A successful IPO of Romanian hydropower giant Hidroelectrica could lead to listings of other major Romanian companies, including Bucharest Airports, Constanta Port and salt monopoly Salrom, Johan Meyer, CEO of Franklin Templeton Investment Solutions’ (FTIS) Bucharest branch and portfolio manager of Fondul Proprietatea (FP), told bne IntelliNews on June 26. 

The IPO of Hidroelectrica is currently underway. The indicative price range has been set at RON94-112 per offer share, which implies a market capitalisation of RON42.3bn-50.4bn (€8.5bn-10bn), making this by far the largest IPO on the Bucharest Stock Exchange (BVB) to date. 

FP is seeking to sell its 19.94% stake in the energy company, with the proceeds planned to be distributed as dividends. The Romanian state, which is the majority shareholder, is not intending to exit its holding. 

Meyer told bne IntelliNews that he is pleased with the progress so far with the IPO. “It’s certainly progressing according to expectations,” he said. 

Efforts to have Hidroelectrica listed have been ongoing since Franklin Templeton took over the management of Fondul Proprietatea back in 2010. 

“It has been a long-term labour of love for Franklin Templeton to get us to this point,” said Meyer. 

“What we needed was firstly a company that was IPO-able in terms of management and governance structures [as well as] the necessary political support and of course the will from the selling shareholder, as Fondul is in this case,” he said. 

“Finally, given the political stability in recent years and the commitment the government made in the National Resilience and Recovery Plan to have a stake in Hidroelectrica listed, all those ingredients were there, to get us to the point where we were able to launch the transaction at the end of last week.” 

Hidroelectrica’s listing is expected to have a significant impact on the local capital market. 

“This is by far the largest IPO in the history of the Romanian capital market. Once it’s listed, Hidroelectrica will immediately become the largest company in terms of market cap by some margin,” Meyer said. 

This is expected to help the development of the local market, not long after Romania was raised from frontier to emerging market status by FTSE Russell in 2020. 

Hidroelectrica’s production in an average hydrological year comes in at over 17 TWh; the company supplies about 30% of the total energy produced in Romania. It employed 3,465 people as of the end of 2022. 

The IPO is taking place at a time of growing emphasis on green energy amid the transition away from fossil fuels. 

Meyer believes Hidroelectrica is “the right company at the right time”, and notes there are plans for further investment into green energy generation capacity. 

He says he hopes the IPO of Hidroelectrica will open the way for more IPOs of its portfolio companies by sending a “very positive signal in terms of investor interest in growth and opportunities in Romania”. 

“In the weeks and months after the IPO I think the benefits of listing companies such as Hidroelectrica will become clear … I believe this would put us in a very strong position to make progress with IPOs of different companies from the portfolio,” Meyer told bne IntelliNews. 

“Of course timing is completely uncertain at this moment, but going through the process and seeing the high level of investor interest in Romania, what is going on here in terms of economic growth, and in terms of opportunities, would certainly put us in a very good position to advance the narrative of further IPOs.”

Following the sale of FP’s stake in Hidroelectrica, the largest companies remaining in the fund’s portfolio will be Constanta Port, Bucharest Airports and salt monopoly Salrom. 

“Each of these would certainly benefit from being listed on the stock exchange for different reasons,” said Meyer. 

“For example, with Bucharest Airports there is the need for investment in additional passenger processing capacity, so having access to additional financing through the capital market would be very beneficial for the company.”