Strategy for the transition from coal of the Valley

Analysis of the key challenges and opportunities in the

March 2020

– Draft –

SRSS/SC2019/119 SRSS/2018/01/FWC/002

Strictly private and confidential

Foreword

The project “Strategy for the transition from coal of the Jiu Valley” is funded by the European Commission via the Structural Reform Support Programme (DG-REFORM) and implemented in collaboration with PricewaterhouseCoopers under Contract number SRSS/SC2019/119 between PricewaterhouseCoopers EU Services EESV and the Structural Reform Support Programme (DG REFORM – the Client) of the European Commission, signed on 23 October 2019, having as Beneficiary the Ministry of European Funds (MEUF).

This report was prepared by PricewaterhouseCoopers Management Consultants SRL (hereinafter “PwC”). It represents the second deliverable and was drafted for the purpose of presenting the current challenges and opportunities in Jiu Valley, covering political and administrative, economic, social and cultural, technological and environmental dimensions.

In identifying and substantiating the challenges and opportunities we have used public information sources as well as information resulting from stakeholder interviews conducted by PwC in the period January-February 2020 in Jiu Valley. The sources for data and information are indicated below the charts, graphs and tables and in the footnote. The information was considered accurate and reliable and has not been verified separately by us.

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Table of Contents 1. Foreword ...... 2 2. Table of figures ...... 5 3. List of acronyms and abbreviations ...... 7 4. Summary of key findings ...... 8 5. Political and administrative ...... 12

Political and administrative state of play ...... 13

Political and administrative challenges ...... 20 Perception of administrative power...... 20 Public investment limitations ...... 20 EU funds accession challenge ...... 20 Urban vs rural areas ...... 21

Political and administrative opportunities ...... 22 Collaboration towards a common goal ...... 22 Proximity as a plus ...... 22 The National Development Bank – a source for additional funds ...... 22 6. Economic and environmental ...... 23

Economic state of play ...... 24 Economic growth ...... 24 Industry and energy ...... 28 Infrastructure ...... 29 Business environment ...... 31 Tourism ...... 42 Agriculture, livestock farming and forestry ...... 45 Investments ...... 47 Culture and entertainment ...... 50

Economic challenges...... 51 A traditionally mono-industrial area ...... 51 Poor area in a rich region ...... 51 No specific incentives to attract investors ...... 51 Local farmers not being part of value chains ...... 52 Other mining: quartz – a legal issue may preclude its economic exploitation in the medium term ...... 52 No integrated tourism concept for year-round activities ...... 52 Natura 2000 sites around the Valley may restricts certain large-scale activities ...... 53

Economic opportunities ...... 54 Environmental and cultural diversity as well as traditions are a good basis for tourism development ...... 54 Development of local attractions ...... 55 Creation of a local brand for goods and services ...... 56 Small industry and crafts may complement tourism development ...... 56 Development of transport infrastructure will benefit economy of the Valley ...... 57 Mining – but different resource: quartz (I) ...... 58 Energy grid development may attract interest from renewable energy companies ...... 58 Low-priced real estate may attract workforce to the area ...... 58 Urban regeneration - basis for promotion of cities in the Valley ...... 59 Other investment from the public sector: relocation of certain regional institutions in the Valley ...... 60 Cheap land and existing buildings with utilities may be of interest for SMEs ...... 61

Environmental state of play ...... 62 Air Pollution ...... 64 Water Pollution ...... 65 3

Soil Pollution ...... 65

Environmental challenges ...... 67 Land reclamation ...... 67 Ponds from ash ...... 67

Environmental opportunities ...... 68 Alternate use of mines ...... 68 7. Social and cultural ...... 69

Social and cultural state of play ...... 69 Demographics ...... 69 Workforce ...... 73 Education ...... 75 Healthcare ...... 78 Social services ...... 79

Social and cultural challenges ...... 81 People migration negatively affects all socio-economic areas ...... 81 School dropout in early stages of education affects the future of workforce in the Valley ...... 81 Local education not adapted to the local labour market ...... 81 Limited social services leave vulnerable population unattended ...... 82 Professional reconversion of miners – a traditional challenge ...... 82 Slow pace of change leads to scepticism and resignation ...... 82

Social and cultural opportunities ...... 83 The number of employable persons may be of interest for investors ...... 83 Higher education is available in the Valley ...... 83 Interest to preserve local traditions may complement the brand of the Valley ...... 83 Ethnic and religious diversity may support social inclusion ...... 83 8. Technological ...... 84

Technological state of play ...... 84

Technological challenges ...... 94 The labour intensity challenge ...... 94

Technological opportunities ...... 95 Investing in technology – a possible driver for growth ...... 95 Mining – but different resource: quartz (II) ...... 95 Robotics research centre – an opportunity to provide high skilled labour opportunities in the Valley ...... 96 9. SWOT analysis ...... 97 10. European best practices ...... 99

Best practice sharing ...... 99

Case studies ...... 100 Poland (Silesia) ...... 100 Spain (Aragon) ...... 101 Netherlands (Limburg) ...... 101 France (Nord-pas-de-Calais) ...... 102 Germany (Essen) ...... 103 Slovakia (Horna Nitra) ...... 104 11. Annex ...... 106 Business environment state of play ...... 106 Sites available for new investments ...... 111 4

Table of figures

Table 1 – Population, size and budget of main municipalities in Jiu Valley ...... 13 Table 2 – Elected mayors of Jiu Valley 1996-2016 ...... 14 Table 3 – Financial aid allocated through the Regional Operational Program 2014-2020 by region ...... 16 Table 4 – Maximum state aid intensity by region ...... 17 Table 5 - Companies involved in agricultural activities in Jiu Valley ...... 45 Table 6 - Companies involved in livestock farming in Jiu Valley ...... 45 Table 7 – Surface of the municipality by categories of use* ...... 46 Table 8 - Institutions for infants and disabled adults in Jiu Valley as of 30 September 2019 ...... 80

Map 1 – Jiu Valley hospitals ...... 14 Map 2 – Map of roads - West Region ...... 19 Map 3 – Map of the railway network - West Region ...... 19 Map 4 – Straja Ski resort ...... 42 Map 5 – Example of an x-country MTB route ...... 43 Map 4 – Natura 2000 sites surrounding the Jiu Valley ...... 53 Map 5 – 3D view of the Jiu Valley...... 54 Map 6 – The perimeter of the Comarnicel 1 fortress ...... 55 Map 9 – Jiu Valley’s geographical location ...... 62 Map 10 – Map of Jiu Valley's mines, as of February 2020 ...... 64 Map 11 - Coal power plant Paroseni – Key stats ...... 65

Chart 1 – Jiu Valley’s 2018 GDP split [EUR M] ...... 27 Chart 2 – County’s 2018 GDP split [EUR M] ...... 27 Chart 3 - No. of companies per municipality ...... 31 Chart 4 – No. of companies, Jiu Valley vs. ...... 32 Chart 5 – No. & % of companies with positive operating result (positive EBIT), per municipality ...... 32 Chart 6 – No. & % of companies with positive operating result (positive EBIT), Jiu Valley vs. Hunedoara County .. 33 Chart 7 – No. and % of profitable companies after tax, per municipality ...... 33 Chart 8 – No. and % of profitable companies after tax, Jiu Valley vs. Hunedoara County ...... 34 Chart 9 – Petrosani economic snapshot, 2018 ...... 35 Chart 10 – economic snapshot, 2018 ...... 36 Chart 11 – Vulcan economic snapshot, 2018 ...... 37 Chart 12 – economic snapshot, 2018 ...... 38 Chart 13 – economic snapshot, 2018 ...... 39 Chart 14 – economic snapshot, 2018 ...... 40 Chart 15 – Hunedoara county economic snapshot, 2018 ...... 41 Chart 16 - Evolution of libraries in Jiu Valley between 1995-2018 ...... 50 Chart 17 - Evolution of population in each municipality from Jiu Valley between 1992-2019 [‘000] ...... 69 Chart 18 - Evolution and forecast of population in Jiu Valley (values in ‘000) ...... 70 Chart 19 - Evolution of natural movement of population in Jiu Valley between 1992-2018 ...... 70 Chart 20 - Evolution of net migration rate in Jiu Valley between 1992-2018 ...... 71 Chart 21 – Jiu Valley population by age and gender (1992 vs 2019)...... 72 Chart 22 - Evolution of workforce in Jiu Valley between 1992-2018 [‘000] ...... 73 Chart 23 - Evolution of unemployed persons in Jiu Valley between 2010-2019 ...... 74 Chart 24 - Comparison of average net salaries between Hunedoara, West Region and in 2018 [RON] ... 74 Chart 25 - Evolution of students by level of education between 2011-2018 ...... 76 Chart 26 - Evolution of graduates by level of education between 2011-2017 ...... 77 Chart 27 - Evolution of teachers by level of education between 2011-2018 ...... 77 Chart 28 - Evolution of medical staff in Jiu Valley between 1995-2018 ...... 78 Chart 29 - Evolution of ratio between population and medical staff from 1998-2018 ...... 79 Chart 29 - Companies per industry in Jiu Valley [2017, no.] ...... 84 Chart 30 - Active companies per industry at Hunedoara county level [2018, no.] ...... 85 Chart 31 – Aninoasa: Top 10 companies by turnover [2018] ...... 86 Chart 32 – Lupeni: Top 10 companies by turnover [2018] ...... 87 Chart 33 – Petrila: Top 10 companies by turnover [2018] ...... 88 5

Chart 34 – Petrosani: Top 10 companies by turnover [2018] ...... 89 Chart 35 – Vulcan: Top 10 companies by turnover [2018] ...... 90 Chart 36 – Uricani: Top 10 companies by turnover [2018] ...... 91

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List of acronyms and abbreviations

‘000 Thousand ADR Agency for Regional Development AID Associations for Inter-Community Development, Bln. Billion C Central CAGR Compound Annual Growth Rate EBIT Earnings Before Interest and Tax ERDF European Regional Development Fund EU European Union EUR Euro GDP Gross Domestic Product Ha Hectares HEC Hunedoara Energy Complex HV High Voltage JVR Jiu Valley Region Km Kilometres kV kilowatt LV Low voltage M Million m Meter MV Medium Voltage NE North-East NW North-West ROP Regional Operational Program S South SE South-East SME Small to medium-size enterprise SW South-West W West

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Summary of key findings

Jiu Valley Region (JVR) is singled out as one of the most sensitive socio-economic regions in Romania in terms of growth, living standards and prospects, given the long-term consequences of the abrupt industrialization process of the past and the industrial restructuring policies implemented after the fall of Communism which impacted the entire Hunedoara County. As it operated under a mono-industrial structure, hard coal mining industry was the driving force behind most economic activities in JVR. The collapse of mining and the corresponding drop in revenue had a significant impact on the region’s overall employment level, JVR recording a lower share of effectively employed people and a higher dependency ratio than the rest of the country. The large number of lay-offs which occurred as consequence of mine closures brought Jiu Valley in a state of severe economic and social decline, especially as efforts made at different stages to revive the economy of the region and boost people’s morale by providing the needed social support had limited success. The 2008 economic crisis entangled developments which significantly deepened the already existing discrepancies between Hunedoara and the neighbouring counties of Timis, Arad and Alba. Consequently, transition from the mono-industrial times proves to be a complex and slow process with significant challenges for all stakeholders. Nevertheless, JVR exhibits enough potential for economic revival and social development of its communities, as well as natural beauties which could truly change the stand and future of this region, if appropriately and consistently capitalized on.

This report summarises in the draft PEST and SWOT analyses the current challenges which proved to be obstacles in Jiu Valley’s endeavours towards development and progress so far, coupled with the opportunities that may arise from the existing local realities on four dimensions: a) political and administrative, b) economic and environmental, c) social and cultural and d) technological. The key findings derived from this analytical approach will be used to identify (in direct consultation with all local stakeholders) and build on the main pillars for Jiu Valley’s future development, representing the main grounds for drafting the Strategy for Social, Economic and Environmental Development of the region and the Action Plan intended to include realistic and feasible projects in line with Jiu Valley’s utmost social and economic needs.

The report was drafted based on data and information collected through several channels, including: • Desk research covering existing documentation for the analyzed sectors/dimensions, studies and strategies addressing the situation in JVR, past sectorial assessments and evaluations, statistical data, policy documents; • Desk research of most recent available macroeconomic data (national, central and local/regional statistics); • Desk research on other available sources/studies on coal regions in transitions and concrete lessons learned from similar projects conducted in other European countries; • Face-to-face interviews with the relevant stakeholders as presented in the Stakeholders Engagement Strategy, with particular focus on those at local level as well as written questionnaires; • Site visits in all 6 JVR cities, including 2 mines. The desk research was conducted based on the available statistical data some of which latest record dating few years ago, on information and official documents provided by Hunedoara County Council, the city halls of the 6 cities and other central institutions, as well as on public official documents as drafted by central and local governmental authorities. The collected data has not been checked for accuracy but compared in-between the available sources and during interviews with knowledgeable stakeholders. The interviews conducted in the field consisted of both face-to-face meetings and written questionnaires sent via email, tailored to the profile of each category of stakeholders. They were divided into topics/areas and key economic and social segments to receive relevant qualitative information from the entire pool of stakeholders. We have collected their views and recommendations on the current situation in JVR, the challenges and opportunities as seen by each of them. The following categories of local stakeholders were considered suitable for this exercise: • The 6 mayors of Petrosani, Lupeni, Aninoasa, Vulcan, Petrila and Uricani and the President of the Hunedoara County Council; • Central governmental officials (Ministry of EU Funds); • The most prominent NGOs active at local level in JVR (members and to-be members of Coalition “Valea Jiului Implicata”), as well as environmental NGOs (Bankwatch, Greenpeace etc.); • Representatives of the local business community (ACIVJ), as well as some small local businesses;

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• Representatives of business associations/potential investors knowledgeable about and already engaged in some activities related to the Jiu Valley (e.g. RWEA); • Representatives of the local cults; • Academia representatives (e.g. the Petrosani University, the Energy Policy Group); • Local media representatives.

The research conducted to perform the PEST analysis led to key findings on each analysed dimension, particularly when it comes to the potential opportunities that authorities in Jiu Valley could develop if benefitting from the necessary funding and consistent governmental support for successful implementation. We hereby summarize few relevant findings to be further considered and developed within an integrated strategic concept: Political and administrative dimension The very stable administrative governance of Jiu Valley, in light of the long-lasting tenure of the mayors – regularly elected during the last years - in each of the 6 cities, has ensured continuity and constancy in an environment impacted by economic concerns and social distress. But the low local budgets and insufficient funding received so far proved to be an important obstacle hindering development of projects which could have brought some changes in the overall landscape and environment of Jiu Valley. At the same time, poor infrastructure and the absence of job opportunities are two important factors still blocking attraction of qualified workforce to the region. Although small cities facing similar challenges, disparities between the 6 cities have emerged in time, being furthermore shadowed by the higher urban profile of Petrosani due to the educational and healthcare facilities it provides. Nevertheless, Jiu Valley authorities are determined to join efforts and bring a change for the future of their cities and communities. The Memorandum signed by the 6 mayors in Brussels last year and the mechanisms developed by the European Commission to support coal regions in transitions pave the way for successful cooperation to achieve ambitious goals that seemed difficult to achieve so far. Speaking through one voice to spread common messages and working together, aside from political competition, for building and implementing an integrated concept of the Strategy targeting the balanced development of the Valley from East to West are only two of the consensual endeavours embraced by the 6 mayors. Economic and environmental dimension With a GDP per capita of around EUR 3,400 in 2018, Jiu Valley stands out as one of the poorest regions in Romania. With a mining history spread over three different centuries, the region’s strength became its largest weakness today as coal exploitation activity is expected to cease by 2030. Investments are subject to the general fiscal regime, without any particular incentive, while minimum operational conditions (good infrastructure, purchasing power, qualified labour force) are hard to find, so that attracting new businesses to Jiu Valley continues to be a challenge. There are, however, economic opportunities on which the 6 cities could capitalize for economic recovery should they pursue the development of infrastructures (roads, utilities, educational, health, social assistance) and the business community focus on services and production of various goods. Both public and private entities could benefit from a different fiscal regime than that of Region West they are now subject to. Given the exceptional natural environment of the Valley, many touristic activities such as winter sports and mountain biking have potential to develop. The region needs an integrated touristic concept built on the most effective assets that could secure all-year round revenues and bring profit to the local communities in a sustainable way. Agritourism, equestrian, cultural or speological tourism, coupled with potential valorization of certain industrial/mining sites, are only few areas worth considering. Roads and railway modernisation could raise the attractiveness of the area for new investors and tourists. Indirectly, a better infrastructure would support the development of arts and crafts and the real estate market, especially for weekly rentals to tourists visiting the Valley. Social and cultural dimension In early 90s, Jiu Valley had a population of about 140,000 inhabitants and over 45,000 employees in 15 mines and quarries. They were providing about 22m tons of hard coal per year, securing the internal fuel demand for two coal- fired power plants, Mintia and Paroseni. Today there are 4 operational mines, two of which are expected to cease their activity by 2020. The restructuring programs led to the dismissal of about 40,000 employees. If considering the horizontal industry personnel dedicated to the mining activity (about 20,000 people), unemployment of over 50% of the active population was generated in the area in a very short period of time.

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The massive exodus of population from the region over the past 22 years led to changes in population structure by age, as young people chose to leave Jiu Valley in search of better living opportunities. This declining trend in the number of students and teachers has a significant negative impact on the development of economy, hindering progress in research and development. The labour market highly concentrated on mining activities does not provide for enough employment opportunities in other sectors, especially for the young ones. However, there might be enough labour force willing to work should job opportunities emerge. There are also “young” retired persons (a result of the specific retirement conditions from the mining sector) and their willingness to be re-trained is yet to be established (there was no consensus on this topic among the interviewed stakeholders). Healthcare infrastructure, services and medical staff are yet to be developed to reach higher quality standards, while social services need significant investment to overcome the insufficient day to day-care. The ethnical diversity and local traditions could support the development of the region, especially in the touristic as well as crafts and trades sector. Technological dimension From a technology perspective, Jiu Valley’s economy relies predominantly on labour-intensive industries as a result of both the coal phase out measures and the diversification attempts implemented in the last decade; the latter being focused mainly on sectors characterized by low technological intensity, low technical skills and limited investment capital. Investments in both new technologies for existing companies and new high-tech businesses (e.g. IT&C) could address the current low degree of technological development and ultimately contribute to a fast-paced growth of the local economy. Capitalizing on existing quartz resources in the Şiglău-Uricani area in the medium and long term would also fuel economic growth and development of high-tech industries. Considering the quartz resources’ wide utilization, size, quality as well as the estimated value (~ USD 40-45 million), local administration should explore the opportunity for developing a new high-tech industry that utilises quartz in Jiu Valley - e.g. by attracting investors interested in manufacturing locally high-tech applications of quartz. Another initiative that could positively impact Jiu Valley’s technological development is the establishment of a robotics research centre in Petrosani, focused on research and development of robotics for a variety of fields of application (e.g. security robotics, production and consumer etc.), in partnership with the local University.

The SWOT analysis integrates the key findings of the PESTE exercise, separating the intrinsic values and difficulties of JVR (i.e. factors which policies cannot change, being characteristics of the area) from the extrinsic elements which can affect positively or negatively the development of JVR and which can be influenced by the future policies and programmes to be implemented in the Valley. As such, we identified three major levels of interventions: • A community level i.e. a basic level which aims to build the basis for socio-economic development and addresses the most stringent community issues such as: urban regeneration (including urban networks), social and educational facilities, transport infrastructure. These investments are to be made by the public sector and will offer a development platform for business and people development. • A business level which aims to attract large investors to the area, help the expansion of the existing ones, as well as encourage local entrepreneurs/SMEs to build on their traditions and local resources (crafts and trades). The businesses will generate revenue for the area. • A people level i.e. interventions aimed directly at people: education, re-skilling through vocational schools in line with the labour market requirements, through focused training programmes as well as new curricula in the tertiary education to build on the specializations which are specific to the area; job counselling and increased employability; care for vulnerable persons. The interventions aim to prevent labour force migration.

In preparation for the main deliverable of this project – the Strategy for Social, Economic and Environmental Development – analysing European trends and lessons learned from other regions in transition is deemed appropriate for calibrating actions in line with best practices implemented in countries sharing synergies with Romania (such as Poland or Spain), but also in more advanced countries (such as Germany) where attracting foreign investors or enhancing rapid privatization of the former mining facilities could well

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serve as example and potential models to be imported and adapted to the Romanian realities and regulations. The final chapter on European best practices includes highlights of some relevant case studies from Poland (Silesia), Spain (Asturias), Netherlands (Limburg), France (Nord-Pas-de-Calais), Germany (Ruhr) and Slovakia (Horna Nitra). They reflect opportunities of development in various sectors, being relevant for the level of development and the adequacy related to the general specifics and economics of the respective regions. Three of these countries are considered for the study visits to be organized at a later stage in this project as “exchange of experience” in support of the Romanian authorities when implementing the strategy and the projects that will result from the present effort tailored for Jiu Valley. These best practices mirroring concrete types of projects represent a preamble to an upcoming deliverable related to the pipeline of projects that will be developed for Jiu Valley, being relevant to highlight the following key aspects: • Projects should support the core objectives of the region in transition and not focus on a key sector such as energy/renewables • There should be a balanced approach and distribution between economic and social projects • Good quality projects in line with the local needs and objectives have to be developed to secure successful approval for funding. To this end, the challenges and opportunities as identified and presented in this report will be subject to a thorough and detailed selection that would allow for defining the relevant pillars and key areas for development tailored to Jiu Valley’s realities. This report is not final, neither exhaustive. It represents the draft Analysis of challenges and opportunities that will be subject to consultations with the members of the Steering Committee for further input and fine tuning. The key findings and conclusions to be drawn in the final refined document will be presented to the other categories of stakeholders in Jiu Valley as consultations at local level will begin for identifying the sectoral pillars on which the Strategy will be built.

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Political and administrative

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Political and administrative state of play

Jiu Valley is a micro-region in Hunedoara county, located between the Retezat and Parang Mountains. It consists of 3 cities, Petrila, Uricani and Aninoasa and 3 municipalities (in Romanian – “municipii”) - Petrosani, Lupeni and Vulcan1. Officially, the micro-region does not have rural areas, as the rural area within Jiu Valley has been incorporated within the municipalities or the cities, thus being considered urban. The most notable municipality of the region is Petrosani, with the largest population and an annual budget larger than the ones of all other 5 regions combined. Nonetheless, the budgets of these localities are rather modest and generally cannot cover all the financing needs for the development of the community.

Table 1 – Population, size and budget of main municipalities in Jiu Valley

Municipalities Cities / Localities within Population 2018 Size Budget 2019 Petrosani ● Dalja Mare 41,843 195.56 km² EUR 39,754,910 ● Dalja Mica ● Pestera ● Petrosani (residence) ● Slatinioara Vulcan ● Dealu Babii 28,253 87.31 km² EUR 8,235,467 ● Jiu-Paroseni ● Vulcan (residence) Petrila ● Cimpa 24,417 308.68 km² EUR 10,174,587 ● Jiet ● Petrila (residence) ● Rascoala ● Tirici Aninoasa ● Aninoasa (residence) 4,555 33.61 km² EUR 1,726,692 ● Sateni village ● Viforata village ● Catunul Valea Sasului Lupeni ● Lupeni (residence) 26,201 77.73 km² EUR 5,764,351 Uricani ● Campu lui Neag 9,531 251.41 km² EUR 11,018,402 ● Uricani (residence) ● Valea de Brazi Source: National Institute of Statistics, Population on 1 July 2018; The Local Development Strategy of the Valea Jiu Micro Region, pg. 17; data provided by town hall websites

1 Collectively, we will refer to the 6 as “cities” 13

Map 1 – Jiu Valley hospitals

Source: Google maps Petrosani hosts the only university within the area, the closest alternative being in Targu Jiu, 54 km away. At the same time, Petrosani provides more healthcare facilities - the hospital has 657 beds, 12 wards and 5 compartments, whereas Petrila benefits from the external section of the Emergency Hospital Petroșani has a hospital with 70 beds, 3 wards and compartments, Vulcan has a hospital with 110 beds and 7 compartments and Lupeni has a hospital with 175 beds, 4 wards and 2 compartments. The only 2 private clinics within the area, Affidea and Medlife are located in Petrosani, providing an extensive range of diagnostic imaging services and laboratory tests, this being the only option for residents living in this area. Furthermore, Vulcan, Petrila, Aninoasa, Lupeni and Uricani fall under the constituency of Petrosani courthouse. In terms of administration, long- term continuity of the mayors in their official positions is a significant characteristic as population in Jiu Valley tend to re-elect the mayors they are familiar with.

