Romanian Govt Won't Privatize Airline Tarom - Sources

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In the letter of intent drawn up in the previous evaluation, the Government pledged to seek a strategic investor for Tarom by end-2011, with a view toward full privatization when market conditions permit it. According to the sources, Romanian authorities and IMF officials have decided the airline will not be privatized, but have not yet agreed on the size of the package to be sold.

The Government will continue its programs to sell minority packages in Petrom (10%), Transelectrica (15%), Transgaz (15%) and Romgaz (15%).

As for national coal company CNH and Termoelectrica, authorities must separate viable activities from non-productive ones, before any privatization or termination decision may be made.

The restructuring and optimization of the other state companies will go ahead, but any action to reduce arrears will require discussions with the European Commission, to determine whether it constitutes state aid. This process must eventually lead to lower debts and losses for state-owned companies.

According to the previous letter of intent, the arrears must drop to 18 billion lei (EUR4.3 billion) by the end of the year.

The IMF will present its first evaluation of the follow-up deal on Monday.

(EUR1=RON4.1208)