bne IntelliNews -

The Romanian government has demanded €1.3bn compensation from power distribution company Electrica, accusing the company - in which it has a 48.78% stake - of failing to properly monitor foreign investment into regional distribution firms.

SAPE, the agency that manages state holdings in energy companies, notified Electrica this week that the company owes €1.3bn worth of penalties to the state after it failed to ensure that foreign investors, including Italy's Enel, met their privatisation commitments. 

The invoice, which is not backed yet by any legal action, has worried Electrica’s minority shareholders, adding to already strained relations caused by different views on the tasks and evaluation criteria for the company’s management. At stake is the €600mn in Electrica’s accounts following the company’s 2014 IPO.

Electrica has argued in a letter to its shareholders that the company holds no responsibility in regard to the commitments of the foreign investors.

Separately, SAPE is apparently attempting to impose tighter control over the management of Electrica's operations, according to a letter from the company’s managing board  to the government in August and disclosed on September 9 to investors. The government suggested performance criteria for the upper management and asked to be informed on the appointment on lower level appointments, the managing board explained. The performance criteria are designed to be used to politically control the management, the board argued.  

At the Electrica general shareholders’ meeting on September 9, representatives of the state and minority shareholders failed to reach an agreement on whether to set performance criteria for the management, and failed to endorse the management strategy. While the state insists on these criteria being set, the minority shareholders (whose combined stake is larger than the state’s holding) claim that this would not be in line with European practice. 

The Romanian state through SAPE has already opened international arbitration courts cases against some of the foreign investors in local electricity distribution forms, once parts of Electrica. While it has already lost several of the cases, one of them – probably the most important in financial terms - is due to be decided in November. In this case, SAPE demanded €521mn plus penalties from Enel, claiming that the Italian company has not observed the state’s put option for its 13.6% stake in Electrica Muntenia Sud (EMS) electricity distribution company. The case is being judged at the International Arbitration Court in Paris.