Table 2 – Elected mayors of Jiu Valley 1996-2016

Elections Petrosani Vulcan Petrila Aninoasa Lupeni Uricani 1996 Schreter Giurgiulescu Paducel Ilie Botgros Ilie Napau Ion Suciu Carol Vasile Gheorghe % of votes 74.26% 76.04% 71.86% 60.50% 84.22% 54.65% 2000 David Hodor Petru Paducel Ilie Botgros Ilie Resmerita Suciu Gheorghe Cornel Gheorghe % of votes 62.45% 71.57% 51.28% 54.02% 63.39% 56.20% 2004 Schreter Ilie Gheorghe Paducel Ilie Botgros Ilie Resmerita Buhaescu Carol Cornel Odagiu Danut % of votes 72.42% 59.15% 51.32% 53.51% 68.16% 58.13% 2008 Iacob-Ridzi Ilie Gheorghe Paducel Ilie Botgros Ilie Resmerita Buhaescu Florin-Tiberiu Cornel Odagiu Danut % of votes 60.97% 62.70% 52.17% 60.77% 56.53% 78.60% 2012 Iacob-Ridzi Ilie Gheorghe Paducel Ilie Dunca Resmerita Buhaescu Florin-Tiberiu Nicolae Cornel Odagiu Danut % of votes 65.38% 58.73% 31.53% 38.47% 48.50% 67.66% 2016 Iacob-Ridzi Ilie Gheorghe Jurca Vasile Dunca Resmerita Buhaescu Florin-Tiberiu Nicolae Cornel Odagiu Danut % of votes 49.24% 52.65% 51.24% 74.13% 27.31% 80.15% Source: Data published by the Permanent Electoral Authority 14

This is the case in Petrosani, where the mayor was re-elected twice, Vulcan, where the mayor was re-elected three times, Lupeni (5 mandates) and Uricani with the same mayor since 2004. Governance continuity for long periods of time has been mirrored in the implementation of local strategies and the development of projects, these mayors having a good understanding of the local specifics and changes at local level. The areas within Jiu Valley face challenges in reaching strategic objectives, from lacking the required support for a stable transition and economic development, to difficulties in accessing the appropriate financing that would ensure a gradual and efficient evolution. Besides, most of these regions lack the appropriate infrastructure to attract qualified labour force, as well as to train knowledgeable individuals which could potentially stimulate the economic output of the region. Jiu Valley has been struggling to acquire the financing required for its development, as reflected in the Jiu Valley Strategy plan. Certain aspects have been identified as threats by the local municipality, emphasizing the insufficient funding to develop the appropriate infrastructure: Petrosani2 • lack of financial resources to achieve the necessary investment objectives; • lack of a sustainable urban mobility strategy, impacting the development of transport infrastructure; • lack of public networks (e.g. gas, water) in Parang touristic area; • unclear regulations of the land ownership rights; • lack of public-private partnerships; • the difficulty of connecting the proposed networks in the Parang area to the city networks; • difficulties in developing productive industrial branches in the absence of adequate transport infrastructure and direct connection to the transport network.

Petrila3 • limited financial resources of the local budget; • insufficient land and space to be made available to investors; • lack of access road to Dobraia touristic area; • total lack of utilities networks in the Dobraia area; • weak cooperation for the development of tourism between the cities of the Jiu Valley.

Lupeni4 • limited funding sources for the local private initiatives. Hunedoara county is part of the Region West, classified as developed, along with -Ilfov, which leads to a reduced grant/state aid intensity; • lack of association initiatives at local level and in the Jiu Valley micro-region; • reduced financial resources that do not allow for an integrated approach of investments at the level of the whole territory, from a co-financing point of view.

Uricani5 • insufficient county financial support; • insufficient local budget for co-participation in financing programs; • lack of adequate infrastructure, especially roads for easy access to touristic areas; • lack of tourism infrastructure; • lack of utilities in touristic areas; • advanced state of degradation of the neighbouring roads both in the city and in the component localities Valea de Brazi and Campu lui Neag; • lack of infrastructure and utilities (water, sewerage, waste, gas, internet, cable) in the component localities Valea de Brazi and Campu lui Neag; • lack of technical channels for utilities (to allow for rapid intervention in case of emergency); • deficiencies in the water supply system.

2 https://www.primariapetrosani.ro/wp-content/uploads/2015/09/PDLMP-2014-2020_Partea-III_Analiza-SWOT.pdf 3 http://www.orasulpetrila.ro/wp-content/uploads/2014/07/strategie-actualizata-2016-2020-.pdf 4 https://primarialupeni.ro/wp-content/uploads/2019/09/STRATEGIA-DE-DEZVOLTARE-A-MUNICIPIULUI-LUPENI.pdf 5 Strategia de dezvoltare durabila a orasului Uricani 2015-2020 15

Vulcan6 • delays in the process of programming the European funds at national level and implicitly in launching the calls for project proposals for the 2014-2020 programming period, leading to temporary blocking of some infrastructure projects initiatives; • weak absorption of European funds for infrastructure and their disengagement, with effect on the volume of works financed; • insufficient funds allocated at national, county or donor level to meet the infrastructure development needs.

An additional obstacle is that Jiu Valley is part of Hunedoara, a county in West Region, the second most developed region in Romania. Nevertheless, in 2017 the GDP per capita in Hunedoara county was approximately half of that of the West Region, which shows the disparity between the Hunedoara county and the other counties in the West Region. Consequently, the budget allocated through POR (Regional Operational Program) 2014-2020 is smaller when compared to the rest of the regions.

Table 3 – Financial aid allocated through the Regional Operational Program 2014-2020 by region

Allocated budget for 2014-2020 National Region % by ERDF through ROP (EUR M)7 co-financing (EUR M) Bucuresti-Ilfov 340.9 402 *8 Central 663.0 781.7 14.33% North-East 810.1 955.2 17.51% North-West 639.4 753.9 13.82% West 544.5 642 11.77% South-West 553.8 653 11.97% South 728.2 858.6 15.74% South-East 697.5 810.6 14.86% Total 4,977.4 5,857.0 Source: ARD West Region (Agency for Regional Development West Region, ADR Vest in Romanian), “The financing opportunities of the Regional Operational Program (ROP) for the period 2014-2020” The value of non-reimbursable funding for the projects within POR is determined as a percentage of the eligible value of the eligible projects, to be covered by ERDF (European Regional Development Fund – FEDR in Romanian) and the state budget. The state-aid intensity in the West Region is lower than intensity for other regions, which means that companies and public sector players are required to cover a larger part of the required funding from their own sources. This sometimes precludes such players from accessing state aid. This is valid for SMEs as well (in West Region, SMEs are required to contribute 55% of the eligible cost, as opposed to 30% required by SMEs from the other regions).

6 Strategia de Dezvoltare a Municipiului Vulcan 2014-2020 (updated in 2015) 7 https://www.adrvest.ro/attach_files/Conf_POR_17_09_2014.pdf 8 *Note: The Bucharest-Ilfov region has a direct allocation as it is more developed 16

Table 4 – Maximum state aid intensity by region

Maximum The category in Bucuresti-Ilfov NE SE S SW W NW C state aid which the Bucuresti Ilfov intensity applicant falls/ Development 2014- 2018- 2014- region/ Period 2014-2020 of applicability 2017 2020 2020 of the intensity Maximum% of the Large company eligible 50% 50% 50% 50% 35% 50% 50% 15% 10% 35% value of the project Maximum% of the Medium eligible 60% 60% 60% 60% 45% 60% 60% 25% 20% 45% company value of the project Maximum% of the Small and eligible 70% 70% 70% 70% 55% 70% 70% 35% 30% 55% micro company value of the project Source: Ministry of Regional Development, Public Administration and European Funds, Operational Program 2014- 2020 – General conditions for accessing funds When analysing the proposed budgets for the 2014-2020 strategies of each of the six municipalities of Jiu Valley, one can observe that the funding received is far beneath the sum required. For example, to accomplish the strategic objectives described in the Action plan 2015-2020, Uricani authorities estimated it would require ~EUR 21 M for the development of the infrastructure alone. The funding received amounted to only EUR 5.5 M as follows: • Urban regeneration of Uricani city, Hunedoara county funded total value of EUR 2,372,5929 from POR 2014-2020; • Energy efficiency of the housing blocks located on 1 December Street and Aleea Trandafirilor, Uricani city, Hunedoara county, financed from ROP 2014-2020 - total value EUR 949,862; • Energy efficiency of housing blocks located on 1 Mai street, Revolutiei street and Sterminos street, Uricani city, Hunedoara county funded from ROP 2014-2020 - total value EUR 675,733; • Urban regeneration - former administrative headquarters EM Valea de Brazi, financed from the ROP 2014-2020 - total value EUR 612,949 ; • Energy efficiency of public buildings, Uricani city, Hunedoara county, financed from ROP 2014-2020 - total value EUR 974,261.

Another example is Petrosani, which estimated that approx. EUR 62 M would be needed to cover the costs related to the infrastructure. The projects financed received a funding of EUR 4.4 M distributed as follows10:

• Rehabilitation of the mining museum building and museum arrangement with the aim of preserving the cultural heritage, financed from ROP 2014-2020 - total value EUR 1,042,709 (EUR 21,063 own contribution); • Increasing the energy efficiency of the apartment buildings on 1 Decembrie 1998 street, Aviatorilor street, Avram Iancu street and General Dragalina street in Petrosani municipality to help reduce CO2 emissions, financed from ROP 2014-2020 - total value EUR 1,872,416 (EUR 936,466 own contribution); • Increasing the energy efficiency of the apartment buildings on Carpati street, Viitorului street and Avram Iancu street in Petrosani municipality to help reduce CO2 emissions, financed from ROP 2014-2020 - total value EUR 1,026,277 (EUR 625,993 own contribution);

9 http://orasuluricani.ro/proiecte-finantate-din-por-2014-2020/ (note* the annual exchange rate used for 2019 was provided by BNR:4.7452 RON/EUR) 10 https://www.primariapetrosani.ro/proiecte-investitii/proiecte-cu-finantare-europeana/in-derulare/ 17

• Increasing the energy efficiency of the apartment buildings on Pacii street and O Iosif street to help reduce CO2 emissions, financed from ROP 2014-2020 - total value EUR 494,824 (EUR 254,438 own contribution). The energy transition and economic development of Jiu Valley can be facilitated by the municipalities, approaching every objective as a common goal. Working as an entity instead of separate bodies, the 6 regions in scope may expedite the implementation of projects, offering each other support, engaging at every step of the process and collaborating in order to find the best solution that fits all. Considering the recent actions of the governing bodies of the six municipalities within Jiu Valley, grounds for a strong partnership have already been set-up. The Jiu Valley municipalities set up 3 AID (Associations for Inter-Community Development, ADI in Romanian), being now aligned in terms of transportation, waste management, water supply and sewerage service as follows: AID of Transportation11 • Responsible for “Green Line Jiu Valley”, a project with two components approved in 2019 that oversees the establishment of a green line of electric buses between Petrila, Petrosani, Aninoasa, Vulcan, Lupeni and Uricani; • 26 electric buses will be purchased, a depot will be set up in Vulcan municipality, 112 public transport stations will be built and modernized, along with 34 charging stations for electric buses and 2 electric car charging stations; • At the same time, 4 road sections in Vulcan, Lupeni and Petrosani will be rehabilitated; • The total value of the project amounts to EUR 9.6 M, with a 2% co-finance rate through ROP funding.

AID of Waste Collection12 • Beginning with 2018 the waste collection, sorting, transport and storage service in the Jiu Valley is managed by one operator for all 6 municipalities; • The area is serviced by the Vulcan sorting unit and a sorting unit along with a transfer station in Petrosani; • The project covers the entire Hunedoara country with a value of 57.5 B financed through SOP (Sectoral Operational Program, POS in Romanian) environment with a 25% own finance rate.

AID of Water and Wastewater Systems13 • The project “Modernization of water and wastewater infrastructure in Hunedoara County (Jiu Valley) - 2014-2020” financed by the EU aims to rehabilitate and extend the water distribution pipes and ensure the supply of clean drinking water for the inhabitants in the Jiu Valley area. • The infrastructure serves the urban areas of Aninoasa, Lupeni, Petrila, Petrosani, Uricani and Vulcan; • In total, 69.6 km of water distribution pipelines will be rehabilitated. Of these, 9.2 km in Petrila, 18.4 km in Petrosani, 7 km in Uricani, 17.1 km in Lupeni, 16 km in Vulcan and 1.9 km in Aninoasa. • Regarding the wastewater systems, the project envisages the rehabilitation of 47.4 km of main and secondary sewage pipes, of which 7.4 km in Petrila, 11.1 km in Petrosani, 12.8 km in Lupeni, 7.2 km in Vulcan, 2.5 km in Aninoasa and 6.4 km in Uricani. Five wastewater pumping stations will be built, two of which will be built in Petrosani and Lupeni, and one in Uricani. • The total investment amounts to EUR 104 M, while the EU contribution through the Cohesion Fund is EUR 61 M as part of the Operational Program "Large Infrastructure" for 2014-2020.

Considering the above, the 6 cities have created the foundation for unity, transforming what can be seen as 6 different entities into one single compact region known as Jiu Valley. The idea of connectivity is further sustained by the road and railway infrastructure, which facilitates the transition between the 6 cities, allowing locals to travel in-between them with great ease. The roads cutting across them are fairly direct.

11 http://www.cjhunedoara.ro/documente/hotarari/2019/03%20HOT%20SCAN%2015%20FEB%202019/HCJH%2029.pdf 12 http://www.adideseurihd.ro/db/media/blogs/informariadi/Cofinantare_Proiect.PDF?mtime=1421743161 13 https://ec.europa.eu/regional_policy/ro/projects/romania/water-and-waste-water-infrastructure-modernised-in-romanias-jiu-valley 18

Map 2 – Map of roads - West Region

Map 3 – Map of the railway network - West Region

Source: http://www.regiuneavest.ro/economia-regiunii-vest/infrastructura-de-transport/ The national road DN66 crosses Petrosani for 10 km14. It then splits into DN 66A, a 27-kilometre branch of the national road DN 66 that connects the cities of Petrosani, Vulcan, Lupeni and Uricani15 and DN 7A which connects Petrosani to Petrila.16 The main railway communication path is represented by the electrified double line 202 -Filiasi, with a total length of 202 km, crossing Petrosani.17 In Petrila the railway communication routes are represented by the coal transport lines from Lonea mine. Initially it was a forest railway that was transformed during communism into an industrial railway. The line is 5.5 km long and runs down the slope from Mina Lonea to Petrila, crossing Jiet river.18

14 https://www.primariapetrosani.ro/wp-content/uploads/2015/07/STATUT-MUNICIPIUL-PETROSANI.pdf 15 https://en.wikipedia.org/wiki/Uricani 16 http://www.orasulpetrila.ro/wp-content/uploads/2019/08/statut.pdf 10 https://www.primariapetrosani.ro/wp-content/uploads/2015/07/STATUT-MUNICIPIUL-PETROSANI.pdf 18 https://info-petrila.ro/2019/09/27/calea-ferata-ingusta-si-trenuletul-bad-muskau-germania/ 19

Political and administrative challenges Perception of administrative power

The administrative power in Jiu Valley is unevenly distributed Petrosani has been traditionally known as the informal capital of Jiu Valley, providing the only university, the only courthouse, the largest hospital and the only private clinics within Jiu Valley. Moreover, the entertainment options exceed those of the other 5 municipalities by far. The only theatre within the region is in Petrosani, along with a selection of entertainment premises such as bars, casinos and a cinema. All these make it difficult for the other 5 municipalities to compete with Petrosani, especially as they do not receive enough financing to even reach the socio-economic level of Petrosani. Under the circumstances, Petrosani is expected to attract labour force and revenue from the neighbouring municipalities, providing amenities that cannot be found in the vicinity of the others.

Continuity vs change in administration

In general, local leaders are re-elected by the community for several mandates, even up to 20 years in a row The tendency within Jiu Valley has been to keep the same administration over long periods of time. Despite the governance continuity of these cities, there are difficulties in achieving development goals as growth is limited from a socio-economical point of view.

Public investment limitations

Public investments are “deficient”, challenged by Jiu Valley’s being part of the more developed West Region Each of the cities within Jiu Valley faces the challenge of insufficient financial support as one of the main obstacles in the economic and social development of the region. Furthermore, as Jiu Valley is part of the West Region, even when accessing EU funds, the companies that operate in this region are required to contribute with a larger part of the eligible costs than their peers in other regions. Many companies that cannot meet this requirement are precluded from accessing any type of financial aid.

EU funds accession challenge

Local administrations have rather limited capabilities in attracting EU funds and implementing EU funded projects given their limited size and skilled personnel The staff employed by the mayor's office who is directly involved in investments activities and development of internationally funded projects and public acquisitions is undersized when compared to the overall number of employees in the city hall. In Petrosani, 10 out of 164 employees manage all internationally funded projects. Similarly, Petrila has 10 out of 265 employees with the same responsibilities. Lupeni and Vulcan have allocated only 8 employees, 7 employees respectively, while Aninoasa reported only 4 who manage all activities related to finance, accounting, acquisitions and investments. In Uricani, all EU funded development projects are handled by 2 out of 66 employees.19

19 Town hall websites 20

Staffing shortages may lead to failure in obtaining the needed funding for project implementation for several reasons: • many projects end up being rejected, given the fact that they are poorly written; • approved projects are poorly implemented, and the eligible costs cannot be reimbursed; • in the case of approved projects, the financing contract cannot be signed due to the inability to meet the co- financing requirements.

Urban vs rural areas

There are no rural areas Jiu Valley consists of the six cities, all having gained the statute of urban areas. Even though most of them have elements that would be attributed to rural areas, they operate as urban ones, being hindered from accessing assistance for certain activities specific to rural areas, provided through the National Program for Rural Development (PNDR in Romanian), especially subsidies for livestock and crops.

21

Political and administrative opportunities Collaboration towards a common goal

There is willingness to work together to implement EU funded projects for 2021-2027 to achieve growth On July 16, 2019, in Brussels, the representatives of the six administrative units of the Jiu Valley negotiated and signed an agreement to optimize their approach for the development of the region. Based on this Memorandum, the six mayors committed to work together through the energy transition and economic development, aligning their strategic goals, as well as engaging all public and private organizations within their own jurisdiction to contribute towards these goals. This collaboration yields potential benefits for an efficient transition from a coal-based economy to a more sustainable economic model, whilst ensuring the effective use of limited resources and a consistent and unanimous way of addressing each of the objectives within the strategy.20

The regions within Jiu Valley are accustomed with working together The municipalities in Jiu Valley have already established a precedent for collaboration and cooperation, working altogether in 3 main infrastructure areas: transportation, wastewater collection and distribution, through 3 AID (Associations for Inter-Community Development, ADI in Romanian).

Proximity as a plus

Distances between the municipalities are relatively small and crossed by an important road and a railway: people are used to commuting easily between the Valley cities for work, healthcare or fun It is ordinary for the population in every city within Jiu Valley to regularly travel to any other city in the region. Many people working in Petrosani live in other areas of Jiu Valley and many have relatives across different cities within the region. There is an identity of the Jiu Valley, a communion of behaviour, ideas and an understanding that people are part of the entire region, not just the municipality they are settled in.

The National Development Bank – a source for additional funds

The future setting-up of a National Development Bank would support the financing of the area, complementing the EU funds and the state budget Romanian authorities are working on setting up a National Development Bank in Romania, similar to the models developed in other EU Member States such as Poland, with the aim of providing direct or indirect financing, as well as technical assistance to certain categories of beneficiaries to mitigate market failures and narrow financing gaps. The bank's main target of beneficiaries will be the SME’s; however, it will also target:

• public long-term investments: ✓ municipalities (including investments in social and education infrastructure) ✓ entities operating in four sectors: energy efficiency in multifamily housing, transport and healthcare infrastructure; agriculture; research, development and innovation (RDI); Jiu Valley could benefit of such support for accessing funds otherwise hardly obtained, while ensuring a faster and more efficient allocation of financial resources and consequently shorter time for the implementation of projects that require financing.

20 2019. Minister of European Funds, Memorandum of Understanding between the six administrative units of the Jiu Valley 22

Economic and environmental

23

Economic state of play Economic growth Established in late 1998, West Region is one of the 8 Development Regions in Romania and includes Arad, Caras- Severin, Hunedoara, and Timis counties. It reached significant economic results above the national average, second after the Bucharest-Ilfov Region. Chart 1 - GDP per capita by development regions [‘000 EUR]

Source: National Institute of Statistics, TEMPO_CON103H_21_2_2020

Economic area \ Year 2012 2013 2014 2015 2016 2017 North - West Development Region [EUR M] 5,816 6,218 6,662 7,108 7,792 8,947 Center Development Region [EUR M] 6,414 6,734 7,015 7,545 8,242 9,112 North - East Development Region [EUR M] 4,188 4,503 4,648 4,935 5,301 6,020 South - East Development Region [EUR M] 5,708 6,437 6,774 6,903 7,233 7,904 South Muntenia Development Region [EUR M] 5,082 5,651 6,366 6,395 6,910 7,401 Bucharest - Ilfov Development Region [EUR M] 15,607 16,981 17,547 19,462 20,204 22,218 South-West- Development Region [EUR M] 5,036 5,304 5,389 5,842 6,213 7,133 West Development Region [EUR M] 7,045 7,480 7,624 8,396 9,195 9,899 North - West Development Region [EUR M] 5,816 6,218 6,662 7,108 7,792 8,947 Center Development Region [EUR M] 6,414 6,734 7,015 7,545 8,242 9,112

Source: National Institute of Statistics, TEMPO_CON103H_21_2_2020

24

However, Hunedoara County has a considerably lower GDP per capita compared to the Region it is part of. The chart below illustrates the difference between the two: Hunedoara’s 2013 GDP per capita was only 67% (EUR 5,188) of West Region’s GDP per capita. Four years later, the percentage decreased to 57% (EUR 5,839 in Hunedoara vs EUR 10,173 in West Region).

Chart 2 - Hunedoara and JVR GDP per capita [‘000 EUR]

Source: National Institute of Statistics, TEMPO_CON108D_21_2_2020

West Region has an accelerated growth in absolute terms as well, which is not the case of Jiu Valley, given its lack of economic activity following the mine closures initiated in 1990s’. The latest official data shows that Hunedoara makes up for 17% (EUR 3,020 M) of the total GDP in the West Region. Chart 3 – West Region, Hunedoara and JVR GDP [EUR M]

Source: National Institute of Statistics, TEMPO_CON108D_21_2_2020

25

Chart 3 – 2018 GDPs, Jiu Valley and Hunedoara County, [EUR M] The 2018 GDP of the Jiu Valley was EUR 457 M, representing 15% of Hunedoara’s GDP.21 22

The contribution of the region to the GDP of the county is relatively low, a fact mainly determined by the lack of economic activity in the area and by the negative cumulative profitability of local companies. This situation is reflected in the top 5 companies with largest operational revenue in Hunedoara in 2018, where Societatea Complexul Energetic Hunedoara – the largest company and employer in Jiu Valley – stands the fifth: 1st place – SEWS ROMANIA S.R.L. (EUR 184.5 M); nd 2 place – PHILIPS ORASTIE S.R.L. (EUR 148.4 M); 3rd place – ARCELORMITTAL HUNEDOARA S.A. (EUR 145.7 M); 4th place – FARMACEUTICA REMEDIA DISTRIBUTION & LOGISTICS S.R.L. (EUR 93.3 M); 5th place – SOCIETATEA COMPLEXUL ENERGETIC HUNEDOARA S.A. (EUR 87.2 M).

Source: PwC analysis

Nevertheless, in 2018 Societatea Complexul Energetic Hunedoara was the 2nd largest employer in Hunedoara: 1st place – SEWS ROMANIA S.R.L. (6,058 employees); nd 2 place – SOCIETATEA COMPLEXUL ENERGETIC HUNEDOARA S.A. (4,288 employees); 3rd place – PHILIPS ORASTIE S.R.L. (1,118 employees); 4th place – APA PROD S.A. (1,023 employees); 5th place – ARCELORMITTAL HUNEDOARA S.A. (640 employees).

Top 5 most profitable companies (profit after tax) in 2018 are all located outside the Jiu Valley: 1st place – PHILIPS ORASTIE S.R.L. (EUR 4.6 M); nd 2 place – BESSER ROMANIA S.R.L. (EUR 3.6 M); 3rd place – EUROSPORT DHS S.A. (EUR 3.4 M); 4th place – SARMISMOB S.A. (EUR 3.0 M); 5th place – LANDBRUK S.R.L. (EUR 2.9 M).

At the other end of the spectrum, there are the companies with a net negative result (loss after tax). In 2018, 1,988 unprofitable companies totalling a loss of EUR -323.9 M were located in Hunedoara. Among them, Societatea Complexul Energetic Hunedoara recorded a loss of EUR -267 M, almost 5 times higher than the combined loss of the other 1,997 unprofitable companies. However, the company plays an important role for the national energy security, as well as in assuring socio-economic stability by directly employing 4,288 employees.

21 The 2018 GDP of the Jiu Valley was calculated based on data extracted from TP Catalyst (the personnel costs, interest and profit / loss of every company in the region) and on PwC calculated data (amortization of capital and interest rate). 22 It was assumed that Hunedoara amortization of capital / Hunedoara GDP = Jiu Valley amortization of capital / Jiu Valley GDP; It was assumed that Hunedoara interest rate – Jiu Valley interest rate. 26

Chart 1 – Jiu Valley’s 2018 GDP split [EUR M]

Source: PwC analysis

Chart 2 – Hunedoara County’s 2018 GDP split [EUR M]

Source: PwC analysis

Capital depreciation represents the largest proportion (89%) both in the structure of the Jiu Valley’s GDP and in that of Hunedoara’s GDP. Personnel costs have a lower percentage in the case of Hunedoara, indicating a higher productivity per employee. In this category, Jiu Valley is impacted by the mining sector which provides around 4,300 well paid direct jobs. The net financial result is negative in both cases (EUR -75 M in the Jiu Valley and EUR -156 in Hunedoara), but its overall effect is more significant in the Jiu Valley, as EUR 75 M represents 16.4% of the region’s GDP, while EUR 156 M is equivalent to 5.2% of Hunedoara’s GDP.

