Romania began selling a minority stake in power utility Transelectrica SA (TEL), offering a 13 percent discount to lure investors in eastern European assets after last year’s failed stake sale in OMV Petrom SA. (SNP)
The Balkan nation, which plans to sell minority stakes in six energy companies this year, opened the subscription period today for 15 percent of the grid operator at a minimum price of 14.9 lei ($4.50) per share, 13 percent below the closing market price on March 12, and a maximum price of 19.2 lei, it said yesterday. Investors have until March 27 to submit bids.
Romania joins other former communist countries, including Poland and Russia, in selling state holdings to cut debts, upgrade outmoded plants and boost efficiency. Romania, which failed to complete the sale of a stake in Petrom, the country’s largest oil company, is trying to reassure investors with lower prices amid a credit crisis that continues to roil markets.
“The current higher volatility on the equity markets, could result in higher discounts claimed by investors in order to take exposure on different assets,” said Mihai Caruntu, an analyst at Erste Group Bank AG (EBS)’s Banca Comerciala Romana SA. “Additional discounts are claimed for the low visibility of the Romanian equity market and for the reduced transparency in the country’s energy sector.”
Transelectrica’s shares, which traded at 17.06 lei before the sale, declined 5 percent to close at 16.20 lei in Bucharest trading today. At that price, the company is valued at about 1.19 billion lei. Investors subscribed today about 2.34 percent of the 11 million shares offered by the government, according to the Bucharest bourse’s data.
BCR, Romania’s largest bank by assets, is managing the sale together with brokerages Swiss Capital SA and Intercapital Invest SA. The government and sale managers have been holding meetings with investors across Europe and will seek to sell the stake on the Bucharest Stock Exchange.
“Given the macroeconomic uncertainties, my recommendation to potential investors is to consider subscription at a price below 15.97 lei,” Andrei Radulescu, an analyst at the brokerage SSIF Broker SA (BRK), wrote in a note to clients yesterday.
Romania pledged to the International Monetary Fund and the European Union, which it joined in 2007, to reduce its holdings in state enterprises companies this year to finance infrastructure investments and cut the budget deficit to 1.9 percent of the gross domestic product from 4.35 percent of GDP last year.
“The progress made by Romania in the recent two years under the IMF program is largely acknowledged and maintaining the pace of reforms can create good entry points,” said Ovidiu Fer, an analyst at Wood & Co Financial Services in Prague.
Shoring Up Confidence
The government must reassure investors who are concerned about state companies’ management, a historical lack of liquidity and overregulation, especially in the energy industry, said Fer.
It must also compete for investors with less cash to spend as Poland, the EU’s largest eastern nation, puts stakes in similar companies on the block.
Poland on Feb. 4 sold a stake in PGE SA (PGE), its largest power utility, for 2.52 billion zloty ($796 million), raising the most from asset sales in eight months, to help finance the deficit. The transaction was the biggest state sale since the 5.4 billion-zloty initial public offering of coal producer Jastrzebska Spolka Weglowa SA (JSW) in June.
Spreading the Cash
“We hope the Polish pension funds still have some money left for Romania, too, after they subscribed to the PGE offer,” Dan Weiler, BCR’s head of corporate finance and investment banking in charge with the share sale, told reporters in Bucharest today. “We are counting a lot on the interest of investors from London and Frankfurt who are more familiar with Romania’s perspectives.”
Romania also plans to sell 15 percent stakes in gas company Romgaz SA and gas-grid operator Transgaz SA (TGN) and 10 percent stakes in Hidroelectrica SA and Nuclearelectrica this year. It will also try to revive the sale of a 9.8 percent stake in Petrom after it failed to get enough bids in July amid market turmoil triggered by Europe’s sovereign debt crisis.
“These are difficult times for privatizing but you must keep a door open for investments, we can’t live without them,” said Deputy Economy Minister Karoly Borbely in an interview in Bucharest. “The energy sector is in the pole position for attracting investments and we can’t afford to lose this moment, because it will be hard to catch up.”
Russia’s Energy Ministry said on Feb. 11 it may postpone the planned sale of state stakes in energy companies, such as OAO Rosneft (ROSN), OAO RusHydro (HYDR), OAO Transneft (TRNF) and OAO Zarubezhneft (ZRNFT), due to low market prices.
“Romania’s offerings must be very competitive internationally in terms of structure, management and how they are marketed,” to attract investors’ interest, said Greg Konieczny, the manager of Fondul Proprietatea SA (FP), a minority shareholder in Transelectrica.
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