A March 6 court ruling invalidating the selection of Romanian state-controlled hydropower group Hidroelectrica’s management in 2019 has called into question the company’s IPO planned later this year. 

The Court of Appeal rejected Hidroelectrica’s appeal to a lower court’s ruling issued in April 2022 in the case of the former Hidroelectrica CFO Petronel Chiriac who challenged the legality of the selection procedures for the company’s Board of Directors in 2019.

Hidroelectrica said in a statement released after the Court of Appeal announced its ruling on March 6 that the ruling has no impact on the planned IPO, reported Ziarul Financiar daily.

The ruling, furthermore not final, regards only the selection procedure and does not invalidate the mandates of the company’s board of directors, according to the interpretation by Hidroelectrica’s management set out in its statement.

The mandate of the board expires in June 2023 and a selection process is on course for appointing a supervisory board in charge of setting the selection procedures for a new board of directors, the company also explained. 

However, a statement signed by lawyer Mihai Kehaiyan, who claims to have represented the plaintiff in this process, but does not mention his name, claimed that” "the five directors of Hidroelectrica no longer have any legal capacity — they can no longer sign documents … Practically, they no longer operate as members of the Hidroelectrica Board as of March 1.” 

The lawyer argued that some of the board members should have been rejected from the first stages of the selection procedures, as they failed to meet basic requirements such as speaking a foreign language, meeting seniority criteria or not being in a conflict of interest with the company. 

Hidroelectrica was expected to carry out its IPO on the Bucharest Stock Exchange (BVB) either in the first part of May or in June, after filing the prospectus with the financial market authority, ASF, in April, Karoly Borbely, a member of the company’s managing board, said in February.

The IPO is designed to allow restitution fund Fondul Proprietatea to cash part of its 20% stake in Hidroelectrica. Borbely added that, in future, the Romanian state might decrease its 80% participation to 65-70%.

The manager of Fondul Proprietatea, Franklin Templeton, argued for a dual listing in Bucharest and London, but its shareholders approved the proposal backed by the Romanian authorities and Hidroelectrica shares will be listed only in Romania. The local market wouldn’t be deep enough for the 20% Hidroelectrica stake, Templeton argued.