27

Industry and energy Industrial exploitation of pit coal in Jiu Valley began in the 1850s, stimulated by the General Mining Law of 23rd of May 1854, which triggered a population increase from 6,670 inhabitants in that year to 50,015 inhabitants in 1910, while coal production increased from 853 tons in 1868 to 2.2 M tons in 191323. Almost 140 years later, in the early 1990s, coal exploitation in the Valley was at its peak, the 15 mines and quarries totalling a yearly output of around 22 M tons. In 1992, the area was populated by more than 169,000 people. Since then, mining activity decreased abruptly given the post-communist industrial decline in Romania and the more recent environmental constraints imposed by the European legislation. Only Lonea, Livezeni, Vulcan and Lupeni mines are still operational today, 2 of which will cease their activity by 202424. Annual production in 2019 added up to approximately 0.8 M tons. All 4 mines present difficult working conditions and high risks for miners due to a lack of investments in the past 10 – 15 years. The mining infrastructure is technically and morally depreciated and the mining activity is, according to the Ministry of Energy, “impossible to exploit under conditions of economic efficiency”25. Romania's energy strategy 2019-2030, with the prospect of the year 2050, draft version, specifies that “the pit coal […] will be provided by Vulcan and Livezeni mines, supplemented by imports, until the reconfiguration of the unprofitable thermo-energetic capacities from pit coal to other, more efficient, primary energy resource.” Paroseni and Mintia are the only power plants fuelled with local pit coal, having a joint installed power of 1,200 MW which would theoretically produce approximately 16% of the national primary electricity consumption. Nevertheless, both power plants can cover only 2% of the national consumption given their regular shutdowns triggered by the lack of fuel, failure of power units and uncompetitive pricing.26 Chart 4 - Evolution and prognosis of the available coal-based net capacities [MWe]

Source: Romania's energy strategy 2019-2030, with the prospect of the year 2050, draft version

Romania continues to rely on existing coal-fired power plants in order to maintain its energy security and a reasonable level of energy independence, but the lignite exploited from the Oltenia area and not the pit coal from the Jiu Valley will remain in the energy mix for the next 10 years. In respect to other industries, the Jiu Valley is facing difficulties in diversifying its economy. Over the time, a few medium-sized businesses explored the area, then left in the absence of the necessary facilities needed for developing operations, thus reflecting the investment retention challenge. The mining sector still provides approx. 3,500 direct jobs, however other industries already have similar relevance, such as manufacturing, wood processing, tourism and commerce.

23 2009. Mircea Baron & Oana Dobre-Baron, The emergence of the Jiu Valley coal basin (Romania) - A consequence of the industrial revolution; 24 The operational mines are Lonea (to be closed by the year 2024), Livezeni, Vulcan and Lupeni (to be closed by the year 2024) 25 2018. Romania's energy strategy 2019-2030, with the prospect of the year 2050, draft version, page 44; 26 https://www.economica.net/centralele-pe-carbune-din-valea-jiului-au-asigurat-doar-1-6prc-din-productia-de-energie-a-tarii-mult-sub- rezerva-exact-cand-aveam-nevoie-de-ele_164590.html 28

Infrastructure Transport The Jiu Valley is crossed by the following 3 main roads: • the National Road 66 (segment of the European Road 79) – from the North of Petrosani Depression to the South through the town of Petrosani, over a 10 km distance; • the National Road 66A – from East to West, passing the cities of Aninoasa, Vulcan, Lupeni and Uricani, for approximately 34 km. It is designed to further cross the and connect the Valley with Baile Herculane and the area (110 km) but it is still not asphalted; • the National Road 7A –through the city of Petrila, for about 7 km, connecting the Petrosani Depression with the European Road 81.

Image 1 – The end of the asphalted segment on the National Road 66A, the boarder between Hunedoara and Gorj counties (asphalted in Hunedoara)

Source: Google street view, 2012

Railway In 1867, the first railway was built to ensure the transport of coal from the exploitation to the consumption area through the Merisor-Banita pass (altitude of 759 m), linking the depression with the Tara Hategului and the Mures corridor to the north. In 1892, a second railway was built connecting Petrosani to Lupeni. In 1948, the Bumbesti- Livezeni railway was put into operation, through which the railway link between the Petrosani Depression and the south of the country was secured through the Jiu Valley.27

Air transport Besides the road and rail interconnections, the Valley would need additional interconnections. A feasibility study has already been finalized regarding the possibility of building an airfield in Petrila to provide an alternative way of transit to and from the Valley if the number of tourists would be high enough. According to the Study, the runway can have a length of maximum 1.5 km, such distance being feasible only for ultra-light and light airplanes (i.e. ULM CT2K, Cessna Skyhawk, Cessna Caravan, Piper Seneca, Diamond DA42, Antonov 2).

27 2019. CEROPE. Just transition in Hunedoara – Economic diversification in a fair and sustainable manner 29

Utilities – Electricity According to the national electricity transmission operator , the high voltage network serving the Jiu Valley is one of the most over-charged 220 kV lines in Romania, with a flow constantly higher than its natural power. As per the current network development plan28, a transport capacity increase on the 220-kV axis Urechesti - Targu Jiu Nord - Paroseni - Baru Mare - Hasdat - Mintia is planned to be carried out in 2027, at the earliest. Regarding the distribution network, according to the National Energy Regulatory Authority (ANRE), most of the assets operate since before the year 2000 (98% of the transformation stations, 99% of the HV lines, 96% of the MV lines, 80% of the LV lines), some of them being installed before 1980, even (68% of the transformation stations, 74% of the HV lines, 86% of the MV lines, 67% of the LV lines).29

Utilities – District heating Since 1981, district heating and domestic hot water were provided through a centralized system in the Municipalities of Petrosani, Aninoasa, Vulcan and Lupeni, powered by Paroseni Power Plant (CET Paroseni) – currently a branch of the Hunedoara Energy Complex (HEC). In late 70s the district heating network (transport and distribution) of the Jiu Valley was designed for a capacity of 35,268 points of consumption, including CET Paroseni, two transport pipelines and distribution networks, as well as urban and industrial consumers. Due to the economic inefficiency, the cities have been disconnected from the district heating system, as follows: Aninoasa in 2007, Lupeni in 2016, Vulcan in 2018 and Petrosani in 2019. In addition to the debts accumulated by the consumers in Petrosani, the HEC motivated also a lack of fuel (pit coal), a situation that is not likely to be solved in the future. At present, heating for the population in all 6 cities is provided in a decentralized way, based on apartment heating boilers, gas or wood and coal stoves (Romanian: sobe).

Utilities – Gas All 6 municipalities are crossed by the natural gas network (through Iscroni in Aninoasa), supporting the household consumption and the transition of the remaining households from coal-fired stoves. An economic opportunity with national impact is represented by the conversion of the Paroseni and Mintia plants to be powered by natural gas instead of coal. Given that the BRUA pipeline30 crosses the Jiu Valley, the natural gas supply of the two power plants should not be an issue on the long run.

Utilities – Water The water supply and sewerage service in the Jiu Valley area is provided by the "Apa Valea Jiului" Inter- Community Development Association, an association established in 2008 in partnership between all the local administrations and the County Council.

Utilities – Telecommunications The three main mobile telecommunications operators in Romania (Orange, Vodafone and Telekom) cover the Jiu Valley with 2G and 3G networks and partially with 4G networks.

28 Transelectrica, ETN Development Plan 2018 – 2027, http://www.transelectrica.ro/web/tel/investitii-planificare 29 2018. NREA, Report on the achievement of the performance indicators for transport, system and distribution of electricity, https://www.anre.ro/ro/energie-electrica/rapoarte/rapoarte-indicatori-performanta 30 The BRUA pipeline is a natural gas pipeline part of the future Bulgaria, Romania, Hungary and Austria gas interconnector. 30

Business environment The business environment analysis was performed by PwC based on the available TP Catalyst31 centralized information, for companies with at least one employee. For the 2012 – 2019 timeframe, we analysed the following data categories per company: operating revenue (turnover), number of employees, operating profit or loss (EBIT), taxation, cost of employees, profit or loss before taxes and profit or loss after taxes. Chart 3 - No. of companies per municipality

Source: PwC analysis Petrosani has, by far, the largest number of companies, followed by Vulcan and Lupeni. All cities recorded a growing number of enterprises, Uricani having the largest percentage growth between 2012 and 2018 (89%). In absolute terms, Petrosani is leading, with 140 more firms at the end of the period.

31 TP Catalyst is a data and process driven tax analysis tool. https://www.bvdinfo.com/en-gb/our-products/catalyst/tp-catalyst 31

Chart 4 – No. of companies, Jiu Valley vs. Hunedoara County

Source: PwC analysis Compared to Hunedoara, the number of companies in the Jiu Valley grew slightly faster, with a CAGR of 5% compared to county’s 4%. In 2018, the Jiu Valley had 23% of the companies in the county, which produced only 15% of the GDP. Chart 5 – No. & % of companies with positive operating result (positive EBIT), per municipality32

Source: PwC analysis

32 The scale of the % graphs differs from one graph to another, depending on the magnitude of the fluctuations in the data series. 32

Chart 6 – No. & % of companies with positive operating result (positive EBIT), Jiu Valley vs. Hunedoara County

Source: PwC analysis The share of companies with profitable operations (positive EBIT) in the 2012 – 2018 period was between 30% - and 70%. In general, the chances for a company to be profitable are higher in Petrosani and significantly lower in Aninoasa and Uricani. Over the seven years, the private sector in the Jiu Valley increased its profitability by 11%, exceeding Hunedoara’s private sector which was 9% more profitable in 2017 than in 2012. Chart 7 – No. and % of profitable companies after tax, per municipality

Source: PwC analysis

33

Chart 8 – No. and % of profitable companies after tax, Jiu Valley vs. Hunedoara County

Source: PwC analysis The percentage of companies with a net profitability in 2018 was 54% in the Jiu Valley and 60% in Hunedoara. As it can be observed, the private sector in the Jiu Valley is becoming more profitable at a slightly higher pace than the overall sector of the county (12% CAGR vs 10% CAGR).

34

Chart 9 – Petrosani economic snapshot, 201833

Source: PwC analysis

In 2018, Petrosani had 718 private companies, out of which 691 had positive turnover. Further on, only 446 companies had positive EBIT, from which 452 had positive result before taxes. Finally, the number of profitable companies after tax was 411 (57% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 233.7 M, while EBIT was EUR - 255.6 M. The sector had a loss of EUR -259.6 M before taxes, which reached EUR -260.9 M after taxes. The private sector paid taxes in amount of EUR 1.3 M. The private sector employed 9,508 people which cost the sector (mainly in wages) approximately EUR 94.7 M.

33 Map shows only the city-residence contour 35

Chart 10 – Lupeni economic snapshot, 201834

Source: PwC analysis

In 2018, Lupeni had 223 private companies, out of which 215 had positive turnover. Further on, only 122 companies had positive EBIT, from which 123 had positive result before taxes. Finally, the number of profitable companies after tax was 119 (53% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 62.1 M, while EBIT was EUR 2.1 M. The sector had a profit before taxes of EUR 1.9 M, and the profit after taxes added up to EUR 1.4 M. The private sector paid taxes in amount of EUR 0.5 M. The private sector employed 1,483 people which cost the sector (mainly in wages) approximately EUR 8.9 M.

34 Map shows only the city-residence contour 36

Chart 11 – Vulcan economic snapshot, 201835

Source: PwC analysis

In 2018, Vulcan had 246 private companies, out of which 231 had positive turnover. Only 127 companies had positive EBIT, from which 128 had positive result before taxes. Finally, the number of profitable companies after tax was 119 (48% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 37.0 M, while EBIT was EUR 0.2 M. The sector had a profit before taxes of EUR 0.4 M, and the profit after taxes added up to EUR 0.1 M. The private sector paid taxes in amount of EUR 0.3 M. The private sector employed 1,253 people which cost the sector (mainly in wages) approximately EUR 6.7 M.

35 Map shows only the city-residence contour 37

Chart 12 – Petrila economic snapshot, 201836

Source: PwC analysis

In 2018, Petrila had 165 private companies, out of which 155 had positive turnover. Further on, only 102 companies had positive EBIT, from which 100 had positive result before taxes. Finally, the number of profitable companies after tax was 94 (57% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 31.1 M, while EBIT was EUR 1.7 M. The sector had a profit before taxes of EUR 1.5 M, and the loss after taxes added up to EUR 1.2 M. The private sector paid taxes in amount of EUR 0.3 M. The private sector employed 1,226 people which cost the sector (mainly in wages) approximately EUR 6.3 M.

36 Map shows only the city-residence contour 38

Chart 13 – Uricani economic snapshot, 201837

Source: PwC analysis

In 2018, Uricani had 144 private companies, out of which 139 had positive turnover. Only 72 companies had positive EBIT, from which 70 had positive result before taxes. Finally, the number of profitable companies after tax was 66 (46% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 20.6 M, while EBIT was EUR 2.2 M. The sector had a profit before taxes of EUR 2.1 M, and the profit after taxes added up to EUR 1.9 M. The private sector paid taxes in amount of EUR 0.2 M. The private sector employed 731 people which cost the sector (mainly in wages) approximately EUR 3.6 M.

37 Map shows only the city-residence contour 39

Chart 14 – Aninoasa economic snapshot, 201838

Source: PwC analysis

In 2018, Aninoasa had 40 private companies, out of which 38 had positive turnover. Only 22 companies had positive EBIT, from which 23 had positive result before taxes. Finally, the number of profitable companies after tax was 22 (55% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 14.5 M, while EBIT was EUR 0.1 M. The sector had a profit before taxes of EUR 0.1 M, and the loss after taxes added up to EUR 0.04 M. The private sector paid taxes in amount of EUR 0.1 M. The private sector employed 446 people which cost the sector (mainly in wages) approximately EUR 2.8 M.

38 Map shows only the city-residence contour 40

Chart 15 – Hunedoara county economic snapshot, 2018

Source: PwC analysis

In 2018, Hunedoara County had 6,478 private companies, out of which 6,263 had positive turnover. Further on, only 4,141 companies had positive EBIT, from which 4,164 had positive result before taxes. Finally, the number of profitable companies after tax was 3,913 (60% of the total number of companies). From a monetary point of view, combined operating revenue added up to EUR 2,808.9 M, while EBIT was EUR - 119.8 M. The sector had a loss before taxes of EUR -134.6 M, and the loss after taxes added up to EUR -155.9 M. The private sector paid taxes in amount of EUR 21.4 M. The private sector employed 63,109 people which cost the sector (mainly in wages) approximately EUR 469.6 M.

41

Tourism Winter sports

Jiu Valley has 3 ski areas: Straja, Parang and Valcan Pass. The Straja resort is located near Lupeni city and has approximately 26 km of ski area, divided into 12 trails, each equipped with its own cable transport system. Five trails are equipped with night lighting systems as well. The slopes are maintained with snow machines and artificial-snow cannons. Due to the existence of a gondola and a chairlift to the Straja Peak, Straja Slope has a length of 8.1 km, being the longest in the Valley.39 Parang mountain resort, located in the vicinity of Petrosani city, is accessible by two chairlifts and has 9 trails totalling approximately 6 km, all of them being administered by Petrosani City Hall. The longest one has 3,200 m and includes trails for both beginners and advanced skiers and snowboarders. Vulcan Pass resort is the newest ski area in Jiu Valley, it has a gondola that reaches the outskirts of town and 3 ski slopes equipped with ski lifts. Map 4 – Straja Ski resort

Source: https://www.skistraja.ro/partii.html

According to data resulted from PwC interviews with local stakeholders, the mountain resorts in the Jiu Valley can accommodate up to 6,000 tourists in reasonable comfort conditions, distributed between the Straja / Lupeni and Parang / Petrosani resorts.

39 https://www.skistraja.ro/ 42

Mountain biking In summer, the three ski areas of Straja, Parang and Vulcan Pass are already visited by fans of niche mountain biking (which use chairlifts for “enduro” or “downhill” style); Petrila and Uricani offer the greatest potential in the longer cross-country routes. Overall, the area between the Eastern Jiu and Western Jiu is used for mountain biking with cross-country routes. There are also several accommodation lodges, points of touristic attraction, as well as other outdoor activities such as climbing, speleology, hiking that offer the possibility of a multi-day excursion. Map 5 – Example of an x-country MTB route

Source: https://www.jiuvalley-adventures.ro/en/ and New Horizons Foundation Lupeni The development of mountain trails that can be journeyed with bicycles, horses, motorcycles, cars or on foot already attract tourists during ski off-season. The portal www.jiuvalley-adventures.ro presents a variety selection of touristic opportunities for outdoor activities. According to the agreement reached between all the local authorities and the New Horizons NGO, they will work together to develop access routes and the County Council will provide the necessary funds to create a unitary circuit for the Jiu Valley. Most routes are already accessible. There are, however, important portions where significant interventions are needed (e.g. the portion between the Vulcan Pass and the Gambrinus Hotel).

Climbing and bouldering As the Retezat Park is both limestone and granite systems abutted, a sporting activity which attracts growing number of tourists is rock climbing and bouldering. There are at least 5 sites close to the Valley which are used exclusively for rock climbing.

43

Exploring the caves A natural resource scarcely used so far is the abundance of caves in the West Jiu – Cernisoara perimeter. 630 caves and oats were by now included in the cadastre, for 32 the length remaining unknown, while for other 73 their level is not determined. The caves shorter than 10m are not inventoried and therefore cannot be considered in statistics.40 The level of difficulty varies from very easy to very difficult. Image 2 – The Scorota cave

Source: https://www.jiuvalley-adventures.ro/en/tour/hiking-trail/pestera-spre-scorota-caving-easy-entry- /24398821/#dmdtab=oax-tab1 and New Horizons Foundation Lupeni Rural tourism Rural tourism targets the rural environment, using households and agritouristic farms as structures of touristic reception. The scope of rural tourism includes agritourism or farm tourism activities and “concerns all forms of tourism practiced in the rural area, i.e. outdoor activities (horse riding, fishing, hunting, walking or cycling, health tourism), knowledge tourism (churches, fortresses, various historical vestiges), tourism for discovering the natural environment (flora, fauna), for knowing and understanding local culture (folklore, folk traditions), gastronomic tourism, etc.”41 Even though, from an administrative point of view, there are no villages in the Valley, the outskirts of the cities have all the features of local villages (people inhabiting these areas live in houses with large yards for animal breeding; the distances between houses or group of houses can be of several km). A significant number of the native population (“momarlani”) is still present in the Valley, trying to preserve and uphold their traditions. For these communities, rural tourism and agritourism may be an essential factor for economic sustainability. Industrial sites Only 4 of the 15 mines that have been operational in the area are currently active, 2 of which are to be closed by 2024. Of the 11 closed mines, 9 have already been ecologized and 2 more (Uricani and Paroseni) will undergo a similar procedure this year. Petrila reclaimed certain buildings and installations belonging to the mine and the former mine site was capitalized on as a museum and events hall (it still requires substantial investment to turn it into a proper, modern museum and hall).

40 http://www.speo-csm.ro/muntii-retezat.html 41 Prof dr. Aurel Petru Darau & all – The Concept of Rural Tourism and Agritourism 44

Agriculture, livestock farming and forestry Given the current socio-economic conditions of the people living in Jiu Valley, agriculture represents a mean of subsistence for many. The number of agricultural companies is relatively small – only 10 – and so is the number of livestock farms – 6. A more developed activity is logging, as forests are still plenty in the region. Apart from companies from outside the Jiu Valley coming in search for resource, 31 local companies exploit and process wood: 8 in Petrosani, 11 in Petrila, 4 in Lupeni, 4 in Uricani and 4 in Vulcan.

Table 5 - Companies involved in agricultural activities in Jiu Valley Company Activity Location Nisiro Optim SRL Cultivation of fruit from shrubs, strawberries, nuts and other fruit Petrila trees Publitrans International Growing of cereals (except rice), leguminous crops and oil seeds Petrosani SRL Societatea Cooperativa Cultivation of spices, aromatic, medicinal and pharmaceutical Petrosani Iarba Zanelor plants Martelia Bio SRL Cultivation of fruit shrubs, strawberries, walnuts and other fruit Petrosani trees Dica Natural SRL Auxiliary activities for crop production Aninoasa Transilvano Serv SRL Mixed farming: Plant cultivation combined with livestock farming Aninoasa Cladiral Agro SRL Cultivation of cereals (except rice), leguminous plants and Vulcan oilseed plants Dede & Alin Land SRL Cultivation of vegetables and melons, roots and tubers Vulcan Horticola Nichy SRL Cultivation of other permanent plants, landscaping Lupeni Emicristian Flora SRL Cultivation of spices, aromatic, medicinal and pharmaceutical Lupeni plants Source: https://membri.listafirme.ro/pagini/p1.htm

Table 6 - Companies involved in livestock farming in Jiu Valley Company Activity Location Agro Ana 2006 SRL Pig farming Petrila Caprice Farm SRL Raising of dairy cattle Lupeni Raflolact SRL Raising of dairy cattle Lupeni Agrieco Livestock SRL Raising of other cattle and buffaloes Petrosani Andany Agro-Com SRL Raising of dairy cattle Aninoasa Source: https://membri.listafirme.ro/pagini/p1.htm

The lack of association between producers and suppliers, as well as the low technological endowment make efficient farming difficult, therefore farming is seldom profitable, hindering the possibility of further development in this area. Most of the local products are used by the producers themselves. In Petrosani, the agriculture is limited to the activity of peasants who cultivate maize and potatoes, mainly for their own use. Animal breeding is more developed in the area, with cattle, sheep, pigs and laying birds being bred within the households and used only by their residents42. In 2019, Vulcan reported an output of 765 tons of potatoes, 135 tons of onion, 8 tons of garlic, 180 tons of cabbage, 60 tons of cucumbers, 60 tons of carrots, 20 tons of other vegetables and ownership of 557 cattle, 1,650 sheep, 150 goats, ~250 pigs and ~1,800 poultry. Similarly, Aninoasa reported an output of 10 tons of corn and 80 tons of potatoes, as well as ownership of 300 cattle, 100 pigs, 559 sheep, 200 goats, 30 horses and 4,678 poultry.43

42 https://www.primariapetrosani.ro/wp-content/uploads/2015/07/STATUT-MUNICIPIUL-PETROSANI.pdf 43 Data provided by municipalities 45

In Petrila, agriculture is mainly based on raising of domestic animals (by individual households), on fruit growing and to a lesser extent, on vegetable farming. The agriculture and livestock farming is very dependent on the geographical features of the land in this region. Table 7 – Surface of the municipality by categories of use*44

Municipality Arable Land Pasture Grassland Forests Petrosani45 133 ha 3,082 ha 4.989 ha 11,721 ha Uricani46 120 ha 6,459 ha 5,644 ha Petrila47 134 ha 4,623 ha 3,036 ha 21,114 ha Vulcan48 104 ha 1,670 ha 2,628 ha 3,789 ha Lupeni49 68 ha 1,314 ha 1,140 ha 4,258 ha

In Uricani, only 39 ha out of the total arable land of 120 ha are utilized, with 13 ha for corn, 18 ha for potatoes and 8 ha for other crops. The latest data provided by the municipality shows that the residents own a total of 536 cattle, 1,818 sheep, 14 goats, 574 pigs, 7,050 poultry, 113 horses and 56 bee colonies, while figures for Lupeni indicate 495 cattle, 65 pigs, 1,896 sheep and 3,709 poultry50.. The agricultural land of Lupeni is rather small when compared to the surface of the territory, given that the geographical positioning of the municipality, respectively the high altitude and the climate are unfavourable factors for the development of agricultural holdings. On the other hand, the existence of large areas of pasture and grasslands offer a competitive advantage to the zootechnical sector. However, these are under-utilized in the absence of technical means of production that could allow for a better exploitation of these lands. The main agricultural products in this area are potatoes and vegetables, ~60 ha of the arable land being cultivated.

44 *Data for Aninoasa was unavailable 45 Status of Petrosani municipality 46 The strategic plan for socio-economic development of Uricani 47 Status of Petrila municipality 48 Vulcan Local Strategy 2014-2020 49 The strategic plan for development of Lupeni for 2014-2020

50 Latest available data is 2014 46

Investments Despite difficulties in co-financing, there is a number of key projects which have been implemented or are under implementation in the Valley, initiated by either the public or the private sector. Major public investment projects finalized in the region 1. Ensuring access to ambulatory health services for population of Hunedoara county (Asigurarea accesului la servicii de sanatate in regim ambulatoriu pentru populatia judetului Hunedoara”)51 • Financed through REGIO - ROP 2014-2020; • Period: 12.12.2018 - 16.12.2019; • Project cost: RON 4.26 M out of which RON 4.17 M from non-reimbursable funds (RON 2.98 M financed from the European Regional Development Fund and RON 1.19 M financed from the national budget); • Scope: Increase the accessibility to health services, community services and second level services, especially for poor and isolated regions by investing in health and social services infrastructure; • Results: Streamlined medical services through increased ambulatory capacity by equipping ambulatories with new medical devices.

2. Improvement of population access to emergency medical services in Hunedoara county (Imbunatatirea accesului populatiei din judetul Hunedoara la servicii medicale de urgenta)52; • Financed through REGIO - ROP 2014-2020; • Period: 17.12.2018 - 11.12.2019; • Project cost: RON 9.43 m out of which RON 9.24 m from non-reimbursable funds (RON 6.6 m financed from the European Regional Development Fund and RON 2.64 m financed from the national budget); • Scope: Improvement of quality and efficiency of emergency departments by investing in health and social services infrastructure; • Results: Qualitative increase of services and quantitative increase in the number of persons that benefit from health services by equipping emergency department with new specialized medical devices.

Ongoing public investment projects in JiuValley 1. Green line of electric buses between Petrila-Petroşani-Aninoasa-Vulcan-Lupeni-Uricani (Linia verde de autobuze electrice între Petrila-Petrosani-Aninoasa-Vulcan-Lupeni-Uricani Green Line Valea Jiului)53 • Financed through REGIO - ROP 2014-2020; • Period: Component 1 - 21 months; Component 2 - 17 months; contract signed as of 9 August 2019; • Project cost: RON 95.1 m out of which RON 82.97 from non-reimbursable funds split by components: o Component 1 - RON 49 m out of which RON 43.9 m from non-reimbursable funds; o Component 2 - RON 46 m out of which RON 39 m from non-reimbursable funds;

• Scope: Reduction of CO2 emissions from public transport in Jiu Valley and reduction of transport realized through private cars by offering a modern, high-quality public transport solution to citizens; • Expected results: Acquisition of 26 electric buses, construction or improvement of 112 modern public bus stations, construction of 1 bus garage in Vulcan.

