Romania May Delay IMF-Agreed Hidroelectrica Sale for 2012

Romania may delay selling a minority stake in Hidroelectrica SA that was agreed with the International Monetary Fund and the European Union, as the power utility lacks liquidity to pay its bills and seeks to enter insolvency.

The sale was agreed on in May and its postponement will be discussed with the IMF and the EU after a court approves the legal filings, Hidroelectrica Chairman Remus Vulpescu said in Bucharest today. Vulpescu, who is also in charge of the industry state asset-selling office, said he believes the IMF will be “flexible” with the utility’s solutions.

“We didn’t eliminate or rule out the possibility of getting money for Hidroelectrica through a share sale, but it doesn’t seem possible this year,” Vulpescu told reporters. “The main purpose of the insolvency procedure is to reorganize the company and increase its efficiency through different measures. There is not enough liquidity.”

Romania, which is using a second accord with the IMF and the EU as a safeguard against the European sovereign-debt crisis, seeks to stay within the 5 billion-euro ($6.3 billion) precautionary loan and tries to meet its terms by selling state assets this year.

The country pledged to sell 10 percent stakes in Hidroelectrica and nuclear-power generator Nuclearelectrica SA this year on the Bucharest Stock Exchange and 15 percent stakes in natural-gas grid operator Transgaz SA (TGN) and gas producer Romgaz SA. It also seeks to sell a majority stake in unprofitable chemical company Oltchim SA.

No Bankruptcy

The insolvency won’t force the company to go into bankruptcy. It is meant to help its reorganization and won’t lead to cuts in power supplies to Hidroelectrica’s clients, Vulpescu said. A judicial administrator will propose a reorganization plan for Hidroelectrica which must be approved by its creditors, including Fondul Proprietatea SA (FP), he said. The restructuring won’t last more than 16 months to 18 months, he added.

The government also pledged to its international lenders to renegotiate some of Hidroelectrica’s bilateral contracts with companies such as Alro SA (ALR), which are under investigation by EU competition authorities for possible state aid in selling electricity below market prices.

The Bucharest-based court has set the first hearing on Hidroelectrica’s insolvency for tomorrow.

The government selected in April a group of banks and a brokerage led by BRD-Groupe Societe Generale SA (BRD) to sell the Hidroelectrica stake. The group also includes Citigroup Inc., (C) Societe Generale SA (GLE) and local brokerage Intercapital Invest SA.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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