped with advanced technologies for operational safety and efficiency, including smart metering systems. I also mention the Romgaz project in the Merii area, Ilfov county, which involved the construction of a primary treatment plant for natural gas by separating the liquid fraction. In the current economic context, the project is of strategic importance for Romania, as it supports the growth of domestic natural gas production.

The supply chains of the Habau Romania company, disrupted by the war in Ukraine

Reporter: Your company operates in a sensitive sector, where some impact was felt following the illegal aggression initiated by the Russian Federation in Ukraine. The impact we're talking about is supply chains. Have you experienced supply chain issues with the required materials, and if so, how did you overcome them?

Karl Leidenfrost: Ukraine and Russia play key roles in the global supply chain for the oil and gas industry, providing essential raw materials such as steel. The conflict in Ukraine and sanctions against Russia have significantly disrupted the supply chain. Delays in the delivery of raw materials have triggered a cascading effect on the availability of finished products such as pipes, which are critical to our sector. Faced with these challenges, our strategy was to turn to suppliers in Turkey, to supply us with the materials needed for the projects carried out. For EU-funded projects that were already underway, the options to change suppliers were limited. Therefore, in these situations we have renegotiated the existing contracts with our partners, to ensure the completion of the works on the stipulated terms.

Reporter: How does your company adapt to the targets set by the European Commission through the Green Deal? What percentage of the company's activity is based on the use of renewable energy and what measures have you taken to reduce your carbon footprint and meet your environmental protection targets?

Karl Leidenfrost: The Habau Romania company is actively engaged in fulfilling the environmental objectives established by the European Green Pact, by integrating the principles of sustainability in all activities and operational processes. In recent years, we have implemented a number of measures aimed at reducing the company's carbon footprint. We have replaced old machinery with new, more energy efficient electrical equipment. In addition, we started the process of modernizing the vehicle fleet by purchasing new, less polluting vehicles. Aware of the importance of the transition to green energy, we are actively exploring opportunities in the field of renewable energy to diversify and expand our expertise. Our interests focus on solar, wind, hydrogen, hydropower and biofuels. We are convinced that the future will bring significant European investments in Romania for these necessary and sustainable energy sources. At the same time, we must bear in mind that gas and oil will continue to be essential pillars of the global energy sector. The coming years will be defined by major projects that will aim to interconnect large industrial areas to regional transport mains, ensuring the diversification of gas supply sources. In this context, our mission is to innovate and deliver projects at the highest quality standards, taking into account both current needs and long-term development prospects. As our slogan says "We build today, with tomorrow in mind".

Reconstruction of Ukraine's strategic infrastructure - major opportunity for the Habau Romania company

Reporter: I saw that you are a regional company, with activity not only in Romania, but also in Serbia, the Republic of Moldova and Bulgaria. At the end of the conflict in Ukraine, do you intend to be one of the companies that will contribute to the reconstruction of the strategic infrastructure in that country? What development plans do you have in the medium and long term?

Karl Leidenfrost: Our company's medium and long-term strategy is focused on growth and diversification. Our main objective is to expand operations at the regional level, targeting large-scale projects not only in the countries where we currently operate, but also in other countries in the region. Ukraine is certainly an area of interest once the conflict is over, given that this complex process will require a concerted effort and solid expertise in the field - resources that our company possesses and is prepared to mobilize. Also, our medium and long-term plans aim at the development of the company, through two main directions: the initiation of new business lines and possible acquisitions of local companies, relying on the financial support and vast experience of the HABAU Group. We have recently started to expand our activity in the field of civil construction, environmental projects and water and sewerage distribution and we have set out to develop our expertise in these areas.

Reporter: A strong company also needs strength skilled work. How are you doing in the current conditions of the labor market in Romania? Have you turned to foreign workers to supplement your required workforce? What financial effort on the company's part was involved in bringing in these workers and qualifying them?

Karl Leidenfrost: The shortage of qualified personnel represents a major challenge for the HABAU Group, affecting our operations both in Romania and in the other countries where we operate. Faced with this challenge, we have also turned to foreign workers, but we are aware that importing labor from outside the EU is not a long-term solution. Therefore, we work on several fronts to attract, train and retain specialists in our field.

"Globally, the transition to green energy and the need for decarbonization influence market demand and supply"

Reporter: What is your opinion on global and regional trends in the energy sector and their implication on completing projects on time and within approved budgets?

Karl Leidenfrost: Global and regional trends in the energy sector can have a significant impact on strategic infrastructure projects if they are not properly managed. First, rising raw material prices, energy and labor costs have a negative impact on our industry. The time between submitting a bid and awarding a project is generally quite long, while quotes for materials or equipment can change quickly. In this volatile context, the industry requires greater flexibility from the government and customers, both public and private, to adjust prices according to market developments. Globally, the transition to green energy and the need for decarbonization are influencing market demand and supply, while also setting new efficiency and sustainability standards for developed projects. In this framework, our projects must not only be economical and cost-effective, but also aligned with the sustainability objectives of the European Union. To successfully navigate these challenges, we take a flexible and proactive approach, investing in innovation, technology and strengthening strategic partnerships. We also place a strong emphasis on rigorous planning and risk management, ensuring that our projects are delivered on time, on budget and meet the highest standards of quality and sustainability.

Reporter: Research, development, innovation are the terms we hear more and more often in recent years, to which Artificial Intelligence has recently been added. What does the Habau company do to keep up with the current technological trends and remain competitive in the market at a high level?

Karl Leidenfrost: As a leader in the field in which we operate, we always strive to stay abreast of current trends in our industry and adopt new innovations. The HABAU Group has been in existence for over 100 years, so it is in our DNA to adapt to market developments to maintain our standards. Habau Romania annually allocates a significant investment budget, oriented both to the implementation of new technologies and to the improvement of employees and the development of teams. In 2021, we took an important step towards digitization, becoming the first company in the region to implement the new RISE with SAP solution. This project was coordinated by my colleague, Roxana Gureanu, Managing Director of Habau Romania. The new integrated IT system improves our process efficiency and reporting capability, giving us increased resilience and increased agility in adapting to an ever-changing market.

Reporter: What are your estimates for the end of this year?

Karl Leidenfrost: In 2024, we expect to maintain and even surpass last year's performance, given the increased European demand for investments in gas interconnection and storage facilities. We currently manage euro230 million worth of projects, which are either ongoing or recently contracted.

Reporter: Thank you.

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