2. Improvement of population access to emergency medical services in Hunedoara county (Imbunatatirea accesului populatiei din judetul Hunedoara la servicii medicale de urgenta) 54 • Financed through REGIO - ROP 2014-2020;

51 http://www.cjhunedoara.ro/documente/finantare%20UE/COMUNICATE%20de%20presa%20pe%20proiecte%20Antonela%202020/com unicat%20de%20presa%20%20-%20spitale%20-%20ambulatorii.pdf 52 http://www.cjhunedoara.ro/documente/finantare%20UE/COMUNICATE%20de%20presa%20pe%20proiecte%20Antonela%202020/Co municat%20de%20presa%20%20-%20spitale%20-%20urgente.pdf 53 https://adrvest.ro/green-line-valea-jiului-95-de-milioane-de-lei-prin-regio-por-pentru-linia-verde-de-autobuze-electrice-din-judetul- hunedoara/ 54 http://www.e-vulcan.ro/portal/hunedoara/vulcan/portal.nsf/AllByUNID/Modernizarea-ambulatoriului-din-municipiul-Vulcan- 00008792?OpenDocument 47

• Period: 06.06.2019 - 28.02.2022; • Project cost: RON 12.33 m out of which RON 10.49 m from non-reimbursable funds; • Scope: Increase the accessibility to health services and improvement of health services of ambulatory in Vulcan Municipality; • Expected results: Rehabilitation of ambulatory building and acquisition of specialized medical equipment; 30% increase in the number of patients treated in ambulatory and 10% reduction of hospitalized patients 5 years after the project end date.

3. Thermic rehabilitation of residential buildings in Vulcan Municipality (Reabilitare termica blocuri Municipiul Vulcan) 55 • Financed through REGIO - ROP 2014-2020; • Period: 06.06.2019 - 30.06.2020; • Project cost: RON 4.37 m out of which RON 2.46 m from non-reimbursable funds; • Scope: Increase of energy efficiency for 4 residential buildings; • Expected results: Decrease of greenhouse gases and energy consumption for 229 apartments.

4. Simplified administrative procedures for Vulcan City Hall (Proceduri administrative simplificate la Primaria Vulcan) 56 • Financed through REGIO - ROP 2014-2020; • Period: 22.07.2019 - 22.07.2021; • Project cost: RON 2.69 m out of which RON 2.63 m from non-reimbursable funds; • Scope: Improved accessibility and quality of public services offered by the City Hall and reduction of bureaucracy; • Expected results: Improve skills and knowledge of Vulcan City Hall employees, simplified procedures for citizens, implementation of an information system for collecting proposals from citizens.

5. Increase in energy efficiency for residential buildings in Petrosani Municipality (Cresterea eficientei energetice a blocurilor de locuinte din Municipiul Petrosani) 57;

• Financed through REGIO - ROP 2014-2020; • Period: 17.08.2016 - 15.09.2021; • Project cost: RON 8.89 m out of which: o RON 4.44 m from non-reimbursable funds (RON 3.78 m financed from the European Regional Development Fund and RON 0.66 m financed from the national budget); o RON 4.44m from Petrosani Municipality and homeowners’ association; • Scope: Increase in energy efficiency for several residential buildings; • Expected results: Decrease of greenhouse gases and energy consumption.

6. Increase in energy efficiency for residential buildings in Petrosani Municipality (Cresterea eficientei energetice a blocurilor de locuinte din Municipiul Petrosani) 58 • Financed through REGIO - ROP 2014-2020; • Period: 17.08.2016 - 15.04.2022; • Project cost: RON 4.87 m out of which: o RON 1.9 m from non-reimbursable funds (RON 1.61 m financed from the European Regional Development Fund and RON 0.29 m financed from the national budget); o RON 2.97 from Petrosani Municipality and homeowners’ association; • Scope: Increase of energy efficiency for several residential buildings; • Expected results: Decrease of greenhouse gases and energy consumption.

7. Increase in energy efficiency for residential buildings in Petrosani Municipality (Cresterea eficientei energetice a blocurilor de locuinte din Municipiul Petrosani) 59

55 http://www.e- vulcan.ro/portal/hunedoara/vulcan/portal.nsf/E0950637AFDB49D2C225846B003F55CF/$FILE/Comunicat%20de%20presa%20Reabilit are%20terminca%20blocuri.pdf 56 http://www.e- vulcan.ro/portal/hunedoara/vulcan/portal.nsf/6462E4CCF1EAF4D6C225846B00425FEC/$FILE/Comunicat%20de%20presa.pdf 57 https://www.primariapetrosani.ro/wp-content/uploads/2019/07/Fisa-Proiect_SMIS-117296_sigle.pdf 58 https://www.primariapetrosani.ro/wp-content/uploads/2019/07/Fisa-Proiect_SMIS-119885_sigle.pdf 59 https://www.primariapetrosani.ro/wp-content/uploads/2019/07/Fisa-Proiect_SMIS-119886_sigle.pdf 48

• Financed through REGIO - ROP 2014-2020; • Period: 17.08.2016 - 15.04.2022; • Project cost: RON 2.35 m out of which: o RON 1.14 m from non-reimbursable funds (RON 0.97 m financed from the European Regional Development Fund and RON 0.17 m financed from the national budget); o RON 1.21 from Petrosani Municipality and homeowners’ association; • Scope: Increase of energy efficiency for several residential buildings; • Expected results: Decrease of greenhouse gases and energy consumption.

8. Increase in energy efficiency for residential buildings in Petrosani Municipality (Cresterea eficientei energetice a blocurilor de locuinte din Municipiul Petrosani) 60 • Financed through REGIO - ROP 2014-2020; • Period: 17.08.2016 - 15.04.2022; • Project cost: RON 3.6 m out of which: o RON 1.47 m from non-reimbursable funds (RON 1.25 m financed from the European Regional Development Fund and RON 0.22 m financed from the national budget); o RON 2.13 from Petrosani Municipality and homeowners’ association; • Scope: Increase of energy efficiency for several residential buildings; • Expected results: Decrease of greenhouse gases and energy consumption.

9. Rehabilitation of the “Miner Museum” and museum arrangement (Reabilitarea cladirii Muzeului Mineritului si amenajare muzeistica) 61 • Financed through REGIO - ROP 2014-2020; • Period: 05.05.2014 - 05.05.2020; • Project cost: RON 4.95 m out of which: o RON 4.85 m from non-reimbursable funds (RON 4.2 m financed from the European Regional Development Fund and RON 0.65 m financed from the national budget); o RON 0.1 m from Petrosani Municipality; • Scope: Protection and promotion of cultural heritage in the region by increasing the attractiveness of the museum and the quality of services offered; • Expected results: A rehabilitated cultural heritage landmark.

10. Rehabilitation of the “Miner Museum” and museum arrangement (ePAS - eficientizarea Procedurilor Administrative prin Simplificare la Primaria Municipiului Petrosani) 62 • Financed through POCA 2014-2020; • Period: 01.06.2019 - 01.06.2021; • Project cost: RON 2.78 m out of which: o RON 2.72 m from non-reimbursable funds (RON 2.36 m financed from the European Regional Development Fund and RON 0.36 m financed from the national budget); o RON 0.06 m from Petrosani Municipality; • Scope: Increase the capacity of Petrosani Municipality to ensure the quality and access to public services offered by the town hall by simplifying the local administration’s procedures and diminishing bureaucracy; • Expected results: Web portal that ensures access to electronic services, improved information systems, improved computer skills of employees.

Major private investment projects finalized in the region: 1. Investment in cable transport system and snow cannons for Straja Ski Resort63; • Financed by Comexim (the company that manages 15 kilometres of ski slopes); • Project cost: EUR 1.5 m; • Scope: Improvement of ski slopes to meet tourists’ needs; • Results: Acquisition of a new ski lift and ten snow cannons that produce artificial snow.

60 https://www.primariapetrosani.ro/wp-content/uploads/2019/07/Fisa-Proiect_SMIS-119887_sigle.pdf 61 https://www.primariapetrosani.ro/wp-content/uploads/2019/08/Fisa-Proiect_SMIS-116194_sigle.pdf 62 https://www.primariapetrosani.ro/wp-content/uploads/2019/06/Descriere-proiect-SIPOCA-642_SMIS-127741.pdf 63 https://www.zf.ro/companii/vine-sezonul-de-schi-administratorul-partiilor-din-straja-a-investit-1-5-mil-euro-intr-un-telescaun-si-zece- tunuri-de-zapada-17562438 49

Culture and entertainment

Jiu Valley has several museums, culture halls, churches all of which preserve its traditions and local spirit. Some of the most notable museums among are: • “Muzeul Mineritului” in Petrosani, a mining museum founded almost 60 years ago; • “Muzeul Momarlanului” in Petrosani, a traditional museum which exhibits traditional items that belonged to the traditional inhabitants of Jiu Valley; • “Muzeul Instalatorului Roman” in Petrosani, a unique museum founded in 2016 by Ion Barbu; • “Muzeul Mamei” in Petrila, a museum dedicated to mothers and founded in 2012. The following chart presents the evolution of libraries in Jiu Valley between 1995-2018. Statistics includes all types of libraries in the region: school libraries, university libraries, public and private libraries. In 2018, there were 37 libraries in Jiu Valley, approximately 4.7% out of the total in West Region. Each town, except for Lupeni, had one public library for the local community (i.e. municipality or county). Chart 16 - Evolution of libraries in Jiu Valley between 1995-2018

Source: National Institute of Statistics Database; PwC analysis Jiu Valley also hosts theatres, cinemas and culture halls: • Drama theatre “Ion D. Sirbu” in Petrosani; • Culture hall “Ladisalu Schmidt” in Petrila; • Culture hall “The miner” in Lupeni; • Culture hall in Uricani • Cinema “Cultural” in Lupeni that went bankrupt and was abandoned in 201164; • Cinema 3D “Serban Ionescu in Petrosani. Several ethnic groups can be identified in the region, but the biggest share is represented by the Romanian population. Minorities are represented by and . As for religion, most of the local inhabitants are orthodox, followed by roman-Catholics, Protestants and Pentecostals. Jiu Valley is a region rich in churches, where some of the traditions are deeply anchored in religious beliefs. Churches (irrespective of the faith they represent) are deemed as appropriate venues for educating people, also providing behavioural guidelines that should be followed during everyday life.

64 https://www.nytimes.com/2019/04/09/business/romania-coal-towns.html 50

Economic challenges A traditionally mono-industrial area

Jiu Valley is a mono-industrial mining area that will cease coal mining activity by 2030 Considering the history of more than 150 years of coal mining in the Valley, the local economy grew exclusively on the underground resources. A side effect of this self-sufficiency is the fact that the area remained physically disconnected from the adjacent ones, aggravated by the mountain relief. The only solid interconnected infrastructures were the energy grid and the railway, both of which are currently deteriorating in the absence of investments.

Poor area in a rich region

Jiu Valley is part of the relatively wealthy West Region, although it is significantly below the area’s average GDP per capita, making co-financing of investments more difficult According to the current state-aid regulations, investments made by entities located in the West Region are eligible for European funding of up to 65%, the private investors’ co-financing covering the remaining 35%65. In general, medium-sized enterprises can access financing of 55% and small companies only 45%. According to all stakeholder categories eligible for European funding (businesses, municipalities, NGOs, etc.), being part of the relatively wealthy West Region is a significant setback when it comes to financing their projects.

No specific incentives to attract investors

Investments in Jiu Valley are subject to the general fiscal system with no particular incentives Even though local taxes are rather small, investors are not willing to relocate or set up businesses in the Jiu Valley in the absence of a more lenient tax regime to alleviate the area’s shortcomings such as: limited consumer market (small number of inhabitants, low purchasing power), the accessibility of the area is difficult (road infrastructure needs major repairs and widening to ease transporting and deliver merchandise on time); skilled workers are difficult to find as they migrated to other regions or countries (and are not willing to return in the absence of consistent evidence that the Valley is set on a sustainable growth path). Given the above-mentioned shortcomings, which are not exhaustive, investors are reluctant to locate businesses in Jiu Valley to the detriment of other more accessible and economically connected areas. The companies currently operating in the region either have a specific competitive advantage which is not available elsewhere, such as the ski slopes, or are run by local businessmen with “sentimental investment” in the area. Based on interviews with stakeholders in the Jiu Valley, the desirable path forward would be to decouple Jiu Valley of the West Region. As such, all stakeholders would like the Valley to be a Development Region by itself, with a special tax regime and higher state aid intensity.

65 If they are large companies. 51

Local farmers not being part of value chains

Local farmers are not part of the production and distribution value chains, especially given the lack of local processing facilities Throughout the Valley, farming activities are focused mainly on poultry, sheep or cattle breeding and to a smaller extent on pigs, goats or horses. Fertile lands provide for potato, fodder plants (clover, lucerne), corn and bean crops. Most of the farmers are “momarlani” natives who inherited narrow lands covering up to a few hectares, most of which on abrupt hill slopes. The population who settled in the area in the second half of the 20th century generally lived in apartments, and their descendants do not have the land required for agriculture today. Although farmers avail of enough land to expand their activity, a significant production would not sell. Jiu Valley has no slaughterhouses, meat processing factories, milk collection facilities, wool washers and processors, or other facilities necessary to small producers. In the past years, there was only one slaughterhouse and one milk processing plant operational in the area, but not sustainable, being oversized compared to the production levels at that time. It took too long for the farmers to understand there was a market to increase their output and to obtain producer certificates required for selling products. Today, in the absence of alternatives, products such as wool, which could be used in energy efficiency projects as an industrial isolator, turn to waste, consequently polluting the environment.

Other mining: quartz – a legal issue may preclude its economic exploitation in the medium term

The existing quartz resources are not capitalized on given the ongoing legal issue whose settlement may prove to be a lengthy process The quartz resources located in the Siglau-Uricani area present the purest quartz deposit in and the third, in terms of quality, in the world. The quartz from the Siglau - Uricani, Hunedoara County has an average content of 98.82% SiO2 and 0.11% Fe2o3 and it is estimated at 27 M tonnes (in the first phase, up to 650,000 tonnes can be exploited). Based on available studies, it is estimated that the existing quartz deposit in the quarry can be exploited for another 43 years, being valued at USD 40-45 M.

Despite once being exploited and processed in a local plant, at the moment the mountain career is in ruins and the quartz resources cannot be capitalized on due to a legal issue. Specifically, Construct Grup International - the company owning the processing plant obtained a loan from the Romanian Discount Bank for which it used the rights to exploit the quartz quarry as a guarantee.

Over the years, the National Agency for Mineral Resources withdrew the concession license of Construct Grup International. Moreover, the quartz business was also the subject of a lawsuit filed by the prosecutors. At this moment it is unclear how long it will take to solve the legal issue, but this might be a lengthy process.

According to local media reports, there are large companies interested in taking over the exploitation of the quartz resources, however the path forward is blocked as long as the legal issue is not solved.

No integrated tourism concept for year-round activities

Tourism-related businesses are fragmented in the absence of an integrated concept that would ensure diversified activities for year-round visitors Considering current local realities, skiers and bikers have limited alternatives to spend time in the Valley, both in terms of activities they can do, as well as relaxation options. An integrated tourism concept could create a unitary cooperation mechanism between businesses in the area, to help boost tourism by expanding visitor facilities and consequently generating increased consumption in the area.

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Natura 2000 sites around the Valley may restricts certain large-scale activities

The existence of multiple Natura 2000 sites poses certain challenges when it comes to large scale investment in infrastructure, utilities Natura 2000 is an ecological network of protected areas, set up to ensure the survival of Europe's most valuable species and habitats66. Romania has 435 sites protecting the habitat and 171 special bird protection areas. In the map bellow, parts of the individual sites under the Birds Directive are displayed with red hatching, under the Habitats Directive with blue hatching and under both directives with red and blue hatching. Map 6 – Natura 2000 sites surrounding the Jiu Valley

Source: http://natura2000.eea.europa.eu/ All 6 cities are bordered by Natura 2000 sites, Aninoasa being one of the most impacted ones. From an economic development point of view, this situation restricts the possibilities for infrastructure development, for bringing utilities to the area and erecting new buildings.

66 http://natura2000.eea.europa.eu/ 53

Economic opportunities Environmental and cultural diversity as well as traditions are a good basis for tourism development

The environment is suitable for the development of various types of tourism such as sports, rural, industrial sites, gastronomic, speleological, hunting, cultural, etc. Crossed by the Eastern Jiu and Western Jiu, the Jiu Valley is situated between the Retezat and Parang Mountains. The highest peak in the Parang mountains is Paringul Mare, with a height of 2,519 m, while Retezat’s highest peak is Peleaga, with 2,508 m above the sea level. The Valley overlaps to the east, in its upper side, with the Petrosani depression, an area of tectonic origin, formed in the Paleogene with a filling of several ages (Paleogene, Neogene, Quaternary), making its margins very fragmented by deep and narrow valleys.67 Map 7 – 3D view of the Jiu Valley

Source: Google Earth Many tourism activities could be developed based on the exceptional natural environment of the Valley. Dominated by forest-covered mountains and by the two Jiu rivers that unite in the Petrosani depression, the area is suitable for various activities all-year round. Jiu Valley is a growing touristic attraction, especially for the winter sports fans visiting Parang, Straja and Vulcan ski slopes, while the mountain biking trails are the second highest touristic attraction of the Valley: the ski infrastructure by the number of yearly visitors. Both winter sports and mountain biking recorded a substantial increase in the past years (up to over 6,000 people per weekend in the winter68), however, this evolution stays below the region’s potential. There are various other small entrepreneurial endeavours, such as equestrian or cultural tourism, however these are isolated from each other and not retaining visitors for longer periods. Moreover, different types of tourism such as agritourism, industrial sites, gastronomic, speleological, hunting, cultural are untapped in the area. Given the touristic potential of the Petrila industrial site, in combination with that of the mines to be closed, setting an industrial tourist circuit accessing the European Route of Industrial Heritage69 could be a solution to support the economic development of the area. The year-round touristic potential would increase significantly if the municipalities, together with the business environment, are committed to designing and implementing an integrated touristic concept for the entire Valea Jiului region.

67 1980, Ioan Marza, Monografia judetului Hunedoara 68 According to PwC interviews 69 https://www.erih.net/welcome.html 54

Development of local attractions

Other attractions that can be part of an integrated touristic concept are two roman camps (Romanian: castre romane), the Cave of Disease (Romanian: Pestera Bolii), as well as emerging attractions, such as a yearly festival and / or various smaller events Sureanu Mountains is the place where the last war stages between and Romans took place. During the two wars (101–102; 105–106), the battle systems were adapted to the terrain land, the military offensive/defensive structures being visible even today.70 Given the rich history of the area, Comarnicel 1 (5.8 ha) and Comarnicel 2 (7.8 ha) can support cultural tourism if integrated in a circuit, together with the Cave of Disease – a natural cave in the proximity of Petrila. Map 8 – The perimeter of the Comarnicel 1 fortress

Source: 2016. Dorel Micle et all, Urme peste timp: Topografia castrelor romane de mars din muntii Sureanu Other cultural opportunities would be the creation of a modern anual festival, similar to Electric Castle, on the hillsides in Petrila or close to the Petrila mine, providing thus significant revenues for the population and for the local administration. In 2019, 700,000 participated at music festivals and spent EUR 18 on average, totaling a revenue of EUR 13 M. Given that the penetration rate of music festivals is only 3.6%, there is significant room for growth. Petrila has the added benefit of Planeta Petrila’s notoriety – a documentary Gopo and TIFF awards – on which it can create a powerful marketing strategy. Such events would be facilitated and even enhanced by an integrated touristic concept of the region, as described earlier in this section.

70 2016. Dorel Micle et all, Urme peste timp: Topografia castrelor romane de mars din muntii Sureanu 55

Creation of a local brand for goods and services

Traditional food with local specificity could support creation of a “Jiu Valley” brand In the worldwide competition for tourists and investments, city branding gained importance as an urban policy, as cities increasingly apply branding principles to build good profile and reputation. City brands are co-created equally through established urban policies as well as through residents' collective actions and can be understood as the customers' perception of the collective actions and values of its stakeholders.71 Burdened by the sad memory of the Mineriads72, even though a generation has passed since then, the cities of the Jiu Valley could not reinvent themselves, both the economy and the self-esteem of their inhabitants being significantly impacted. In this regard the cities would have a great opportunity if working on changing perception both in Romania and abroad. Given the professional pride of the miners who have significantly contributed to the national economy, coupled with the renewable energy companies’ interest for this area, the community could regain its role in the energy transition by attracting these companies. Therefore, the first pillar of the Jiu Valley brand could be linked to its role in the energy transition. On the other hand, through efficient urban regulation (e.g. designed colours, building style, construction materials, sizes, etc.), common for the entire Valley, the municipalities could regain their “mountain-cities” appearance, promoting themselves as attractive for weekly retreats, opposite to the hectic and smog-filled big cities. A third pillar for developing the Jiu Valley brand could relate to the rural character of these cities. Farmers who are not currently integrated into the product chains could work with local businesses and create registered trademarks of natural food for distribution to hotels, guesthouses and restaurants in the area, bringing significant added value to the region.

Small industry and crafts may complement tourism development

Tourism development would support related activities, such as the small industry and crafts, including wood processing for value added products Tourism intersects with and stimulates a wide number of other sectors in the supply chain, especially agriculture, infrastructure, communications, construction, and handcrafts.73 Its direct impact is reflected through the revenues brought to the Valley (salaries, profits of hotels, restaurants, various operators, etc.) as a result of tourists’ expenses. The indirect impact of tourism is mirrored in the increase in expenses for touristic services on branches producing consumer goods used by touristic companies to promote their offer at competitive parameters. Finally, the induced impact on the Jiu Valley economy can be traced as both the incomes of those working directly in tourism and those working in the consumer goods sector are reinvested for purchasing other goods and services. We are thus witnessing a process of multiplying aggregate demand on a macroeconomic scale. Based on PwC interviews, the main complementary activities that could develop in the Valley if the number of tourists increases would be the local natural food production required by hotels and pensions, rehabilitation of apartments by owners who will start renting through apps like Airbnb and Booking.com, traditional clothes manufacturing, bike repair shops, restaurants, etc. According to a 2010 study, up to half of the jobs in tourism are held by people under 25 years of age. This employment feature in the touristic sector underlines the importance of continuous vocational training programmes for young people to secure long-term jobs.74

71 2017. Christine Vallaster et all, The interplay between urban policies and grassroots city brand co-creation and co-destruction during the refugee crisis: Insights from the city brand Munich (Germany)

72 The (Romanian: Mineriada) were a series of violent demonstrations by Jiu Valley miners in Bucharest during the 1990s, particularly 1990–91.

73 2010. Ian Goldin, Tourism and the G-20: T.20 Strategic Paper 74 2010. Ian Goldin, Tourism and the G-20: T.20 Strategic Paper 56

Development of transport infrastructure will benefit economy of the Valley

Modernization of roads would have a positive impact on the entire economic environment of the Valley Improving road infrastructure in-between Jiu Valley cities would optimize the transit of workers commuting from one locality to another, also preventing road accidents. On one hand, the area could be better interconnected with the other regions, if works at 66A road are finalized, enhancing connection of the most westerly city of the Jiu Valley to Baile Herculane. Without this road, most of the Jiu Valley represents dead-end from which you can exit on the come-in road only. Another required strategic investment is the modernization and enlargement of the National Road 66 (segment of the European Road 79) from one lane to two lanes per direction for a distance of approximately 80 km between Petrosani and Simeria. Thus, Jiu Valley would be connected to the , reaching the western border with Hungary and relatively close to Serbia. The modernization of the National Road 7A should be a priority as well, as it facilitates the access to the European Road 81, connecting Ramnicu Valcea and Sibiu.

5 of the 6 municipalities have railroads crossing their city centres The railway network crosses the from Petrosani to Lupeni and it is connected to the national railway network. If investments are made to rehabilitate the railway and the railway stations this could become an active route for private railway operators and a viable transport alternative for workers commuting between cities in the area. In Petrila, there is an isolated railway between Petrila and Lonea mines. It is 5.5 km long and has a maximum ramp of 3%, being initially designed as a forest railway and transformed into an industrial one. Today, there is only one lane, parallel to local road 68, circulated by diesel-hydraulic locomotives type L45H with a power of 450 hp and a maximum speed 40 km/h, which are able to carry up to 12 wagons with a capacity of 22T each.75 This railway could be a touristic attraction for visitors eager to see the city and commute in-between mines in a thematic train. Image 3 – Wagons on the narrow railway in Lonea

Image used with the permission of the owner – ACV Comunitate SRL

75 https://info-petrila.ro/2019/09/27/calea-ferata-ingusta-si-trenuletul-bad-muskau-germania/ 57

Mining – but different resource: quartz (I)

The quartz deposit located in Uricani has potential for exploitation Quartz is suitable for various applications, such as watches, microphones, computers and mobile phones processors, radios, sensors, testing and measurement of electronic equipment – signal generators and oscilloscopes. Quartz sand is employed in glass manufacturing, in the petroleum industry, as abrasive material, in metallurgy, for manufacturing of lenses/mirrors, etc. The quartz deposit in the Siglau - Uricani area, on which the surface exploitation was already performed at a 10m- depth, falls under Romanian State’s ownership, with possibilities for exploitation on a license basis issued by the National Agency for Mineral Resources (ANRM). The land (18.7 ha), the access road (4.1 km) in the quarry, as well as the exploitation rights on the deposit are the property of the bankrupt Romanian Discount Bank (Banca Romana de Scont) and of ASTRA SA Insurance - Reinsurance Company. According to current studies, the quartz deposit has an average content of 98.82% SiO2 and 0.11% Fe2O3. The exploitable resources are estimated at approximately 27m. tonnes, the first 0.65m tonnes being exploitable with maximum efficiency at eight 10-meter-deep steps, from which no more than 20% was exploited so far (according to public information). If a private investor acquires the exploitation rights, this would generate investments at least for exploitation and potentially for processing the extracted quartz as well. This economic activity would bring direct, indirect and induced revenues to the local budget, creating jobs for former coal miners.

