Romania is pushing ahead with its faltering privatisation plans with the IPO of a 10% stake in Nuclearelectrica on the stock exchange through a capital increase, which should be completed by September 20.
The listing is part of a broader privatisation project by Romania's government agreed as part of a series of aid deals with the International Monetary Fund; Romania signed at the end of July the latest €4bn stand-by deal with the IMF after the government managed to finally strike a deal on June 20 to sell rail freight carrier CFR Marfa to sole bidder Grup Feroviar Roman (GFR) - a requirement of the previous IMF agreement designed to shore up Romania's finances and stabilise the leu currency
However, in general these privatisation commitments by Romania have been honoured more in the breach than in practice, and while many have been repeatedly postponed, others have failed through incompetence or worse by the authorities. As recently as August 6, according to a report in the Ziarul Financiar newspaper, Romania was indicating in a draft letter of intent to the IMF that it wanted to push back a pledge to sell minority stakes in various state-owned energy companies to next year.
In the letter, the newspaper reported, the government wanted to list a 10% stake in hydropower producer Hidroelectrica in May 2014, a 10% stake in nuclear power producer Nuclearelectrica in September 2014, a 10% stake in gas producer Romgaz in October 2014 and a 15% stake in lignite power holding Oltenia by June 2014.
However, the slow progress in restructuring the country's inefficient and corrupt energy sector has been a particular focus of complaints by lenders and investors, who argue this is holding back Romania's economic development. Thus, the leftish government of Prime Minister Viktor Ponta has now decided to keep to its plan of selling the stake in the country's nuclear power producer, with the offer for a 10% stake in Nuclearelectrica running from September 9 to September 20. According to the prospectus, the price range for the shares has been set at between RON11.2 per share and RON15 (€4.50). At the mid-price, the stake should raise about €75m.
The state is the major shareholder of Nuclearelectrica, which runs the Cernavoda nuclear power plant and produces around 20% of Romania's power, with 90.28% of the shares. Fondul Proprietatea, a large fund created to compensate people who lost property during communism which is a part-owner of many public sector companies, holds the rest of 9.72%.
For the Emerging Europe investor East Capital, it has high hopes for Romania as a "new capital market superstar" due to the privatisation plans. "The most important thing for us as financial investors is the country's impressive plan for privatisations, with the Romanian state listing the companies on the stock exchange as a step in the process," says Peter Elam HÃ¥kansson, a founding partner of East Capital. "If all of these IPOs go through, the Bucharest Stock Exchange will attract lots of attention from many international investors. It is already attracting a lot of attention, because the market is also benefitting from the investor trend of seeking out frontier market investments, and Romania is classified as such a market."
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