Romania’s Electrica starts trading in Bucharest and London

By Olga Rosca
@olgarosca

Romania’s Electrica trading in Bucharest and London

Romania’s major electricity distribution company S.C. Electrica S.A began trading on the Bucharest Stock Exchange and London Stock Exchange on Friday, 4 July 2014, after Romania’s largest ever initial public offering attracted a host of individual and institutional investors, including the European Bank for Reconstruction and Development (EBRD).

The Bank has invested over RON 320 million (equivalent to €75 million) for an 8.6 per cent stake in Electrica, as the firm has moved towards privatisation, selling the majority stake of 51.2 per cent.

In their market debut in London and Bucharest on Friday morning Electrica shares were selling for RON 11.11 per share, about 1.2 per cent higher than the IPO price last month.

Electrica set the final price of its shares at 11 lei a piece, having previously set a range of 11-13.5 lei.

S.C. Electrica S.A., with headquarters in Bucharest, serves around 3.5 million customers in north-western, central, southern and south-eastern Romania.

Romania's Prime Minister Victor Ponta has hailed the Electrica majority privatisation through an IPO as a great success. “I welcome the EBRD’s decision to invest in Electrica stake. This shows that we have a company that is seen as a major player on the European energy market and that has a bright future ahead,” he said in a government press release, adding that the EBRD involvement would also influence other foreign investors to get involved in the energy market of Romania.

The EBRD is investing in the company to help finance an ambitious investment strategy to upgrade the firm’s infrastructure. This will allow the electricity provider to offer its customers the same level of service as other – already privatised – market players. The Bank’s support will also help to make Electrica’s network more flexible in response to the recent increase in variable renewable energy capacity in Romania.

Speaking during Electrica’s IPO marketing roadshow in London in the lead up to the transaction, Romanian Energy Minister Răzvan-Eugen Nicolescu, said: “We trust that the EBRD will be a long-term partner for Romania through Electrica, and will use its vast experience to support the implementation of international corporate governance standards in the company. We hope that this IPO will promote Electrica, and thereby Romania, as a good business destination, stable and predictable for investment.”

Notably, the EBRD’s investment also enables the Bank to support a comprehensive plan to improve corporate governance, internal control systems and environmental management practices at Electrica. In this regard, the EBRD and Electrica’s management have signed a framework agreement for the implementation of a corporate governance action plan and an environmental and social action plan.

Nandita Parshad, Power and Energy Director at the EBRD, said: “Electrica’s IPO – Romania’s largest to date – is a landmark transaction. Our participation demonstrates the EBRD’s commitment to supporting the government’s plans for increased privatisation of the energy sector. We will work with the company towards the successful implementation of an ambitious set of measures to align its corporate governance with international standards. This will provide additional comfort and confidence to potential future investors.”

The transaction will also contribute to the development of local capital markets, providing an important benchmark for future listings and increasing market liquidity.

Bucharest-based Senior Banker Mihnea Crăciun said: “Looking forward, we will continue exploring possibilities to support the restructuring and privatization of Romania’s state energy sector either through capital markets (IPOs) or with strategic investors, to promote state-of-the-art, environmentally friendly investment.

The EBRD is the largest institutional investor in Romania. To date, the Bank has invested approximately €6.7 billion across 360 projects in the country. The EBRD has further mobilised over €14 billion from other sources of financing.