Energy grid development may attract interest from renewable energy companies

Physical interconnection of the Jiu Valley with the surrounding regions should be considered If the power grid is upgraded and the connection to the network becomes cheaper, the economic development opportunities of the Valley would diversify, as renewable energy companies could show interest in developing wind or solar power plants. Additional studies are needed to confirm and assess the real potential for renewable resources in the area.

Low-priced real estate may attract workforce to the area

Low pricing for apartments and municipalities’ providing land for free for new house building are favourable factors for attracting workforce and young people to the area At the end of 2019, the average rental price for a 1st rate comfort, 2-room apartment built between 1980 and 2000 in Targu-Jiu was 210 EUR/month, while in Deva was 230 EUR/month.76 Considering the massive depopulation of the Jiu Valley over the last 20 years, many apartments are unoccupied, while the majority of the blocks are unrehabilitated. As a result, the real estate market is very low, rating below the cities of Deva and Targu-Jiu, which are nevertheless some of the cheapest in Romania. Given the abundance of unused apartments, it is difficult to determine an average rental price in the area. As for the purchase price of a two-room apartment in an unrehabilitated building, in Lupeni, for example, the starting price can be around EUR 5,000. A modern-furnished, two-room apartment, in a refurbished block in Petrosani might cost between EUR 20,000 and EUR 25,000. Under the circumstances, the development of tourism could support the rehabilitation of apartments and blocks altogether, for the purpose of renting them in hotel regime through apps such as Airbnb or Booking.com. The rehabilitation of a 4-story building (not including the apartments’ interior improvements) by a private in Lupeni city could cost around 10,000 EUR.77

76 2019. Imobiliare.ro, Romanian Residential Market Report, Q4-2019 77 Prices are based on PwC interviews and are indicative 58

Urban regeneration - basis for promotion of cities in the Valley

All six cities could greatly benefit of urban regeneration projects The concept of urban regeneration involves planning regulation, urban growth and development, city branding and local and national identity promotion in an international context. Jiu Valley cities include important urban icons (urban landscapes, elements of urban structure and emblematic iconic places) and cultural heritages. For historical reasons, the Valley is ethnically diverse and there is a multitude of religious denominations as well, with churches being a common sightseeing attraction. Most of them are very well designed by outdoor lighting at night, being the best maintained buildings in each city. On the other hand, most apartments or public buildings are not yet rehabilitated, needing significant investments to improve the cities' overall landscape. Image 4 – Historical building in Petrosani

Image used with the permission of the owner – ACV Comunitate SRL

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Other investment from the public sector: relocation of certain regional institutions in the Valley

The potential relocation of central authorities / creation of a regional-interest public facility in the Jiu Valley would create direct and indirect jobs Some stakeholders in Jiu Valley suggested the opportunity of relocating some central authorities to the Jiu Valley, as well as identifying projects of regional interest that could be developed by the state in this area (for example, setting up a detention centre). Such initiatives may be complemented with investments from the private companies, especially in the services sector. The Valley has the advantage of having several unused industrial buildings with solid structures, suitable for accommodating regional or central institutions.

Image 5 -Large building in Petrila

Image used with the permission of the owner – ACV Comunitate SRL On 12 February 2020, The European Commission launched the infringement procedure on illegal logging in Romania, urging the authorities to improve legislation, manage and check the large quantities of illegally wood cut from the forests. One of the examples highlighted by the European Commission within this infringement showcased Retezat Natural Park, which is accessed through Uricani. This situation could turn into an economic opportunity if brought to the attention of the central authorities with a proposal for relocating the headquarters of environmental-protection agencies and of other entities with responsibilities in areas where the Jiu Valley is disadvantaged, such as: ICAS78 – The National Institute for Research and Development in Forestry "Marin Dracea" is specialized in scientific research, technological development, investment design, providing specialized technical consultancy, as well as in

78 https://www.icas.ro/Contact 60

the implementation of new technologies for the sustainable management of the forests. Currently, the institute is located in the close proximity of Bucharest. ANZM79 – The National Agency of the Mountain Zone applies the Government's strategy and policies in the field of development and protection of mountain areas in Romania, marked by specificity, ecologically fragile and economically-socially disadvantaged due to natural causes, which require specific management. Currently, the Agency is located in Bucharest with a branch in Vatra Dornei (CFIDC – The Training and Innovation Center for Carpathian Development).80 ANARZ81 – The National Agency for Livestock has attributes related to the genetic selection of livestock, certification of breeding material etc. Currently, the Agency is located in the close proximity of Bucharest.82 ANRSC83 – The National Regulatory Authority for National Public Utilities has as its main activity the regulation, monitoring and control at central level of the activities in the field of community services of public utilities that are within its regulatory sphere, in accordance with the provisions of Law no. 51/2006, republished, with the subsequent modifications and completions. Currently, the authority is located in Bucharest. INCDT84 – The National Institute of Research and Development in Tourism has as main object of activity carrying out fundamental and applied research, of public and national interest, regarding the development and promotion of Romanian tourism. Currently, the authority is located in Bucharest. AOR85 – The Association of Romanian Cities has as its main activity the representation of the specific interests of the cities in the dialogue with the central public administration: governmental structures (ministries, authorities and government agencies), parliamentary committees. Currently, the authority is located in Bucharest.

Cheap land and existing buildings with utilities may be of interest for SMEs

Medium-sized businesses could be attracted to Jiu Valley to capitalize on cleared lands, the existence of industrial halls and assets such as industrial cranes and electric transformers Given the mine closures in Jiu Valley and the significant decrease in activity for the remaining ones, multiple land plots became available for new investments. The main advantages of these areas consist of their being under sole ownership and well connected to the road and railway transport infrastructure, having all the utilities on site. Some former mine sites (e.g. at Mina Petrila) still have industrial halls, power transformers and heavy-duty cranes. In 2018, there were 31 industrial areas (25 public and 6 private) for rent or sale, totalling almost 2.5m sqm of land, out of which 20,000 built area (industrial halls and administrative buildings). All sites can be accessed by road, 11 of them having railway access as well. The closest public transportation is on average at less than 0.5 km.86 The complete and detailed list of available sites can be found in the Annex. For a medium-sized business, the cheap land, the existence of utilities, the access infrastructure (especially the railway), as well as the assets coming from the former mines can represent significant competitive advantages, especially if generating business growth.

79 http://azm.gov.ro/ 80 Law on the establishment, organization and functioning of the National Agency of the Mountain Zone, law no. 181/2007 81 http://www.anarz.eu/ 82 G.D. no.1223 / 1996; Law no. 63/2008; Livestock Law no.72 / 2002. 83 https://www.anrsc.ro/adresa-si-contact/ 84 http://www.incdt.ro/index.pl/contact_en 85 http://www.aor.ro/serviciiprestateaor.html 86 https://issuu.com/investinjiuvalley/docs/draft_2_borsura_jv_1009 61

Environmental state of play

Jiu Valley is located in the Petrosani intermountain depression in the central part of the . The depression has the shape of a triangle, with a length of 45.6 km and a width of 9.6 km in the Eastern part and 2 km, respectively in the Western part, covering an area of 137.6 sqm. It is surrounded by the Retezat and Sebes mountains (part of the Sureanu Mountains) in the north and the Valcan and Parang Mountains in the South. The Petrosani Depression is located in southeast of Hunedoara county on two rivers West Jiu and East Jiu and is surrounded by prominent mountains that approach or exceed 2,000 m height: Retezat, Parang, Valcan. In terms of the relief, there is a plateau located at an altitude of 800 m within the depression, where depths of 200 - 300 m formed narrow valleys - with the exception of West Jiu Valley and North Jiu Valley which are much wider and accompanied by well-formed trails.

Map 9 – Jiu Valley’s geographical location

Source: www.strategvest.ro, PwC

Regarding the geological characteristics of the deposit, the Petrosani basin is composed of a crystalline foundation and sedimentary deposits: Mesozoic and Neozoic. Sedimentary, metamorphosed deposits of Mesozoic age appear as small patches on the outside of the basin (north and west of Campu lui Neag, in Varful Pietrii, North and East of Vulcan, between Rascoala and the Pestera Bolii) over the metamorphic formations. The Mesozoic deposits are represented by a limestone facies and a detritic facies. The sedimentary deposits belong to the Upper Cretaceous, Paleogene and the Miocene, largely covered by Quaternary formations. Neozoic deposits are divided into five horizons87: • Lower or basal horizon, disposed directly over the crystalline foundation or over the upper Cretaceous.

87 Florin Faur, ‘’The elaboration of an environmental monitoring system in Jiu’s Valley’’ 62

• Horizon 2 appears on the surface at Rascoala, Petrila, Dalja,Lupeni. The average thickness is 290m in the west and 350m in the east. The clays representing 36% are friable, 7% marls are compact, coal represents 5.5% forming about 21 layers of varying thicknesses and qualities. • Horizon 3 or middle - 530 m in the western area 250 m in the eastern area. Within this horizon were found pituitary, psammite and pelite rocks. Within this horizon, very thin intercalations of coal shale are very rare. • Horizon 4 has a thickness of 450 m and is made up from an alternation of detrital rocks made of clays, greasy clays, sandstone and conglomerates weakly consolidated, gravel and thin layers of coal. • Horizon 5 or terminal is represented by gravels, sands, clays and ashes. To the surface of this horizon is an intersection of bushes with a thickness of 1-1.5 m. The thickness of the deposits in horizon 5 is estimated at 400 m.

The soil of the Jiu Valley has a number of characteristics related to the paedogenetic conditions and the particularities of the relief. As a whole, they have a zonal character, determined by the altitude and, implicitly, by the bioclimatic conditions. Spodic soils can be found in the mountainous area with heights exceeding 1.700m, above the upper limit of the forest, under the conditions of a cold and humid subalpine climate, on the materials resulting from the disaggregation of silicon acid rocks (crystalline shales). They have a low profile (thicknesses below 0.5m) and are strongly acidic, having a pH between 3.5 at the surface and 4.7 in depth. The forest area, which extends to the edge of the mountains, is the area of Cambodian soils. These are acid brown soils that develop under the spruce and mix forests, but also under the sub-alpine meadows. At the edge of the mountains, on the hilly foothills, clayey soils develop in different stages of podzolization. Their spread is related to the presence of deciduous forests. At lower altitudes, with average annual temperatures of 9.5ºC and precipitation of 700mm / year, soils like cambic chernozems and illuvial clay soil are predominately developed on horizontal or slightly inclined surfaces, having as substrate clays, marls and deposits. In the Jiu Valley area, there are also alluvial, hydromorphic, turbid, soils and red soils (terra rossa). Jiu Valley’s hydrographic network is dependent on the two main rivers: East Jiu and the West Jiu with a length of 28 km and 51.4 km, respectively. Along the 6 localities of the Jiu Valley, there are a series of rivers and streams, in general with lengths between 6 and 12 km, with the exception of Taia and Banita with a length of 20 km and 12 km, respectively. Being mountain running waters they have turbulent flow regime which causes a good oxygenation. Besides these rivers, there are several other streams relevant for the extra urban communities (e.g. for industrial use or recreational fishing). In terms of natural resources, Jiu Valley’s key resource is the hard coal, which was estimated at approximately 232 M tons, out of which 83 M tons are exploitable in the concession perimeters. Other resources include minerals such as the quartz resources available in Uricani, which are not currently exploited. The mining activity is among the main sources of environmental pollution driven by both the actual extraction of the coal and its processing. Deterioration of environmental components as a result of different activities carried out within this industry can lead to an ecological imbalance that affects the life of living organisms.

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Air Pollution The air pollution in the Jiu Valley’s area is mainly driven by the activity of the thermal power stations serving the mining units and the ventilation stations belonging to the same units. They are responsible for the pollution with sulfur oxides and nitrogen powders suspension, soot and carbon dioxide especially in the surrounding areas. The ventilation units belonging to the mining units have the role of evacuating the air vitiated from underground, air whose composition includes some harmful gases (e.g. methane, hydrogen sulfide, carbon monoxide, etc.) and mineral suspensions. Starting 1994, Jiu Valley’s coal mines have been gradually closed and hence, at this moment only four mines are still functioning. Out of these four, two mines – Lupeni and Lonea are expected to be open until 2024 and to be reclaimed by 2027.

Map 10 – Map of Jiu Valley's mines, as of February 2020

Source: Google Maps, PwC Analysis

The mines closed between 1997 and 2018 were also reclaimed (except Petrosani, where the process is currently underway, and it is expected to be finalized later this year). The demolition of the on-ground buildings of the former mines, which is currently underway would remove the predominant industrial landscape in the area. Another pollution source is CEH (Complexul Energetic Hunedoara) due to its thermal power plant Paroseni’s activity in the region. The Europe Beyond Coal ranks Paroseni as #196 of all EU coal plants in terms of carbon dioxide emissions with 0.3 M tones in 2018. Main pollutants produced by the plant and thermal power plants located other companies include monoxide and dioxide carbon, dust (fly ash, particles coal fired, slag, etc.); sulphur oxides; nitrogen oxides; small quantities of tar, hydrocarbons,soils, sulfates and acids organic, etc. Moreover, according to the Europe Beyond Coal model - this plant’s impact on human health is estimated at 53 premature deaths in 2016.

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Map 11 - Coal power plant Paroseni – Key stats

Source: The Europe Beyond Coal, https://beyond-coal.eu/data/

Water Pollution The mining activity carried out over time in Jiu Valley also involved the drainage of groundwater as well as the use of large quantities of water in the coal preparation processes. Wastewater from coal extraction and preparation is impure with both mineral suspensions and chemicals. Coal extraction in underground operations is associated with important local changes in the configuration of the earth's crust, which affect the regional hydrological regime - both from a quantitative point of view, by amplifying the surface water flows infiltrated in the lower layers of the lithosphere and qualitative, through the dissolved mineral substances released in receiving water accumulations.

Mines exploit relatively clean water, from the ground, which they return loaded with substances that harm the flora and fauna of the rivers and lakes, while also reducing water resources for domestic, agricultural and industrial consumption.

In recent years, there has been a decrease in pollution with solid suspensions in Jiu Valley, due to phasing out the activities responsible for this pollution, and to the upgrade of some production units.

Soil Pollution Operating activity in the underground has negative impact on the surface of the land due to the fact that it involves the storage of some relatively large quantities of mining waste, leading to changes in the morphology of the land, in the way land is used and activating the emergence of some new forms of relief. There are large areas with specific surface endowments, namely 97 tailing dumps, out of which 7 are currently still active, 4 tailing ponds - which occupy large flat areas. Moreover, infrastructure for car and rail transport from/to mines also occupy flat areas - as well as the technological premises of the eleven closed mines, which account for a total area of approximately 750 ha. Most of the tailing dumps in Jiu Valley are located outside of built-up areas, on the slopes or along the valleys. Some of the tailing dumps were built in such a way that they blocked valleys without permanent water courses, forming 65

lakes from precipitations. The water can seep into the tailings dump by altering the properties of the rocks and of the terrain, leading to erosion phenomena and creating hydrostatic and hydrodynamic pressure, which can eventually cause landslides or muddy water leaks (the latter being observed in the past - e.g. in the Lupeni area). Construction in these tailing dumps areas may be possible as long as a geotechnical evaluation study shows the feasibility of a certain type of building; however, this should be evaluated on a case-by-case basis. As most of the mining activities were phased out and greening measures were enforced for the closed mines, subject matter experts consider that currently, there is no significant pollution with dangerous and toxic substances in Jiu Valley.

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Environmental challenges Land reclamation

Previously closed mines might have undergone a suboptimal reclamation process in some cases Based on the interviews held with local stakeholders, it appears that there were incidents (e.g. collapses of galleries) in some of the mines closed in the past. This suggests that the site reclamation process may not have been enforced properly in some cases. Furthermore, in 2019 local media reports88 show that smoke came out of the ground as well as a strong coal-like smell in the community living in the area above the Dalja mine’s galleries. As per the on-site analysis, the potential cause of this phenomena was a coal deposit - possibly a waste dump, dating back many years. In Jiu Valley, in areas where coal has been exploited at a depth lower than the safety pillar, there is a landscape deterioration through subsidence. The mines located in Lonea and Lupeni are among the oldest mining operations in the Jiu Valley, having a mining structure expanded on several levels of operation with several enclosures that have lost their usefulness as coal mining depth’s increased. For instance, in Lupeni, an area of about 10 ha from the outskirts of the municipality sank, resulting in a difference of the land’s level of about 3-4 m. According to media reports89, the subsidence phenomena has worsened: deformations of the surface due to the underground exploration of the coal have increased, leading to modifications of the closing plans for both of these mines. Moreover, the open-pit mining in micro-quarries in Jiu Valley led to a major deterioration of the landscape and it is now difficult to restore the landscape to its initial state.

Considering the fact that carrying out a suboptimal reclamation process can impact negatively the environment and ultimately, living organisms in the area, it is imperative to ensure mine’s closing and reclamation is pursued in accordance with the relevant standards and guidelines (e.g. United Nations Environment Programme - Guide for mine closure).

Ponds from ash

Burning coal for electricity production in the region generated two ponds for storage of ash There are two ponds built for the storage of ash from the thermal power plants located in Paroseni and Coroesti. The ponds are put back into operation by using ash in the building materials industry (in the case of ponds belonging to the Paroseni Power Plant) and by the elevation of earth dams (in the case of E.P.C. Coroesti). The surrounding land is not impacted for now, but a potential breaking of the dams would have adverse repercussions, exposing a large area to some possible overflows.

88 https://gddhd.ro/actualitate/realitate-sau-scenarii-situatie-controversata-in-zona-mina-dalja-care-pe-care-sau-pericolul-care-a-iesit-la- suprafata/ 89 https://cronicaromana.net/2018/03/06/doua-mine-din-valea-jiului-vor-opri-productia-2018/ 67

Environmental opportunities Alternate use of mines

Properly closed and rehabilitated, the mines could be reintroduced in the economy According to the interviews conducted by PwC, there is a growing interest in reclaiming the sites of recently closed coal mines and to further capitalize on them. In order to enable the implementation of such an initiative, the Ministry of Economy should transfer the property of the land to the County Council or to local city-halls. Being located in a mountain area, flat land areas in Jiu Valley are rather limited and the closed mines occupy a large part of this areas. The greening works and environment restoration for the closed mines would enable the repurposing of such areas (e.g. development of new businesses). Depending on the current state of the mine, some buildings might be refurbished and transformed into educational/ cultural/ recreational sights (e.g. classrooms). A critical requirement would be to ensure that the mine closing follows the relevant standards for responsible mining. For this purpose, several key steps should be considered, namely: • Defining a vision of the final result for mining land with concrete objectives for implementation; • Ensuring that the mine closure plan is an integral part of the life cycle of project; • Preparation of an early closure plan in the mine development process and in consultation with regulatory authority and local communities; • Explicitly including environmental, social and economic problems of the time mining operations planning; • Continuous review from the pre-operative phase planning through all the stages - construction, mining, mine management and closure, post – closure. The successful enforcement of this initiative would minimize and mitigate the environmental effects of mining and bring the land to a natural or economically usable state.

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Social and cultural Social and cultural state of play Demographics The demographic analysis of Jiu Valley indicates a reduction of population since 1998, year that also recorded the sharpest population reduction rate: -2%. In 1998, 166,000 people were living in the Valley, while at the beginning of 2019 there were only 134,000 left. It is generally accepted that this decline in population has been triggered by the layoffs and restructuring of mining industry.

Chart 17 - Evolution of population in each municipality from Jiu Valley between 1992-2019 [‘000]

Source: National Institute of Statistics Database; PwC analysis

The historical population data in Jiu Valley from 1992 to 2019 allows for a statistical determination of the evolution if no action is taken. We have used the Excel forecast tool, which uses an algorithm90 which indicates where 95% of the future values will be.

Chart 2 below presents the forecast of population in Jiu Valley until 2030. The declining trend is expected to continue if no action is taken, so that the number of Jiu Valley inhabitants will decrease at a CAGR of 1.4%, reaching approx. 114,000 inhabitants in 2030, which is almost a 30% decline compared to the peak achieved in 1997.

Such estimation does not consider the age profile of the population, however if no action is taken, it is highly likely that the average age of the population in the Jiu Valley will also increase.

90 The AAA version of the Exponential Smoothing (ETS) algorithm, with a confidence interval of 95% 69

Chart 18 - Evolution and forecast of population in Jiu Valley (values in ‘000)

Source: National Institute of Statistics Database; PwC analysis

The natural movement of population analysis also highlights a negative trend, with the number of births that decreased significantly between 1992-2018, from 2,580 births in 1992 to 1053 births in 2018, with the smallest number of births registered in 2013 - approx. 960. While the number of births decreased, the number of deaths revolved around the average of 1500 deaths/year. Birth rate, mortality rate and birth-death ratio are presented in the following chart.

Chart 19 - Evolution of natural movement of population in Jiu Valley between 1992-2018

Source: National Institute of Statistics Database; PwC analysis

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Another indicator that could be relevant for the analysis of Jiu Valley demographics is the net migration rate which is generally computed as the difference between the number of immigrants and number of emigrants divided by population and multiplied by 1000. A negative indicator shows that there are more people leaving the area than entering the area. The following chart highlights the evolution of net migration rate in Jiu Valley between 1992- 2018. The highest negative migration rate of -18.3 was registered in 1998, in line with the total population decline. In 2018, there were almost 9 persons leaving the area for each 1000 persons.

It is important to mention that this statistic considers only persons that moved their residence in or out of the Jiu Valley and notified the authorities by relevant documentation. The statistics does not consider those who left without notification, or people who still have the main residence registered in one of the Jiu Valley cities although living elsewhere.

Chart 20 - Evolution of net migration rate in Jiu Valley between 1992-2018

Source: National Institute of Statistics Database; PwC analysis

Such fluctuations in the population structure by age and gender has impact on workforce, educational requirements, health and social services. In 1992, population of Jiu Valley was represented by 51% men and 49% women, while in 2019 the percentages reversed.

The following chart presents the population pyramid of Jiu Valley, emphasizing that in 1992 there were far more aged persons between 0-40 years, compared to 2019. There were 56% less persons aged 0-20 in 2019 than in 1992; these statistics are in line with the decrease in the birth-death ratio over the analysed period. Moreover, the effect of the aging population is visible as the percentage of people aged over 45 years increased by 45% in 2019 compared to 1992.

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Chart 21 – Jiu Valley population by age and gender (1992 vs 2019)

Source: National Institute of Statistics Database; PwC analysis

The effect of depopulation which began in 1998 led to a decrease in the young population, currently the area being inhabited mostly by people above 45. The decline in the number of young persons will continue at an accelerated pace if no action is taken to revitalize the region.

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Workforce

The Jiu Valley region is a mono-industrial area where the main activity was/is mining; most of the citizens working in this sector had to re-qualify and find jobs in other areas of activity after the economic restructuring and mine closures. However, the region does not provide viable employment alternatives hence people sought employment in other cities or even abroad. In 2019, Jiu Valley recorded approx. 100,000 people capable of working, aged 15-65. Only a quarter of this group was employed, compared to 1992 when more than 60% of the population had a job. Uricani is the most affected municipality, as the number of the employed (as a percentage of total persons that can work) decreased from 83% in 1992 to 8% between 2016-2018. The decrease in the number of jobs started in 1998 when layoffs began due to restructuring of the mining industry while other businesses developed at slower pace. Chart 22 - Evolution of workforce in Jiu Valley between 1992-2018 [‘000]

Source: National Institute of Statistics Database; PwC analysis Statistics show that the number of unemployed persons has declined between 2010 and 2019 at a fast pace. In 2019, there were less than half unemployed persons than in 2016. However, there is a discrepancy between the number of unemployed vs. those who can work but do not have a job. For example, in 2018, there were 78,000 people in Jiu Valley that were able to work, but not employed, and only 1,680 unemployed persons according to the statistics provided by the National Institute of Statistics. This situation arises as statistics on unemployed persons considers only the citizens registered as unemployed with the National Agency for Employment and meet certain criteria in accordance with Law 76/2002. Therefore, the statistics referring to unemployment do not realistically depict the unemployment situation in Jiu Valley which may be considerably higher. The evolution of unemployed persons in Jiu Valley between 2010-2019 is highlighted in the chart below.

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Chart 23 - Evolution of unemployed persons in Jiu Valley between 2010-2019

Source: National Institute of Statistics Database; PwC analysis

The chart below highlights the differences between the average net salaries recorded for several sectors of the economy in Romania, West Region and Hunedoara in 2018. In Hunedoara, mining sector ranks third after utilities, health and social services in terms of average net salary (excluding public administration and defence). Miners have a higher average net salary than that of all sectors of the Romanian economy (21% higher) and that of the West Region (26% higher). A higher difference is recorded in Hunedoara, where employees in the mining sector earn 53% more than employees in other sectors. In Hunedoara mining activities are conducted only in Jiu Valley.

