There is "pretty much no chance” of the long-awaited IPO of Romanian hydropower producer Hidroelectrica taking place this year, the managers of minority shareholder Fondul Proprietatea (FP) said on February 14. 

FP has been seeking for years to list Hidroelectrica, but the listing depends on approval from the Romanian government as the state is the main shareholder. Given the size of the company, the listing would give a big boost to the local stock exchange, which is seeking an upgrade to emerging market status but has been held back by low liquidity levels. 

Romania’s then minister of energy Toma Petcu said back in September 2017 that Bucharest is interested in accelerating the IPO of Hidroelectrica. Since then, however, there has been a change of government, and repeated clashes between FP and the Romanian authorities over corporate governance at companies where they are both shareholders. 

Speaking at a press conference in Bucharest on February 14, FP fund manager Greg Konieczny said that before an IPO can take place Hidroelectrica has to be ready for listing. 

“It’s not and there is really no intention, no action from the government to move Hidroelectrica closer to the listing,” Konieczny argued. 

“Looking at where we are right now, the process is not moving forward, and we see pretty much no chance to list Hidroelectrica this year. Next year it is possible but this depends on the political will from the highest levels of the government, or shadow government, whoever is considered to rule the country,” he added, in what he later explained as a reference to the presence of Liviu Dragnea, leader of the ruling Social Democratic Party (PSD) as the eminence grise behind recent governments. 

Specifically, FP executives and the Romanian government have clashed over moves by the government to install interim management teams at Hidroelectrica and other majority state-owned companies. The fund has also attacked the government for its attempts to waive the corporate governance law, which stipulates the appointment of professional management, for a long list of major enterprises. On February 13, Romania’s constitutional court invalidated the amendments by which lawmakers waived the law, saying they breached the constitution, though this does not rule out a fresh attempt using different methods. 

“The government has continued to approve interim boards and interim executive management, which we believe directly affect the potential of listing companies,” said Konieczny. “We are well aware that investors in IPOs want clarity on oversight and management, and we have been very firm in our position that having interim management in place is not good practice for long-term investment strategy.”  

The new government under Prime Minister Viorica Dancila was voted in by the parliament at the end of January, and FP’s co-portfolio manager Johan Meyer told journalists that FP representatives have not yet met the new minister to discuss Hidroelectrica, though he says the fund plans to “initiate an open and frank conversation”. He adds that the frequent government changes — Dancila is the fourth prime minister since the beginning of 2017 — are also holding back preparations for the Hidroelectrica IPO. 

“The listing has been expected for years. In the last year there was a golden opportunity to get it listed in terms of the market, but the important thing is to take a decision and go ahead with it,” Meyer said. 

“It’s unsettling and annoying to have such frequent changes in government and in ministerial portfolios, because very little can be done. We would very much like to see more stability of government.”

Despite all the hiccups along the way, FP managers are confident that when — rather than if — the IPO finally takes place, it will be well received by the market, with Meyer citing the company’s “unique assets” and the interest in investing into companies involved in sustainable, renewable energy supply. “A company like Hidroelectrica would be in tremendous demand from any shareholder,” he forecast. 

FP is also keen to push for an IPO of another portfolio company, Bucharest Airports, which manages Henri Coanda Airport and the smaller Aurel Vlaicu Airport airport in the Romanian capital. Given the upturn in air traffic via Bucharest, Henri Coanda Airport is overdue for an upgrade, and an IPO would make it possible to raise funds to expand the country’s main airport.