Chart 24 - Comparison of average net salaries between Hunedoara, West Region and Romania in 2018 [RON]

Source: National Institute of Statistics Database; PwC analysis

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According to the most recent statistics (February 2020) published by National House of Public Pensions91, Hunedoara is the leading county in Romania in terms of average pension benefit. Compared to Romania overall, where the average pension benefit was RON 1,374 and the other three counties that are part of the West Region, where the average pension benefit was RON 1,322, in Hunedoara county there was recorded a notably higher average pension benefit of RON 1,824 (approx. 33% higher).

Interviews with some groups of stakeholders revealed that many miners in Jiu Valley benefit from the early retirement opportunity. Moreover, the initiative of a Jiu Valley Senator to provide social protection for those who are working in the mining sector by lowering the retirement age is under consideration of the parliamentary bodies. Currently, employees in the mining sector can retire and receive pension benefits as soon as they have reached 45 and meet the requirement of having at least 20 years of experience in the sector.

The high unemployment rate in the region could lead to financial hardships and poverty, further triggering decline in self-esteem, family tensions and other social issues such as increased alcohol consumption, drug addiction or social isolation. As the number of people in Jiu Valley who are available to work is relatively high, job creation programs in the region are most likely to be successful. However, incentivizing miners to reskill or continue to work in other sectors can become challenging as the remuneration in the sector is high and early retirement is a viable option.

Education

It is generally considered that education is one of the most important growth factors in a society, especially the people that benefit from higher education or formal qualification in certain trades as they are the ones enabling innovation and facilitating the spread of knowledge and technological development. Throughout this chapter, students and pupils enrolled in any education level are referred to as “students” if not specified otherwise. In Romania, the public education is free for all the students during the legal study period. However, there are also public post-secondary education institutions that charge annual fees for certain places in study programmes that are not financed by the government. According to data provided by Hunedoara County School Inspectorate92, in the region of Jiu Valley there are 45 educational institutions of different levels as follows: 12 pre-school education institutions (kindergartens), 22 primary and lower secondary education institutions, 10 secondary education institutions (high schools) and 1 post- secondary education institution in Petrosani. The chart below shows the overall declining trend in the number of students and pupils at all educational levels in the region (there are 5.5% less students in each year compared to the previous year). The smallest reduction is recorded in Uricani where the total numbers of students decreased from 1,184 in 2011 to 1,011 in 2018. The number of students enrolled in post-secondary education decreased at a faster rate (approx. 8% annually) than the total number of students in the region. On one hand, this reduction can indicate a higher dropout rate at this level of education. On the other hand, it can be the consequence of the migration of students to other universities in the country that offer study programmes adapted for the current status of the labour market. Another cause can be the declining trend in the number of students enrolled in pre-school education in line with the decrease in young population. This phenomenon may lead to further difficulties in the social and economic sector. University of Petrosani provides students enrolled in post-secondary education with the opportunity to obtain a bachelor’s, master’s and doctoral degree. According to data provided by the University, in 2019 school year there were 2,353 students enrolled for bachelor studies, 778 enrolled for master studies and 153 for doctoral studies. The declining trend in the number of pupils enrolled in pre-school education probably represents the main trigger of the reduction of students enrolled in the upper levels of education. This phenomenon can lead to further difficulties in the social and economic sector, especially when it comes to providing skilled labour force or entrepreneurs.

91 Statistics retrieved from https://www.cnpp.ro/en/web/guest/indicatori-statistici-pilon-i 92 Hunedoara County School Inspectorate, http://isj.hd.edu.ro/index.php/reteaua-scolara 75

Chart 25 - Evolution of students by level of education between 2011-2018

Source: National Institute of Statistics Database; Hunedoara County School Inspectorate; PwC analysis

Even if the biggest share of students in the Valley is represented by those enrolled in primary and lower secondary education, the share of students graduating from the primary and lower secondary education is lower than that of students graduating from secondary education. This statistic indicates that young students in the Valley who reach secondary education don’t encounter the same difficulties in graduating compared to those enrolled in primary and secondary education. However, in Lupeni there is a sharp reduction (19% annual average) in the number of secondary education students, from 484 in 2011 students to 179 in 2017.

The number of graduates in the Valley does not follow the same declining trend. The number of students who graduated in 2012 and 2014 is higher than that of previous years. Yet, the number of students graduating from University of Petrosani almost halved in the period 2011-2017. The evolution is reflected in the chart below.

At the end of school year 2017, Jiu Valley was totalling 4,566 graduates at all educational levels, approximately 50% of the total students who graduated in Hunedoara county. Jiu Valley graduates represent 10% of the total graduates in the West Region and 1% of all graduates at national level in 2017.

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Chart 26 - Evolution of graduates by level of education between 2011-2017

Source: National Institute of Statistics Database; Hunedoara County School Inspectorate; PwC analysis

The total number of teachers in the region also decreased, but at a slower pace (4% annual average) than the total number of students, leading to a ratio of 18 to 1 between students and teachers in 2017 school year. Regarding post-secondary education, the ratio between students and teachers was 22 to 1 in 2017, compared to a ratio of 29 to 1 in 2011. The data regarding number of teachers in vocational schools shows no records since 2011, except for 2013 when only 3 professors were recorded. However, as the previous charts showed both students and graduates as part of the vocational education this could probably be explained as these students are following vocational courses as part of a secondary education institution, the teachers being also regarded as part of secondary education.

Chart 27 - Evolution of teachers by level of education between 2011-2018

Source: National Institute of Statistics Database; PwC analysis

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The decreasing number of students, teachers and graduates in the region can impact the development of economy, innovation and research. However, Petrosani University could become a sustainable post-secondary education centre in the region which could also attract students and teachers from other regions in Romania.

Healthcare

The access to public healthcare services depend on the existence of healthcare institutions, their location throughout the region, how well they are equipped and filled with medical staff. There are 190 healthcare institutions of different types in the Valley, almost half of them located in Petrosani. In 2018 the number of healthcare institutions in the Valley was almost double than in 1998 due to the increasing number of medical facilities located in schools (“cabinete medicale scolare”), family doctor clinics (“cabinete medicale de familie”), dental clinics (“cabinete stomatologice”) and other specialized clinics (“cabinete medicale de specialitate”). As of 2018, the healthcare institutions in the Valley included: 3 hospitals, 9 medical facilities located in schools (none in Uricani and Aninoasa), 60 family doctor clinics, 44 dental clinics (out of which 20 in Petrosani alone but none in Aninoasa), 38 specialized ambulatory clinics that usually provide services in ambulatory care regime, 26 pharmacies and 10 other type of clinics. The three operational hospitals are: Municipal Emergency Hospital of Petrosani, Municipal Hospital of Lupeni and the Municipal Hospital of Vulcan. The interviews with various stakeholder groups revealed that the hospital in Petrosani is particularly known for the good practices in the orthopaedics. The total number of medical staff does not follow the general declining trend in the Valley but rather fluctuates on a yearly basis within the range 1,100 - 1,300. There were 1,121 persons working in healthcare in 2018, compared to 1,168 persons in 1995. More than half of the medical staff in the Valley is working in Petrosani (645 employees in 2018), followed by Lupeni and Vulcan with 211 and 151 employees in the healthcare sector. Chart below highlights the evolution of different categories of medical staff in Jiu Valley between 1995 and 2018. Chart 28 - Evolution of medical staff in Jiu Valley between 1995-2018

Source: National Institute of Statistics Database; PwC analysis From a total of 261 doctors in 2018, 84 were working in the private sector (48 as family doctors), while the remaining 177 were working in the public health institutions. In 2018, there was one doctor for 520 inhabitants in Jiu Valley, while in West Region and at national level the ratio was considerably lower: 1 doctor for every 278 inhabitants, respective 1 doctor for every 367 inhabitants.

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As of 2018, more than 90% of the pharmacists and dentists in the region were working in the private sector. The differences arise again when referring to the number of inhabitants per specialist. There was 1 dentist for 2,771persons and 1 pharmacist for 2,425 persons in Jiu Valley in 2018, while in the West Region there was 1 dentist for 1,060 persons and 1 pharmacist for 1,526 persons. At national level, the ratio is 1,261 persons to 1 dentist and 1,350 persons to1 pharmacist. The category “Other secondary education healthcare staff” include employed nurses, pharmacy assistants, laboratory technicians and others; the staff belonging to this category has decreased by 100 persons since 1995, but this reduction is offset by the increasing number of dentists and pharmacists in the region. The number of personnel at this level is closer to the figures recorded in West Region and at national level. The evolution of the ratio between population and medical staff in Jiu Valley is highlighted in the chart below. Chart 29 - Evolution of ratio between population and medical staff from 1998-2018

Source: National Institute of Statistics Database; PwC analysis

Social services

According to the National Authority for Disabled Persons93, in end-September 2019, the total number of people with disabilities in Romania reached 839,632. Only 2% of the total is represented by persons living in public residential institutions, the rest of 98% being taken care of by families or living independently. The same source highlights that the West Region recorded 78,088 disable people (i.e. about 9.3%). In the same period, there were 5,435 disabled persons not living in a residential institution in Jiu Valley94, out of which 462 were infants95. More than 40% of these persons are diagnosed with the highest grade of disability. The share of disabled persons of 4.1% from the total population in Jiu Valley is higher than the share of 3.8% in West Region and 3.8% in the entire country. Many families in Hunedoara county and - Jiu Valley is no exception - are split because parents chose to leave the country and work abroad. In end-September 2019, in Hunedoara there were 1,617 children raised by relatives who did not benefit from any protection measure, 146 of them benefited from protection measures and 13 children did not benefit from protection measures and were not raised by their relatives3. If population is taken as a benchmark, then it can be assumed that there are approximately 520 infants in Jiu Valley that are not raised by their parents (2% of population in 2019 ranging 0-19 years of age).

93 Source: National Authority for Disabled Persons - Statistical Data - 30 September 2019 94 Source: D.G.A.S.P.C Hunedoara - Statistic Data regarding child protection and disabled persons - 30 September 2019 95 The term “infant” is used with the meaning it usually has in law i.e. person that did not reach 18 years old yet.

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There were 442 residential social assistance public institutions for disabled persons and 60 non-residential social assistance public institutions at a national level at the end of September 2019. The residential institutions accommodate approximately 17,700 persons2. In Jiu Valley there are several residential and non-residential institutions for infants and one for disabled adults in Petrila. These are presented in the table below. Table 8 - Institutions for infants and disabled adults in Jiu Valley as of 30 September 2019

Institution Location Type Capacity Beneficiaries

Centre for Assistance and Care for disabled adults Petrila Residential 50 44

Day center Petrila Non-Residential 120 136

Orphanage Lupeni Residential 30 16

Orphanage Lupeni Residential 20 19

Day center Lupeni Non-Residential 50 50

Centre for disabled infants Vulcan Residential 30 20

Family apartment for infants Vulcan Residential 6 6

Orphanage “Betania” Uricani Residential 22 15

Orphanage “Cor Iesu” Petrosani Residential 30 38

Day center “Cor Iesu” Petrosani Non-Residential 60 44

Day center “Casa Policino” Petrosani Non-Residential 24 73

Day center “Maria Stein” Petrosani Non-Residential 35 41

Day center “Sf. Varvara” Petrosani Non-Residential 15 15

Even if there seem to be enough institutions in the Valley to accommodate vulnerable people who need an accommodation place, the number and capacity of non-residential day-care facilities is not enough. Moreover, the distribution of these types of institutions throughout the region is not symmetrical as 3 cities out of 6 do not have such facilities (most of them are in Petrosani).

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Social and cultural challenges People migration negatively affects all socio-economic areas

Locals leaving Jiu Valley to search for other opportunities as there is limited employment opportunity especially for young educated people The people migration from Jiu Valley can also be regarded as a consequence of the limited employment opportunity for educated professionals. The trend is also seen among young people who wish to pursue a career in different industries that are not present in Jiu Valley. Those leaving the Valley for study reasons either go to university in Petrosani or move to other regions throughout the country. However, the number of people returning to Jiu Valley after completion of studies is very low due to various factors, mainly the limited number of jobs available and high demand in other regions of Romania. The limited diversification in people’s professional skills and the limited technologic know-how impedes the emergence of new age jobs.

School dropout in early stages of education affects the future of workforce in the Valley

Relatively high level of school drop-out School drop-out in the early stages of education can lead to social exclusion, unemployment and poverty. Among the many reasons young people give up on school, the most common ones refer to the poor socio-economic context, personal and family problems and learning difficulties. The interviews conducted with various groups of stakeholders revealed that young people in Jiu Valley encounter difficulties in deciding the career opportunities they would enjoy, and they would like to pursue or whether finishing school is relevant for their prospects. This happens as the level of counselling received in school is relatively low.

Local education not adapted to the local labour market

The technical / vocational schools lack modern facilities and synchronicity with the local labour market Jiu Valley has 3 technical colleges, 2 technological high schools and a post-secondary school96. When considering the curricula, human resources and financial resources, the technical / vocational education presents the following deficiencies97, which are not, however, specific to Valea Jiului only, but to the Romanian educational system as a whole: • Teachers do not use modern tools – worksheets, student portfolios, educational software etc. • Practical training is usually a repetition of the theoretical knowledge previously taught in the classroom; • Teachers’ creativity is not supported when teaching, being unable to deviate from the laborious curricula which is mandatory; • Teachers could be trained to use the available material base better in the teaching-learning process; • Many teachers have a conservative attitude and are resistant to change on issues such as focusing on the needs of students, modernizing lessons and digitalizing the education process; • Technical schools are poorly funded, with laboratories lacking modern equipment, their overwhelming majority being more than 40 years old. As for the students, the main weakness is their lack of long-term perspective with regard to their professional development.

96 Hunedoara County School Inspectorate, http://isj.hd.edu.ro/index.php/reteaua-scolara 97 Adaptation of the SWOT analysis in the Mihai Viteazul Technologic Highschool Action Plan, 2019 – 2025, based on PwC interviews with stakeholders, http://www.mihaiviteazuvulcan.ro/ 81

Limited social services leave vulnerable population unattended

Limited availability of social services provided by the public sector There is a relatively high number of disabled people who do not have the opportunity to live in a public residential institution, especially those diagnosed with a high grade of disability. The insufficient number of non-residential facilities for infants has a high impact on the development and well-being of children in the region, especially those missing parents’ direct care. These infants are either raised by their relatives or by the community. The interviews held with various categories of stakeholders further emphasized the considerable amount of vulnerable population who does not avail of a decent residential place, sufficient financial resources for a decent living or who are subject to domestic violence due to alcohol, drugs consumption or gambling addiction.

Professional reconversion of miners – a traditional challenge

Miners have a high professional pride and relatively generous salaries and/or pensions A career switch for a miner can be challenging both for the miner and for the job providers as, besides the high professional pride, there are many financial advantages in relation to the mining profession. Therefore, resistance to change and reskilling of current or former employees in the mining sector was relatively high. The fact that pension benefit for miners is above the average salary after tax in Romania, coupled with the possibility for early retirement decreases the willingness of miners to seek employment in other sectors.

Slow pace of change leads to scepticism and resignation

Scepticism and resignation of certain groups of population regarding the socio-economic situation and prospects The interviews held with different group of stakeholders reveal a latent state of scepticism and resignation among certain categories of population regarding the socio-economic context in the Valley as well as the future improvement prospects. This happens as population that lived in the Valley since 1990 perceives the progress in the region to happen at a slow pace; some may argue that the socio-economic context actually regressed. The most discussed issues refer to: limited number of jobs available, workforce migration, few options in spending free time, lack of trust in the capability of public authorities to implement high amplitude projects.

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Social and cultural opportunities The number of employable persons may be of interest for investors

A relatively high number of available employable persons There is likely that many of the unemployed would work if offered relevant opportunities. Possible investments in the region that would require available workforce are not likely to face difficulties in finding workforce. However, specific training might be needed in order to reskill the population in one sector or another.

Higher education is available in the Valley

The existence of Petrosani University in the region The fact that there is a University in the region can facilitate the development process of young people willing to continue their studies after secondary education. It can also incentivize innovation, research and development activities in the region. There is opportunity to adapt the current curricula for better representation of the current needs on the labour market.

Interest to preserve local traditions may complement the brand of the Valley

Presence of traditional inhabitants to help preserve local traditions The existence of myths and superstitions could be capitalized on by developing a type of tourism based on characteristics of local inhabitants which are known in the region as “momarlani”. The existence of the “Momarlan Museum” in Petrosani can help incentivize the development of this kind of tourism in the region. Moreover, certain highly profiled members of the local communities in Jiu Valley are willing and determined to promote the region as a place where people, either residents or tourists, can spend quality time by engaging in different activities organized with the help of NGOs.

Ethnic and religious diversity may support social inclusion

Religious traditions of different denominations Jiu Valley is a region benefitting from ethnic and religious diversity. Residents of Jiu Valley consider themselves an ethnically diverse population embracing different faiths. However, the interviews with stakeholders revealed that only a small number of people out of the total population in the Valley goes to church. They could be incentivized to share the knowledge and good practices they learn with the society they belong to. They can act as contributors to strengthening the social inclusion process of the more vulnerable members of the communities.

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Technological Technological state of play

Jiu Valley’s historical background as a mono-industrial area as well as its ongoing transition from coal-based activities have significantly shaped the local business environment and the economy. The breakdown of Jiu Valley’s economic profile outlines that the local economy is dominated by the services sector – particularly trade. Out of the total number of companies active in Jiu Valley, 42% operate in the trade sector. The second largest sector is manufacturing with 8.5% of the total number of active companies, followed by transport, construction and the hotel industry with 8.1%, 7.9% and 7.1%, respectively. Trade is also the largest sector from a turnover perspective as it accounts for ~28% of the total turnover created in the Jiu Valley area. The energy and manufacturing sectors contribute with ~24% and ~ 20%, respectively to the total turnover. In terms of workforce, the energy sector employs approximately 5,000 people, followed by the trade sector with over 3,000 employees. Manufacturing and construction register 2,423 employees and 1103 employees, respectively. The manufacturing sector includes mainly activities focused on food, textiles, wood (both wood processing and furniture manufacturing) which are typically labour-intensive businesses. These businesses as well as those in trade, transport, etc. do not require a high degree of technological development, nor knowledge intensive activities and capabilities. Chart 30 - Companies per industry in Jiu Valley [2017, no.]

Source: Rodica Burlacu, Bogdan Suditu and Viorel Gaftea (2019), “Just Transition in Hunedoara – Economic diversification in a fair and sustainable way’’98

98 Produced by CEROPE for Greenpeace Romania and Bankwatch Romania 84

The structure of Jiu Valley’s economy mirrors Hunedoara’s profile as the breakdown of the latter’s economy indicates that the same sectors dominate the county’s economy: trade with ~33% of the companies, manufacturing with ~11%, transport with 9%, construction with ~9% and hotel industry with 7%.

Chart 31 - Active companies per industry at Hunedoara county level [2018, no.]

Source: http://statistici.insse.ro:8077/tempo-online/#/pages/tables/insse-table accessed on February 21st, 2020

The figures in chart 29 and chart 30 indicate that Jiu Valley’s economic structure is further mirrored at regional level. The structure of the West Region’s economy – via its four counties: Arad, Caras-Severin, Hunedoara and Timis – is also dominated by the same industries. However, the developed economies in the West Region – Timis and Arad – include more technology and knowledge intensive sectors. For instance, Timis is the fourth largest county nationwide in terms of revenues of the software industry with approximately EUR 190 M. A key driver behind the success of the software industry in Timis is the Polytehnic University in Timisoara where ~1,100 student with an IT&C background graduate each year. At a more granular level, the assessment of the top companies operating in each of the six municipalities in Jiu Valley further substantiates the economic profile of the area as well as its reliance on low technology sectors.

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Chart 32 – Aninoasa: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis

Aninoasa’s economy is dominated by several companies operating on the local market in low-tech industries such as textiles, wood, retail, etc. All these companies are either small enterprises (e.g. Idea Relax Leather, Automotive Conf) or microbusinesses (e.g. companies ranked 5th to 10th in the above chart) As per latest available data, there were 52 companies active in 2018 and the cumulated annual turnover of the top 10 companies amounted to EUR 12,7 M, which represents approximately 88% of the municipality’s total turnover. Moreover, the share of the top 3 companies in the municipality’s total turnover registered 58% in 2018. Most of the top 10 companies registered profit in 2018, however, the most profitable companies seem to be Ellostyle Group and Remat Transilvania with a net profit margin of 27.4% and 26.1%, respectively. Besides Bufi si Deni, the least profitable companies in 2018 were Nik Art Serv Cons, Automotive Conf and Idea Relax Leather with net profit margins of 0.2%, 0.5% and 0.8%, respectively. In terms of headcount, the top 10 companies in Aninoasa employ approximately 79% of the local workforce in 2018 – with the top three companies’ headcount representing 57% of the local workforce. 86

Chart 33 – Lupeni: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis

Lupeni’s economic profile is similar to the one in Aninoasa in terms of dominance of several companies operating on the local market. Another similarity is the fact that Lupeni’s current economy structure is also based on low-tech industries such as retail, textiles, wood, etc. Most of these companies are small enterprises - with one notable exception: Confezioni Andrea Romania. Despite being a medium-sized enterprise from the perspective of the turnover criterion (as per EU’s definition99), Confezioni Andrea Romania is the second largest company in the Jiu Valley region based on its 2018 turnover. As there are ~300 active companies in Lupeni, this municipality is ranked third in the region, after Petrosani and Vulcan in terms of number of businesses. The cumulated annual turnover of the top 10 companies amounted to approximately EUR 49 M in 2018, which represents ~79% of the municipality’s total turnover.

99 European Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (notified under document number C(2003) 1422) and subsequent updates

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The top 3 companies accounted for 67% of the municipality’s total turnover, mainly driven by Confezioni Andrea Romania’s turnover which represented 58% of the total turnover. In terms of profitability, the most profitable companies seem to be Diacom Prestcom and Prestcom Hercules with a net profit margin of 22.5% and 15.4%, respectively. Approximately 58% of the local workforce is hired by the top 10 companies in Lupeni, while the largest company employs ~31% of the local workforce.

Chart 34 – Petrila: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis

The predominance of low-tech industries is also part of Petrila’s economic profile where the largest companies operate in industries such as wood, wholesale trade, etc. All top 10 companies by 2018 turnover are small enterprises which is in line with the economic profile of the Jiu Valley region. The top 10 companies’ cumulated turnover amounted to EUR 13,2 M in 2018, which represents approximately 44% of the municipality’s total turnover. Compared to other municipalities in the region (e.g. Aninoasa) the share of Petrila’s top 10 companies in the total turnover is two times lower, indicating a higher degree of

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competition among local players. All top 10 companies registered profit in 2018: the most profitable company was Iulian Transfor with a net profit margin of ~23%, while Ocolul Silvic Carpatina was at the opposite end with a net profit margin of 0.6%. In terms of headcount, the top 10 companies in Petrila account for ~43% of the local workforce, while the top three companies employ approximately 24% of the local workforce.

Chart 35 – Petrosani: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis

Despite having the largest business environment among the six municipalities analysed (with approximately 980 active companies in 2018), Petrosani’s current structure of the economy bears a resemblance to the overall profile of the Jiu Valley area in terms of both technology intensity and companies’ size. Largest ten local companies operate in low-tech industries such as trade (wholesale and retail), manufacturing, etc. Most of these companies are small businesses, with one exception – Complexul Energetic Hunedoara (CEH), the state-owned company that operates the two coal mines currently functioning in Jiu Valley as well as the two coal power plants.

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The cumulated annual turnover of the top ten companies in Petrosani amounts to EUR 126 M in 2018, which represents 54% of the municipality’s total turnover. However, Complexul Energetic Hunedoara’s turnover represents ~ 37% of Petrosani’s total turnover registered in 2018. Similar to previous years, CEH reported large losses in 2018; this historical evolution is mainly driven by the fact that CEH uses the most expensive fuel on an increasingly competitive market (where renewable energy sectors lower the energy’s sale price). The rest of the top 10 companies registered profit in 2018, the most profitable being Keops Serv and Adarco Invest with a net profit margin of ~ 24% and 20%, respectively. In terms of headcount, the top 10 companies in Petrosani employ ~ 60% of the local workforce. CEH’s headcount represents 45% of the local workforce and it highlights the reliance on a coal-centric business as the top employer in the Jiu Valley area. Chart 36 – Vulcan: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis

In terms of number of companies active on the local market, Vulcan ranks second among the six municipalities in the Jiu Valley area with 338 companies. Its economic profile its aligned with the rest of the municipalities as there are no high-tech players present in Vulcan. Top 10 companies operate in sectors such trade (both wholesale and retail) and wood.

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As per 2018 data, the cumulated annual turnover of the top 10 companies amounted to EUR 23,7 M (approximately 58% of the municipality’s total turnover), while the share of the top 3 companies’ turnover in the municipality’s total turnover was ~29% in 2018. Top 10 companies, except Pregoterm, registered profit in 2018 - Sigma Struct Invest being the most profitable business among the top ten, with a net profit margin of ~26%.These companies employ approximately 44% of the local workforce in Vulcan– with the top three companies’ headcount representing ~20% of the local workforce.

Chart 37 – Uricani: Top 10 companies by turnover [2018]

Source: TP Catalyst - Release 118 - January 2020 (accessed on February 25th, 2020), PwC Analysis In Uricani, the structure of the local economy is similar to the other municipalities analysed as the main active companies represent low-technology businesses that rely on labour-intensive activities such as retail, wood processing. All top ten companies are either small enterprises or microbusinesses (e.g. Denisa Online, SorfedDachsen Logistiqe Transport, El Dorado Enterprise). According to the latest available data, the cumulated annual turnover of the top 10 companies amounted to EUR 10,3 M in 2018, which represents more than half of the municipality’s total turnover. In terms of profitability, the most profitable companies among the top 10 players were El Dorado Enterprise and Denisa Online with a net profit margin of 97% and 79%, respectively. The top 10 companies in Uricani employ approximately 33% of the local workforce - this is below the percentage registered in other municipalities and is explained by the presence of a larger number of microbusiness in Uricani’s companies ranking. 91

The above analysis of the local business environment shows a limited adaptability to the economic restructuring driven by the phasing out of the coal-based activities, as well as a reliance on small business and microbusinesses active in labour intensive industries. There are several other main barriers for the development of high-tech companies such as, but not limited to: the lack of a skilled workforce (fuelled by migration and an aging population) and limited funds/ investments (high tech businesses usually require a larger initial investment than labour-intensive businesses) In terms of business infrastructure, there are no business incubators in Jiu Valley that could help entrepreneurs navigate the challenges faced when creating and managing a start-up. Similarly, there are no industrial parks in the area that could facilitate the development of local/ regional/ national companies and attract foreign investors. The set-up of industrial parks in the Jiu Valley is an idea that has been repeatedly conveyed in the mass-media by central/ local government officials, without materializing until now. For instance, in 2019 the Mayor of Petrosani stated100 that they were exploring the opportunity to set up two industrial parks in Jiu Valley – one in the east side and the other in the west side. However, based on available information, it is unclear if central/ local government will pursue this initiative. The absence of such support facilities can also be considered another barrier for the development of new companies, particularly the ones in industries based on technology and knowledge/ innovation. The innovation potential in Jiu Valley is rather unexplored currently in the private sector considering that many of the local companies are small businesses or microbusiness that do not operate on knowledge intensive markets or lack the financial resources to invest in research and innovation. The research activities in the Jiu Valley area are carried out in the public sector by INSEMEX Petrosani (National Institute for Research and Development in Mine Safety and Protection to Explosion). The institute was founded more than 70 years ago to solve problems related to safety in the Romanian mining industry. Since then, INSEMEX has become recognized within the mining industry as well as within other industries like the machinery, electro-technical, chemical or oil and gas industry. INSEMEX performs its activity within 4 research departments, consisting of 10 specialized research laboratories. Its activity is run in two premises in which the surface designed for research in the 4 pavilions is of about 6,000 sqm, and the volume of testing installations consisting of tunnels and experimental galleries exceed 1,000 cubic meters. INSEMEX also has a training facility for rescuers, a testing facility for civil use explosives and pyrotechnic articles, located outside Petrosani area, at approximately 5km, and a testing hall for electro-mechanical equipment and installations. In terms of main research areas, the institute101 performs basic, applied, technological development and technological transfer research in the following areas: • security of mineral resources; • protection to explosion; • security of equipment and facilities; • explosive and toxic environments; • environmental protection; • explosion-risk industries; • explosives and blasting techniques; • mining rescue and in toxic / explosive environments; • human resources; • mining and industrial ventilation; • classification of underground works in terms of emanations; • technical expertise of the events generated by explosions of combustible substances and by explosive materials. At academic level, the university in Petrosani carries out its scientific research activity via research groups consisting of representatives of the academic body, researchers employed at the university, doctoral students, students, as well as external collaborators, research centres and specific research laboratories.

Therefore, the university's research units include:

100 https://realitateadehunedoara.net/index.php/2019/04/15/doua-parcuri-industriale-ar-putea-fi-realizate-in-valea-jiului/ 101 Insemex website https://insemex.ro/ (accessed on February 28th, 2020) 92

• Research, Project Management, Innovation and Technology Transfer Department; • Scientific research centres; • Scientific research laboratories; • Platforms / laboratories for interdisciplinary training and research, research groups, student research circles, as well as other units trained in this regard. The University of Petrosani established multiple national and international partnerships with universities and research bodies aimed at increasing the university’s visibility, integrating its researchers in the international research community and accessing research infrastructures of their counterparts. In 2019, the University of Petrosani signed a collaboration agreement with IRCEM (“Institutul pentru Cercetari in Economie Circular a si Mediu Ernest Lupan” from Cluj-Napoca) with the purpose of102: • Development of potential programs on the topic of sustainable development through the initiation of joint seminars, joint research and publications, etc; • Raising awareness regarding the development of a responsible behaviour towards the resources of our planet, and regarding education and study as essential preconditions of the correct, efficient and performant development of people through the transition to a circular economy; • Development of projects by accessing funding through Horizon 2020 programs, Norwegian grants, Swiss grants, governmental grants and other national and international grants that can reach the goal of both parties. The interest for new technology and robotics is in a nascent stage in the area; first initiatives in this purpose were observed in Petrila and Petrosani. A robotics team comprising of high-school students from Petrila’s high school ‘’Colegiul Tehnic Constantin Brancusi'’ were the first promotors of robotics in Jiu Valley. These high schoolers’ passion for robotics was mainly cultivated through self-learning as their high school’s curricula does not include robotics courses or programming language courses (e.g. JAVA). The interest in robotics further translated into the development of robotics equipment and in participation to national and international competitions. For instance, in 2018, the Petrila team won the BRD FIRST Tech Challenge – the only national program teaching students to build robots from scratch. The team’s robotics’ initiative and their success at competitions reverberated and positively impacted the local community, especially the youth – there are several robotics teams in Jiu Valley Starting in 2019, there is an annual Robotics Valley Festival organized by Petrila high school’s robotics team in collaboration with Planeta Petrila foundation. Robotics Valley 2020 event will consist of a session of presentations from some relevant professionals in the field and recognized by the high school youth, shows and demonstration competition of the invited teams and presentation of the robots created by each team participating to the event.

102 Protocol of Cooperation between IRCEM and University of Petrosani, dated March 25th, 2019 93

Technological challenges The labour intensity challenge

Most of the existing non-coal businesses are in labour-intensive sectors, rather than high technology ones The current structure of the Jiu Valley’s economy reflects the results of both the transformation initiatives aimed at phasing out the dominant mining activity and the diversification attempts implemented in the region. The latter focused mainly on sectors characterized by low technological intensity, low technical skills and limited investment capital.

Consequently, the current economic profile is dominated by the services sector (trade), followed by manufacturing, transport, construction and hotels sector – as described in the above state-of-play analysis. The limited competitiveness of services and goods offered by a large part of the local companies translates into an inability to increase the added value of the industries.

Should the Jiu Valley municipalities continue to rely predominantly on labour intensive industries without adopting new technologies, the economies of the six municipalities would continue to lag behind the economies of the rest of the counties in the West Region.

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Technological opportunities Investing in technology – a possible driver for growth

Potential to increase local economy by investing in technology Technology is the main driver of economic growth given that technological developments enable an increased efficiency in the production of more and better goods and services. A high level of technology usage typically leads to a fast-paced economic growth. Investments in new technologies for existing companies active in the manufacturing sector, food industry, textiles would increase performance and competitiveness of these companies and hence, help them create added value in the Jiu Valley’s economy. Besides improving the degree of technological development of existing businesses, there is also an opportunity to drive further growth of the local economy by focusing on hi-tech industries – for instance, the IT&C industry. In order to develop the IT&C sector, especially activities with a high value added such as software development, the University of Petrosani would need to adjust their curricula to ensure their graduates with a technical diploma master the technical capabilities relevant for this initiative. Another key benefit of developing the IT&C sector would be the new jobs created locally that could encourage the young and skilled population to remain in Jiu Valley and thus, improve the demographics of area.

Mining – but different resource: quartz (II)

There is an opportunity to capitalize on the existing quartz resources in the medium and long term

Quartz (SiO2) is the second most common mineral on Earth and the most important sand-forming mineral. Due to its specific properties, the quartz is used in many industries. The quartz is a piezoelectric material - when subjected to mechanical stress, it generates an electric potential (it transforms mechanical energy, pressure or movement, into electrical energy). This property of quartz is what makes it suitable for manufacturing of microphones. The reverse-piezoelectric effect (meaning turning electrical energy into mechanical energy is also true. A battery causes the oscillation of a quartz crystal (32768 times per second) in a typical quartz-based watch, which also employs an electronic circuit that turn quartz crystal oscillations in regular electric pulses (1 pulse per second). Apart from watches, quartz crystals can be also found in all sorts of computers and mobile phones processors, in radios, in testing and measurement electronics equipment, such as signal generators and oscilloscopes, in sensors. Quartz is also used on a large scale for manufacturing jewels. Quartz varieties include, among others, amethyst, onyx and agate. Quartz sand is employed in glass manufacturing, in the petroleum industry (particularly in hydraulic fracturing), as abrasive material (owing to its elevated hardness and in metallurgy (as component of refractory bricks, for example, due to its high melting temperature). Quartz sand is also a widely used material for manufacturing lenses and mirrors employed in eyeglasses, telescopes, microscopes, etc. Considering its wide utilization, size as well as the estimated value of the quartz resources (USD 40-45 M), the utilization of this resource – if the legal issues is solved – offer a chance to impact positively the local economy. Given the availability of a workforce with relevant expertise (i.e. former coal miners), they could switch from coal mining to quartz. Therefore, the measures would decrease the unemployment rate among former miners. The products of ultra-pure quartz such as the one available in Siglau-Uricani are widely utilized in modern high-tech applications, namely: • Optical fibres, semiconductors for the electronic industry • Production of silicon cells for use in photovoltaic systems, as well as in industrial catalytic chemistry for the synthesis of catalysts, zeolites and adsorbent materials in general

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In order to create even more value added in the economy, local administration should explore the opportunity for developing a new high-tech industry that utilises quartz in Jiu Valley - e.g. by attracting an investor interested in manufacturing in Jiu Valley one of the above high-tech applications of quartz. Establishing this high-tech business would create additional value in the economy due to the numerous benefits of such a measure on the local business environment (e.g. jobs creation which could potentially contribute to a decrease in migration, as well as a competitive advantage for Jiu Valley in the region that could further contribute to the definition of Jiu Valley’s brand).

Robotics research centre – an opportunity to provide high skilled labour opportunities in the Valley

The University’s current partnerships could be further expanded by setting up a robotics centre in Jiu Valley As outlined in the state-of-play analysis, interest in technology and robotics in the region is in early stages, however, the University of Petrosani could further build on the existing interest for these sectors at academic level. The University of Petrosani has recently established a partnership with the high-school units in the region that develop students’ passion for robotics and technology. Moreover, the University aims to obtain accreditation for a new specialization degree in the robotics field. These recent partnerships could represent the starting point in establishing a robotics research centre in Petrosani. The centre could focus on research and development of robotics for a variety of fields of application (e.g. security robotics, production and consumer etc.). This initiative’s implementation is dependent on development of local technical capabilities required for running such a centre. As the centre would need interdisciplinary cooperation in order to advance research work and develop robotics, the University should ensure that its curricula can offer specialization in fields such as mathematics, electro-engineering, physics, etc. Alternatively, the multidisciplinary cooperation could be facilitated through international partnerships with similar research centres or robotics companies. The successful implementation of this robotics centre would contribute to the adoption of new technologies and set up of knowledge intensive businesses, while increasing innovation and preparing specialists in the robotics field. From a socio-demographics perspective, the implementation of this initiative would facilitate the young and skilled population’s decision to continue living in Jiu Valley, translating into a lower emigration rate.

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SWOT analysis

The SWOT analysis integrates the key findings of the PEST exercise, separating the intrinsic values and difficulties of JVR (i.e. factors which policies cannot change, being characteristics of the area) from the extrinsic elements which can affect positively or negatively the development of JVR and which can be influence by the future policies and programmes to be implemented in the Valley. As such, we identified three major levels of interventions:

• A community level i.e. a basic level which aims to build the basis for socio-economic development and addresses the most stringent community issues such as: urban regeneration (including urban networks), social and educational facilities, transport infrastructure. These investments are to be made by the public sector and will offer a development platform for business and people development. • A business level which aims to attract large investors to the area, help the expansion of the existing ones, as well as encourage local entrepreneurs/SMEs to build on their traditions and local resources (crafts and trades). The businesses will generate revenue for the area. • A people level i.e. interventions aimed directly at people: education, re-skilling through vocational schools accorded with the labour market requirements, through focused training programmes as well as new curricula in the tertiary education to build on the specializations which are specific to the area; job counselling and increased employability; care for vulnerable persons. The interventions aim to prevent labour force migration. Strengths Weaknesses Opportunities Threats Political & • Local authorities are willing to cooperate for the design of an • Public investments are insufficient, challenged by the fact that • Different state aid intensity from Region West to allow more • Poorly written projects for the new 2021-2027 programming or administrative integrated development concept and for its implementation Jiu Valley is part of the more developed West Region. public co-financing for public and private investment projects not in line with the core objectives of the regions in with EU funds. • Local administrations have limited capabilities in attracting EU • A dedicated fiscal regime to be set-up for the Jiu Valley, transition could end up being rejected from receiving the funds and implementing EU funded projects. different from the one for the West Region, small and medium necessary funding. • There are no rural areas, as for many of the specific economic businesses will have a better chance to grow. activities are not eligible for funding. • The future setting-up of a National Development Bank would support the financing of the area, complementing the EU funds and the state budget.

Economic and • The area is suitable for the development of various types of • Jiu Valley is part of the relatively wealthy West Region, • Tourism development would support related activities, such • There is a high chance for the community to not have enough environmental tourism such as sports, rural, industrial sites, gastronomic, although it is significantly below the area’s average GDP per as the small industry and crafts, including wood processing for influence to determine the exemption of the region from the speleological, hunting, cultural, etc. capita, making funding generally difficult to be obtained. value added products. West Region fiscal regime. • Five of the 6 cities have railroads crossing their city centers. • Investments in Jiu Valley are subject to the general fiscal • If the roads will be modernized, will have a positive direct • The quartz deposit located in Uricani has potential for system with no particular incentives. impact in the entire economic environment of the Jiu Valley. exploitation, especially as specialized labor force (miners / • Jiu Valley is historically relying only on mining, activity that will • All six cities could greatly benefit from urban regeneration former miners) is abundant in the area. be ceased by 2030. projects. • Low pricing for apartments and certain municipalities’ • Local farmers are not part of the production and distribution • The potential relocation of central authorities / creation of a providing land for free for new house building are favorable value chains, especially given the lack of local processing regional-interest public facility in the Jiu Valley would create factors for attracting workforce and young people to the area. facilities. direct and indirect jobs and direct connections/ interface with • Medium-sized businesses can be attracted to Jiu Valley with, • The technical / vocational schools lack modern facilities that the cities. among others, cleared lands, the existence of industrial halls could play to the advantage of supporting the local labor and of assets such as industrial cranes and electric market. transformers. • Tourism is underdeveloped in the absence of an integrated • Traditional food with local specificity could support creation of concept that would ensure diversified year-round activities for a “Jiu Valley” brand. visitors. • The existence of multiple Natura 2,000 sites limits the potential economic development.

Social & cultural • According to statistics, Jiu Valley has a relatively high number • There is a scarcity of day-care facilities for infants and • The development and rethinking of the study programmes in • Locals leaving Jiu Valley to search for other opportunities as of persons available to work. disabled persons. Jiu Valley would support a better adaptation of their students there is limited employment opportunity especially for young • Petrosani is the only city which is not a county residence that • The school dropout in early stages of education affects the to the current needs on the labor market (vocational schools educated people. has a University, completing thus the educational spectrum in future of workforce in the Valley. can also be an option). • If no action is taken, it is highly likely that the average age of the Jiu Valley. • The technical / vocational schools lack modern facilities and • Rehabilitation of old used buildings that serve as important the population in the Jiu Valley will increase. • The 6 cities have museums, cultural halls and/or libraries, and synchronicity with the local labor market. institutions in the society (schools, hospitals, medical clinics,

they could offer an alternative to visitors looking for other • The declining demographic trend is expected to continue if no etc.) could determine people to stop leaving the area; activities. action is taken. • People have multiple unique traditions, myths and • In approximately 30 km, there are 3 hospitals and the entire • There is a scarcity of career opportunities, especially for superstitions, that could attract tourists if properly marketed. Jiu Valley has multiple other health facilities. young people and in high tech sectors. • Many former or active miners are not interested to get reskilled in order to be more competitive on the labor market. • The population is generally resigned regarding its future in the region.

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Strengths Weaknesses Opportunities Threats Technological • The quartz resources located in Siglau-Uricani are the purest • Jiu Valley’s economy reliance on labor-intensive industries • There is an opportunity for wide utilization of products of ultra- • The larger university centers (e.g. Bucuresti, Timisoara, etc) quartz deposit in Europe and the third, in terms of quality, in and the low degree of technological development is pure quartz (such as the one available in Siglau-Uricani) in attract the highly talented young people from the Jiu Valley. the world (estimated at 27 M tones and is valued at USD 40- detrimental to the competitiveness of products made here; modern high-tech applications, namely: • The settlement of ongoing legal issue regarding the quartz 45 M). • The lack of a skilled workforce and the limited availability of o optical fibers, semiconductors for the electronic industry; resources might prove to be a lengthy process, impeding the • There is a growing interest in robotics/ high-tech among local investment capital hinders the establishment of high-tech o production of silicon cells for use in photovoltaic systems, capitalization on quartz resources in the short term. young population (e.g. high-school robotics teams in Petrila, businesses in Jiu Valley. as well as in industrial catalytic chemistry for the synthesis • Robotics is amongst skills most sought after by global tech Petrosani). • There are no business incubators or industrial parks in Jiu of catalysts, zeolites and adsorbent materials in general. companies, leading to potential emigration of local talent. • Recent partnerships were signed between University of Valley that could support entrepreneurs facilitate the • University of Petrosani could apply for accreditation of a new Petrosani and high-school units in the region aimed at development of local/ regional/ national companies. specialization degree in the robotics field. developing students’ interest in robotics and technology. • There is a lack of local capital required to invest in modern • There is potential for facilitation of multidisciplinary high-tech applications, such as of quartz applications. cooperation through international partnerships with similar • Jiu Valley’s high schools’ curricula does not include robotics research centers or robotics companies. courses or programming language courses (e.g. JAVA). • There is a limited availability of technical capabilities (initially) required to run a robotics center in Jiu Valley (e.g. electro- engineering, physics, etc.)

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European best practices

Transitions are happening on various considerations, one of which is the economics of hard coal and lignite production. Managing transitions is about seizing the opportunity to make them more sustainable, so active management plays to the interest of the stakeholders, allowing other sectors to develop (e.g. energy infrastructure - develop energy intensives and biomass plants; land - develop tourist attractions; port infrastructure - develop alternative trading hubs; non-coal industries - support innovation clusters). Coal transitions take time, but provide opportunities for the future, governments having to consider specific measures such as setting in law concrete time horizons; earmarking necessary funds; committing to support alternative energy sources and industrial vision, enhancing stakeholder dialogue and cooperation. Best practice sharing

Best practice sharing is one of the main tools – together with expert discussion, peer-to-peer learning and political dialog - envisaged by “Coal Regions in Transition Initiative” for achieving the objectives of supporting development, transition strategies and concrete projects targeting structural diversification and technology transition in coal mining regions. Structural change and development in mining areas is a challenging process. In Western Europe the topic has stirred political debates and reflection for some 50 years, focusing on major coal and steel regions like North-East England and Wales (Great Britain), Wallonia and Limburg (Belgium), Nord-Pas-de-Calais and Lorraine (France), Ruhr and Saar (Germany) and Asturias (Spain). In the affected areas the end of mining has triggered the industrial decline which entangled economic, social and ecological crisis. Regeneration turned to be a task of national importance and a serious challenge for governments, trade unions and big enterprises. In Central and Eastern Europe, the regime changes of the ‘89/’90 marked a significant turning point as many industries collapsed and regions fell into crisis. Romania’s Jiu Valley is among the flagship regions in Eastern Europe which attracted attention, together with Upper Silesia (Poland), Ostrava-Karvina Region (Czech Republic), Donezkyi Bassejn (Ukraine). The cultural potential of such regions needs to be exploited and valorised even after mineral extraction has ceased. Aside from the heritage aspects (such as use of former mines as museums) the development of post-mining potential can be associated with modernization, which gives a strategic touch to the economic restructuring, also easily combining with urban regeneration, in line with trends such as energy transition and sustainable development. Similar to other regions in transition, Jiu Valley lacks infrastructure, high quality education facilities, local businesses are limited, and local authorities don’t have enough administrative capacity for strategy building, planning and control. Giving Jiu Valley a viable future after mining activities have ceased requires attention to the twists to development in post-mining regions at the beginning of the 21 centuries, considering changes in economic and political framework conditions. Today such regions receive limited funding and face competition from other underdeveloped regions for support from EU funds, this being coupled with other internal factors hampering development. Based on the key findings presented in the study “Post-Mining Regions in Central Europe” (Peter Wirth, Barbara Mali and Wolfgang Fischer), former mining regions need to strengthen their organizational and managerial capacities to include integrated urban and regional development concepts, participative governance networks and transparent decision-making. There is a variety of options for development in post-mining regions: from positive growth environment, good location factors, existing industrial knowledge and skills to touristic attractions, which could turn into steppingstones for investment in other industrial sectors. Industrial production is most likely the only sector that could offer new employment opportunities on larger scale by exploiting the existing available workforce skills. European lessons learned and case studies reflect some interesting aspects worth considering when analysing the situation in Jiu Valley and the potential for new development:

• Research networks between enterprises and educational institutions, as well as training and entrepreneurship programs for the workforce • Integration of the natural and cultural potentials of mining in urban and regional development strategies for former mining regions can improve regeneration, especially during out-phasing of mining – successful models combine ecological and economic development (economic development involve rehabilitation of past mining sites and environmental problems) 99

• Two common fields of action in the use of post-mining potentials are: o Tourism – underlies importance of heritage and traditions connected to past mining activities, but is one of the most challenging choices as tourism infrastructure is lacking in such regions, attitude towards service provision and quality in tourism is not well developed and mining regions are perceived as places of industrial production; it demands special cooperation and coordination among several actors o Energy – could allow for utilization of post-mining potential (mine land for biomass production, mine shafts, galleries for geothermal energy, photovoltaic plants, hydroelectric power production in flooded pits – it requires giving a “green” touch to the landscape – energy potential may be difficult to realize as it require more extensive funding; besides, renewable and conventional energies depend on legal framework conditions, national funding and local conditions (property rights).

Case studies

Developments in various European countries indicate that, irrespective of socio-economic characteristics or regional specifics, the challenges of phasing out coal can well lead to successful development in various areas. We hereby present the situation and initiatives/actions taken in few countries where interesting projects have emerged:

Poland (Silesia) Sector: Silesia accounted for around 80% of total Polish hard coal resourced at 46.9 bln. tons, spanning an area of around 5,600km2. Coal output in Silesia - 59.2 M tons (2016), type: hard coal, employment in coal: 80k; Economy: GDP per capita for the region (EUR) - 20,600; Share of the industry into GDP - 35% (2014); Unemployment Rate - 7% (2015) ; Population - 4.5 M Regional specifications: low level of professional activity, high demographic potential, migrations, biodiversity, high air pollution, touristic potential, city center elicitation, post-industrial areas revitalization, brain drain, large number of universities, large number patents Funding: Poland set to receive EUR 86 bln in the 2014-2020 period from ESI Funds. Actions/Initiatives Revitalization Fund

• Degraded areas management, coordinating the development of functions in the revitalized areas • Inclusion of existing entities (e.g. Silesia Financial Society) in the implementation of ventures in the field of social-economic elicitation or revitalization Ecological Fund

• Improvement of the quality of environment, including air • Development of multimodal public transport • Elimination of ecological bombs, mining damages • Ecological education Silesian Mobility Clusters

• Draft Mobility development program in the field of development of R&D sector and location of productive investments e.g. related to the production of cars or electric buses • Creating conditions for the development of electromobility of Poles by popularizing charging infrastructure and encouraging the purchase of electric vehicles • Stabilization of the power grid by integrating vehicles with the network • Activities for the promotion and development of zero-emission and low-carbon hydrogen solutions • Development of the concept of mobility as a service

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Post-industrial Culture Industry

• Use of post-industrial heritage in order to develop new cultural and touristic functions of the region (development of Industrial Monuments Route) Professional reorientation - Silesian Treasury, incentive program for young people in the region

• Scholarships for learning achievements to most talented pupils, students and Ph. D students • Promoting the best graduates Mine water as a potential source of geothermal heat

• Determination of geothermal potential of mine waters • Pilot implementation of mine water heat pump installations Electricity production in Sub-Surface Pumped Storage Hydro Power Plant

• Utilization of an existing mining shaft for the construction of a pumped storage hydro power plant • economic utilization of coal mining side products from non-existing mines Photovoltaic farms in areas degraded by mining and energy industries

• Construction of photovoltaic farms on dumps to allow using degraded areas and increasing power generation from renewable sources

Spain (Aragon) Sector: Aragon produced 50% of the Spain's coal (Euracoal 2017) amounting 1.3 M tons in 2015. Three thermal power plants in the region cover over 10% of the nation's coal-fired electric energy capacity. The share of coal in the electrical power generation in Spain was relatively small compared to other countries - 19% (2015) (OECD and IEA 2017b). Socioeconomics: With its three provinces Aragon holds a population of 1.3 M (Eurostat 2017). The core mining region in Aragon has seen a substantial decrease in population of -14.4% over the last 30 years. There is a huge educational gap in the region, with 76% of the population at compulsory schooling levels only. Also, the employment of women was particularly low in the region - 77.1%. Employment was highly concentrated in the core mining area, with 45%of the jobs represented in the municipality of Aragon. Strategy: Activities financed through ESI co-funding included: 1. EUR 22.98 M in the category "Access to employment for job seekers through local employment initiatives and support for labour mobility; 2. EUR 16.5 M for ICT: High-speed broadband network (access/local loop); 3. EUR 9.66 M for "Rehabilitation of industrial sites and contaminated land"; 4. EUR 16.7 M for I & innovation, for public R&I infrastructure and R&I processes for SMEs; 5. EUR 19.1 M for community led development initiatives (ERDF) and community led local development strategies (ESF).

Netherlands (Limburg) Socioeconomics: When the closure of the coal mines was announced at the end of 1965, approximately 53.000 people were employed in the Dutch coal mines. Of these, approximately 46.000 were miners and 7.000 were office workers and managers. It was also estimated that the work of approximately 30.000 people indirectly depended on the coal mines (e.g. suppliers of materials, goods and services). This industry was dominant in a small geographic area and contributed largely to the region’s well-being and the regional income. Working in industries other than the mines required a different work ethos. Because work in the mines was dangerous, miners very much depended on one another and fostered feelings of solidarity and fellowship; other types of businesses did not induce such sentiment and values. Miners who lost their jobs also lost status in society. Their self-esteem deteriorated, and social isolation occurred. The closing of the mines caused insecurity among the miners and unrest in families. Little money was invested in solving the social problems; rather, creating new jobs was the highest priority.

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Older miners had more difficulty finding jobs, and special arrangements were made for them. Miners who were within five years of retirement received a financial arrangement to leave earlier (pre-pension arrangement). Many of the other older miners who were not within five years of retirement received financial allowances because they were declared partially or fully disabled to work. Many also received jobs in sheltered workshops. Schooling was needed because the miners were only equipped to work in the mines, so their knowledge and experience were barely applicable to other industries. Approximately 6.000 miners and 800 office workers and managers were retrained/schooled. Most of them were retrained for jobs in the metal, textile, chemical and woodwork/carpentry industries. Strategy: An important sub-goal was that a mine could be closed only if a reasonable opportunity arose for the miners to obtain new jobs or another way of earning money. Actions/Initiatives:

• Subsidies on the price of buying land by existing and new industrial firms or by service firms that promote/drive new employment (e.g. when new activities for at least 25 former miners would be developed that also contributed to improving the industrial structure); • Guarantees for loans to companies when a (new) company met the criteria of the restructuring of the area and its equity was a reasonable part of total assets; • Establishment of offices for national public services (e.g. taxes, statistics, pension funds; more than 25 larger and smaller institutions came to the area); • Arrangements with privately owned mining companies. The contracts specified that these companies should invest the resources that were present at the moment of closure in principle in new industrial activities in the Netherlands, preferably in South Limburg; • Information, advice and education on jobs, schooling and employment finding • Measures were also taken to improve the infrastructure (e.g. highways, railways, waterways, airport) to enable better accessibility to the area. The hilly environment of South Limburg and its beautiful landscape constitute an important tourist area, and tourism could be stimulated in times of increasing welfare. • Limburg Investment and Development Fund (LIOF) was created to actively support the economic transformation and attract new companies. Preparations were made to open a new medical faculty in Maastricht and to turn the hospital in Maastricht into a university hospital. New jobs were created by moving public services and granting subsidies and loans to companies in need.

France (Nord-pas-de-Calais) Economy: In Nord-Pas-de-Calais industrial activities and proximity to densely populated areas in Southern England, Belgium, the Netherlands and Germany have fostered strong infrastructure development since the 19th century. Nord-Pas-de-Calais is one of Europe’s main regions for the transport of goods, given its strategic position between North-West European regions, the major ports of the north of Europe, and the Paris region. Actions/Initiatives: Laws in favour of entrepreneurship: the ‘law for economic initiative’ (loi pour l’initative économique - loi Dutreil in 2003), the ‘law for SMEs’ (loi en faveur des PME - 2 August 2005), the ‘law for the development of services for individuals’ (loi relative au développement des services à la personne - 26 July 2005), and the ‘law for the modernisation of the economy’ (Loi de modernisation de l’économie - 4 August 2008). Collectively, these laws created the status of ‘auto-entrepreneur’ and greatly simplified the administrative process required to set up a business. Environment: Environmental problems exacerbated by the relatively dense urban environment and the considerable overlap between residential and industrial areas. Half of the brownfield sites were located in suburbs close to natural areas and had a very negative effect on the environment. Key issue has been the treatment of 300 mining spoil heaps. Actions/Initiatives: Public body was been set up (Etablissement Public Foncier, EPF) tasked with supporting municipalities in their land management strategies, assisting in cleaning processes and promoting local development activities (planting trees, green and blue corridors). Three parks were set-up that cover 25 percent of the regional territory, which is one of the highest proportions in France. Environmental improvements represent a significant factor in the drive to attract people and economic activity.

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Strategy: Promotion of innovation has been a crucial issue in a period of high economic risk, following the 2008 economic crisis and in the context of increasing international competition. In addition to the competitiveness poles, the region set up a ‘Regional Innovation Strategy’ (Stratégie Régionale de l’Innovation, SRI) in 2010 with the support of the EU Commission. It also launched a series of initiatives in favour of innovation and entrepreneurship, through the ‘Platform for Innovation and Enhancement of Research’ (Plateforme innovation-valorisation de la recherche) and the ‘2000 SMEs Scheme’ (Plan 2000 PME) dedicated to the promotion of innovation in SMEs. Actions/Initiatives:

• Establishment of seven competitiveness poles contributed to the structural adjustment, with innovative clusters launched in the fields of transport (I-Trans), textiles (UP-Tex), maritime industry products (Aquimer), the trade and retail industry (PICOM), nutrition and health (NSL), materials and applications for sustainable use (Maud), and recycling technology (TEAM 2). • Creation of Site de Deux Caps, model project in terms of protection and enhancement of natural and built heritage - 7,000 hectares of protected areas, 23 km of coastline and five Natura 2000 sites. The concrete outcomes of this project included environmental protection, the improvement of amenities, tourist facilities, ecological enhancement, embankments, and soft transport systems. • The mining area of Oignies has been successfully transformed into a major economic and cultural site based on the promotion of the industrial and mining heritage. The mining pit in Oignies was the last to be closed at the beginning of the 1990s in Nord-Pas-deCalais. The local authorities decided to renew the mining heap in order to improve the environment, to maintain cultural heritage, and to promote another image of the mining area. A large part of the transition and rehabilitation activities has been dedicated to music.

Strategy: 1. Keeping the economic upturn going support economic diversification, centers of excellence, the creation of firms, technology transfer, the improvement of research capacities, communication infrastructure 2. Training, mutual assistance and employment: integrate unemployed people and excluded persons, to promote education, training, apprenticeship and vocational training 3. Spatial improvement and upgrading: to improve territorial attractiveness and quality of life, to protect natural areas and upgrade industrial wastelands, to promote tourism and cultural facilities, to promote energy saving 4. Promotion of job-creation and economic development: to support information society, research, technological development, and tourism, to promote networking, financial 5. engineering and training 6. Laying the foundation of economic and social cohesion: to support measures for young people and employees, to improve access to information and communication technologies, to update communication networks and infrastructure 7. Promoting territorial initiatives for sustainable development and solidarity: to promote local development activities, craft, services, and business areas, to support ports and technology platforms, urban policy and health 8. Diversifying suburban agriculture 9. Research and development, innovation, support to businesses 10. Accessibility (transport and Information Society) 11. Territorial strand (sustainable urban and territorial development)

Germany (Essen) Sector: Transformation of deep-mined area into modern historical and cultural centre. Currently, there are museums, casino, restaurants, cycling routes and private events. Strategy: The strategy for the mine’s preservation focused on a responsible redevelopment of the buildings for the purpose of culture and design, entertainment and tourism Funding: These priorities were set out in the “North Rhine-Westphalia (NRW) ERDF Objective 2 Programme 2000- 06”, in which the “successful renewal of old (industrial sites) and setting-up of new infrastructures (innovation and technology centres, training facilities)” is mentioned as highly important. Out of EUR 970 M in the program’s structural funds, EUR 61 M was allocated to the redevelopment of Zollverein park (Construction stages 1-3: EUR 24.691.000). The EU, the federal government, the State of North Rhine-Westphalia, the city of Essen, and the

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Regionalverband Ruhr/Association of the Ruhr Area (RVR) have spent almost EUR 316 M on land preparation, maintenance and conversion measures for buildings and facilities (1990-2014). In particular, EUR 60 M have been invested by the ERDF for the transformation of the Zollverein site. Impact: Stimulating creative businesses, creating new jobs (1,000 new jobs and 170 enterprises), and attracting visitors (Zollverein attracts 1.5 M visitors per year (2011-2014), generating a gross turnover of EUR 68.4 M and safeguarding through tourism almost 1,500 jobs in the hospitality sector) and investment. Investment in Zollverein (overhaul, maintenance, operation) contributed to the strengthening of the economy and safeguarding of jobs. Slovakia (Horna Nitra) Sector: Horna Nitra is the largest coal mining region in Slovakia, where the volume of coal oscillated up to 2 M tons per year in last decade. The coal mining is however unprofitable, subsidized indirectly through the surcharges in end user electricity prices. This support will cease in 2023, which will inevitably lead to the coal phase-out in Horna Nitra. Economy: Unemployment rate in Prievidza district - 4,5% (2018), number of inhabitants in the region approx. 184,000, approx. 3,000-4,000 employees in mining industry, but additional up to 9,000 jobs cumulatively in various sectors at several larger employers in the region, including automotive, chemical, rubber, footwear or machinery industries. Regional specifications: Added value of the local industry is below the Slovak average, lower activity of SMEs in the region, lower innovation potential, migration of young people from the region, aging population, insufficient connection to highway infrastructure and bad condition of roads, tourism potential (one of the main spas located in the region), 55% of the population in the region live in areas with impaired environment. Current development: The government adopted an Action plan for the transition from coal of the region of Horna Nitra in July 2019. The action plan defines the 4 pillars of the action plan - Mobility and interconnection; Economy, entrepreneurship and innovation; Sustainable environment; and Quality of life and social infrastructure, further broken down into priorities and measures with identified long list of potential projects. First initiatives are already being implemented or are approved. Funding: No specific funding for Transition from coal of Horna Nitra has been allocated. The government will focus on the utilization of various available funding, mainly the allocations from the operational programmes within the current programming period of EU funds, followed by the allocations from next programming period, from centrally managed EU funds and JTF. Actions/Initiatives First initiatives of the Action plan for the transition from coal are already being implemented or are approved or are being actively discussed.

• Infrastructure – additional funding was reallocated from other operational programmes to Operational Programme Integrated Infrastructure to specifically support the improvement of the road infrastructure in Horna Nitra region. Approx. 58 M EUR was allocated to the project preparation of selected sections of new expressway (R2 connecting the region of Horna Nitra to the main motorway backbone), to modernization of selected roads and to the construction of the road by-pass of the city of Prievidza, the largest city in Horna Nitra. • Institutional capacities – funding allocated from the Operational Programme Effective Public Administration to fund new capacities at the selected 4 municipalities in the Horna Nitra region to improve their institutional capacities needed to prepare projects related to the coal transition and to help with the implementation of the coal transition activities. • Labour market – allocation of 43 M EUR under the National project for the transition of Horna Nitra from the Operational Programme Human Resources to support soft measures on the labour market. The measures can include diagnostic and analysis of capabilities of workforce, community work, re-skilling and active co-operation with the employers. • Innovations and SMEs – special call for the Horna Nitra to support SMEs and innovations from the Operational Programme Research and Innovations with allocation of up to 10 M EUR. • Financial support for miners – special surcharge for miners who will lose their jobs should be established to partially compensate the loss of income. The surcharge depends on the number of years of work in the mine and can be paid for several years. In addition to that, the miners will be eligible for one-off severance payment depending on the number of years of work in the mine. The expected allocation for the special surcharge is 43 M EUR and for the severance payment 28 M EUR.

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Further initiatives and potential projects were mapped as part of the development of the action plan for the transition from coal, which are in various stages of planning. Overall, approx. 220 projects and project ideas were collected to form a long list of potential transition projects. Examples of the projects include: 1. Replacement of the existing district heating source – the coal-fired power plant in Novaky in Horna Nitra, which used to be one of the major polluters in Slovakia, is also producing heat and steam for the city of Prievidza and several other municipalities and industrial customers. Following the expected coal phase out, the heating source will have to be re-places. Based on the current development, a new gas-fired CHP plant should be built in the premises of the Novaky power plant. There were also discussions (which might be re- considered in the future), to build a waste-to-energy plant in the region and also to explore the potential to utilize the mining heat and mine water for heat production. 2. Re-purposing of mining premises – there are ongoing discussions between a major railway carriage production company and the mining company to form a JV to utilize the existing railway infrastructure and facilities in the premises of the mines to set up a modern railway carriage production line. The investment would not only help to utilize the existing infrastructure, but would also create new jobs (including jobs where existing mining employees and engineers can be utilized) and set up an R&D. The value of potential investment is up to 100 M EUR and it can create up to 600 new jobs. 3. Extension of the existing automotive production – Brose, an automotive supplier already established in the city of Prievidza, is expecting to expand its operations in the region, with several project, including new production lines, R&D and testing center, cooperation in dual education, with potential investment up to EUR 125 M. 4. Novaky brownfield park re-development – Re-development of part of the existing brownfield industrial zone of Novaky power plant to new industrial park, utilizing the existing robust infrastructure in the park, including roads, buildings, electricity, water, rail and IT infrastructure. Part of the park can still be utilized for future central district heating solution. The project could help to address the issue with the low availability of free space in existing industrial parks in the region. Research center for underground technologies – another potential cooperation of the mining company with a new innovative company active in the area of underground drilling – GA Drilling. The project is to develop a research center for underground technologies (mining, drilling, extraction) using plasma drilling technology, utilizing the engineering capacities and capabilities of the mining company.

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Annex

Business environment state of play Source of data: TP Catalyst No. of companies Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 40 38 35 31 32 31 26 Uricani 144 136 116 106 97 85 76 Petrila 165 165 146 146 145 134 130 Vulcan 246 229 206 186 176 166 163 Lupeni 223 210 183 165 154 150 145 Petrosani 718 700 664 621 599 589 578 Jiu Valley 1,496 1,440 1,315 1,224 1,171 1,124 1,092 Hunedoara 6,478 6,357 5,965 5,682 5,567 5,348 5,186 Number of employees Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 446 486 431 341 224 144 105 Uricani 731 736 642 551 518 491 470 Petrila 1,226 1,229 1,074 1,106 999 1,015 935 Vulcan 1,253 1,249 1,227 1,234 1,125 793 1,743 Lupeni 1,483 1,413 1,397 1,733 2,102 2,126 1,690 Petrosani 9,508 9,934 11,226 11,813 12,194 9,853 15,081 Jiu Valley 14,201 14,561 15,566 16,437 16,938 14,278 19,919 Hunedoara 63,109 56,340 57,247 57,943 66,332 61,269 69,339 Costs of employees ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 2,760 2,456 2,006 1,263 722 333 323 Uricani 3,583 3,219 2,498 1,830 1,476 1,189 1,062 Petrila 6,337 5,929 4,895 4,089 3,415 2,900 2,809 Vulcan 6,694 6,013 5,306 4,799 3,758 3,174 9,027 Lupeni 8,852 7,268 7,424 8,726 8,255 7,207 5,386 Petrosani 94,654 96,256 95,961 112,259 115,364 74,864 122,943 Jiu Valley 120,120 118,685 116,084 131,703 132,268 89,334 141,227 Hunedoara 469,632 388,800 351,166 343,696 370,211 302,610 364,048

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Operating revenue (turnover) ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 14,463 14,692 13,636 10,330 5,195 2,591 2,166 Uricani 20,638 17,433 14,972 11,785 9,294 7,312 6,949 Petrila 31,107 30,809 27,430 26,839 24,677 21,162 21,786 Vulcan 36,988 34,966 32,098 30,211 24,783 21,441 70,875 Lupeni 62,099 55,402 52,469 58,865 47,511 38,720 31,240 Petrosani 233,736 263,557 239,588 277,722 280,026 378,615 492,736 Jiu Valley 384,568 402,167 366,557 405,422 386,291 467,250 623,586 Hunedoara 2,808,913 2,419,571 2,128,756 2,273,548 2,301,826 2,148,520 2,502,967 No. of companies with positive operating revenue (turnover) Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 38 36 34 30 28 28 26 Uricani 139 132 110 98 88 79 74 Petrila 155 156 139 137 133 119 121 Vulcan 231 210 197 171 170 157 155 Lupeni 215 197 170 157 147 140 136 Petrosani 691 665 638 596 571 559 550 Jiu Valley 1,431 1,360 1,254 1,159 1,109 1,054 1,036 Hunedoara 6,263 6,055 5,701 5,390 5,271 5,018 4,918 % of companies with positive operating revenue (turnover) Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 95% 95% 97% 97% 88% 90% 100% Uricani 97% 97% 95% 92% 91% 93% 97% Petrila 94% 95% 95% 94% 92% 89% 93% Vulcan 94% 92% 96% 92% 97% 95% 95% Lupeni 96% 94% 93% 95% 95% 93% 94% Petrosani 96% 95% 96% 96% 95% 95% 95% Jiu Valley 96% 94% 95% 95% 95% 94% 95%

Hunedoara 97% 95% 96% 95% 95% 94% 95%

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Operating profit / loss (EBIT) ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 136 1306 847 202 -42 68 -134 Uricani 2183 487 687 191 289 117 107 Petrila 1690 1676 923 1876 1875 904 847 Vulcan 236 1031 1238 1110 702 -112 -5631 Lupeni 2109 2711 2971 3715 1312 632 644 Petrosani -255597 -149516 -298951 -358598 -77318 -44384 -27977 Jiu Valley -249379 -143611 -293132 -351706 -73140 -42843 -32010 Hunedoara -119772 -36452 -208370 -228755 13449 15287 2968

No. of companies with positive operating result (positive EBIT) Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 22 22 22 15 14 13 10 Uricani 72 67 64 61 46 36 23 Petrila 102 105 86 80 74 61 56 Vulcan 127 122 120 103 99 69 69 Lupeni 122 120 112 89 80 68 59 Petrosani 446 444 421 376 329 280 270 Jiu Valley 869 858 803 709 628 514 477 Hunedoara 4,141 4,000 3,810 3,602 3,150 2,680 2,450 % of companies with positive operating result (positive EBIT) Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 55% 58% 63% 48% 44% 42% 38% Uricani 50% 49% 55% 58% 47% 42% 30% Petrila 62% 64% 59% 55% 51% 46% 43% Vulcan 52% 53% 58% 55% 56% 42% 42% Lupeni 55% 57% 61% 54% 52% 45% 41% Petrosani 62% 63% 63% 61% 55% 48% 47% Jiu Valley 58% 60% 61% 58% 54% 46% 44% Hunedoara 64% 63% 64% 63% 57% 50% 47%

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Profit / Loss before tax ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 137 1310 789 217 -58 60 -148 Uricani 2116 414 624 115 239 91 56 Petrila 1472 1405 935 1725 1764 773 664 Vulcan 383 1102 1468 1149 446 -90 -6866 Lupeni 1927 2482 2770 3543 1255 536 593 Petrosani -259565 -155038 -303879 -362270 -80209 -40692 -24595 Jiu Valley -253667 -149635 -298082 -355738 -76505 -39382 -30148 Hunedoara -134554 -46634 -226596 -258073 -24711 7915 -18402 No. of companies with positive result before tax Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 23 23 22 15 13 12 10 Uricani 70 67 64 61 46 36 21 Petrila 100 105 83 81 74 58 53 Vulcan 128 123 123 106 96 68 66 Lupeni 123 118 111 86 77 66 54 Petrosani 452 447 426 380 323 277 252 Jiu Valley 873 860 807 714 616 505 446 Hunedoara 4,164 4,006 3,821 3,599 3,123 2,653 2,368

% of companies with positive result before tax Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 58% 61% 63% 48% 41% 39% 38% Uricani 49% 49% 55% 58% 47% 42% 28% Petrila 61% 64% 57% 55% 51% 43% 41% Vulcan 52% 54% 60% 57% 55% 41% 40% Lupeni 55% 56% 61% 52% 50% 44% 37% Petrosani 63% 64% 64% 61% 54% 47% 44% Jiu Valley 58% 60% 61% 58% 53% 45% 41% Hunedoara 64% 63% 64% 63% 56% 50% 46%

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Profit / Loss after tax ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa -42 1214 675 165 -94 28 -162 Uricani 1916 282 486 -19 133 -3 -10 Petrila 1190 1177 756 1403 1426 545 477 Vulcan 90 860 1148 824 209 -255 -6972 Lupeni 1432 1833 2365 2837 988 331 399 Petrosani -260934 -156411 -305379 -363892 -81253 -41646 -25858 Jiu Valley -256306 -152259 -300624 -358847 -78497 -41028 -31964 Hunedoara -155911 -67948 -245987 -280834 -44147 -8200 -33815 No. of profitable companies after tax Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 22 21 20 14 11 10 10 Uricani 66 62 58 57 44 33 21 Petrila 94 98 79 73 67 54 51 Vulcan 119 110 112 95 84 59 61 Lupeni 119 109 103 79 64 59 53 Petrosani 411 420 406 348 293 242 234 Jiu Valley 809 799 758 652 552 447 420 Hunedoara 3,913 3,771 3,593 3,344 2,859 2,410 2,259 % of profitable companies after tax Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 55% 55% 57% 45% 34% 32% 38% Uricani 46% 46% 50% 54% 45% 39% 28% Petrila 57% 59% 54% 50% 46% 40% 39% Vulcan 48% 48% 54% 51% 48% 36% 37% Lupeni 53% 52% 56% 48% 42% 39% 37% Petrosani 57% 60% 61% 56% 49% 41% 40% Jiu Valley 54% 55% 58% 53% 47% 40% 38% Hunedoara 60% 59% 60% 59% 51% 45% 44% Taxes (P/L before tax - P/L after tax) ['000 EUR] Area 2018 2017 2016 2015 2014 2013 2012 Aninoasa 179 96 114 52 36 32 14 Uricani 200 132 138 134 106 94 66 Petrila 282 228 179 322 338 228 187 Vulcan 293 242 320 325 237 165 106 Lupeni 495 649 405 706 267 205 194 Petrosani 1,369 1,373 1,500 1,622 1,044 954 1,263 Jiu Valley 2,639 2,624 2,542 3,109 1,992 1,646 1,816 Hunedoara 21,357 21,314 19,391 22,761 19,436 16,115 15,413

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Sites available for new investments Source of data: Invest in Jiu Valley

Municipality Lupeni Lupeni Lupeni Lupeni Lupeni Lupeni Lupeni Former Vascoza Former Former Stadionului Revolutiei Site DN66A site Barbateni Industrial Lupeni Carolina Street Site street site Mine Site South Mine Mine Property type Public Public Public Public Public Public Public Site area [sqm] 150,000 86,100 56,700 10,930 7,774 6,492 4,855 Unbuilt area [sqm] 150,000 86,100 56,700 6,193 7,774 6,492 4,855 Floor area [sqm] 0 0 0 4,737 0 0 0 Idustrial Industrial Industrial Industrial Industrial Industrial Industrial Zoning area area area area area area area Distance to NR 0 1,6 0.19 0 0.34 1,6 0.31 [km] Truck access Yes Yes Yes Yes Yes Yes Yes Rail access No No Yes No No No No Utilities Yes No Yes Yes Yes No Yes Closest public 0 1,580 190 0 340 1,580 310 transportation [m]

Municipality Petrila Petrila Petrila Vulcan Vulcan Uricani Uricani Former Valcan Former Former Site Former Galbera Melaia Hill furniture Pass Paroseni Valea de Petrila Mine Quarry factory Resort Mine Brazi Mine Property type Public Public Private Public Public Public Public Site area [sqm] 346,144 166,700 17,177 223,077 114,312 47,324 38,500 Unbuilt area [sqm] 346,144 143,500 13,173 223,077 114,312 47,324 38,500 Floor area [sqm] 0 23,200 4,004 0 0 0 0 Unincorpo- Industrial Industrial Tourism Industrial Unincorpo- Industrial Zoning rated area area services area rated area Distance to NR 2.54 1.23 1.55 6.55 0.42 0.37 0.15 [km] Truck access Yes Yes Yes Yes Yes Yes Yes Rail access No Yes No No Yes No Yes Utilities No Yes Np No Yes No No Closest public 1,640 340 345 0 420 375 0 transportation [m]

Municipality Petrosani Petrosani Petrosani Petrosani Petrosani Petrosani Petrosani Livezeni Former Site Golden UPSROM Ronconstru Industrial Dalja Mine TED Trans Brau Union Market Industry ct Park Site Property type Public Public Private Private Private Private Private Site area [sqm] 120,000 13,820 6,300 4,327 1,702 1,523 738 Unbuilt area [sqm] 120,000 13,820 3,140 3,263 0 0 0 Floor area [sqm] 0 0 3,160 1,034 1.702 1,523 738 Industrial Industrial Industrial Industrial Industrial Industrial Industrial Zoning area area area area area area area Distance to NR 1.35 3.15 0.4 3.35 0.4 0.4 3.35 [km] Truck access Yes Yes Yes Yes Yes Yes Yes

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Rail access Yes No No Yes No No Yes Utilities Yes Yes Yes Yes Yes Yes Yes Closest public 1,350 435 400 200 400 400 200 transportation [m]

Municipality Uricani Uricani Uricani Uricani Uricani Uricani Former Former Site Campu lui Poiana Sesul Valomir Coal Uricani Neag Lake Mare Serbanilor Quarry Station Mine Property type Public Public Public Public Public Public Site area [sqm] 630,285 141,427 122.034 112,119 74,335 60,142 Unbuilt area [sqm] 630,285 141,427 122.034 112,119 74,335 60,142 Floor area [sqm] 0 0 0 0 0 0 Industrial Industrial Industrial Industrial Industrial Industrial Zoning area area area area area area Distance to NR [km] 0 0 0 0 0 0.65 Truck access Yes Yes Yes Yes Yes Yes Rail access No Yes No No Yes No Utilities No Yes No No Yes No Closest public transportation 0 0 430 620 0 635 [m]

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113 Strategy for the transition from coal of the Jiu Valley