Enel May Ride Electrica IPO Wave With Sale of Romanian Assets

Romania’s successful sale of national electricity distributor Electrica SA may give a boost to Enel SpA’s effort to sell power-generation assets in Eastern Europe for as much as 4.4 billion euros ($5.9 billion).

The initial public offering of a 51 percent stake in Electrica, which raised 435 million euros last month for Romania, “serves as a good indicator of investors’ interest” in the regulated power assets and indicates that Enel could raise 2 billion euros or more for its assets in the country, according to London-based Sanford C. Bernstein Ltd. analyst Cosma Panzacchi. The assets include a majority stake in the utility that powers Bucharest.

Enel Chief Executive Officer Francesco Starace, who took office in May, pledged to sell Romanian and Slovak assets by the end of the year to strengthen the balance sheet. Potential buyers include Electrica as well as investment funds, the State Grid Corporation of China, RWE AG, which has recently opened an office in Romania, and Electricite de France SA, according to Bernstein, RBC Capital Markets and others.

“We think this event has an indirect, yet important and positive, implication for Enel,” Panzacchi said by e-mail. “The company will successfully execute its disposal plan.”

RWE spokesman Michael Murphy declined to comment on a possible offer, as did an EDF spokeswoman, who asked not to be identified in line with the company’s policy. The Chinese grid operator didn’t respond to e-mails seeking comment.

Arbitration Case

Enel owns majority stakes in five Romanian companies with a total market share of about 30 percent.

Any sale may be delayed after the government said it will open an arbitration case against Enel, asking the company to pay about 522 million euros for its remaining shares in the Muntenia Sud unit following a privatization contract signed in 2007. Enel doesn’t expect the arbitration to affect the sale process, its spokeswoman said.

The Romanian state has a preemptive right to Enel’s units in the country and hasn’t said whether it’s interested in the assets.

“Enel’s distribution assets in Romania could be taken over by international private or state-owned investors or by Romanian investors, but it’s also possible that this intention to sell will not materialize,” Energy Minister Razvan Nicolescu said in an e-mailed response to questions.

The Italian utility is also seeking a buyer for its 66 percent stake in Slovakia’s largest utility, Slovenske Elektrarne AS, which operates two nuclear stations and is building two new reactors.

Potential buyers include Czech utility CEZ AS, whose CEO Daniel Benes said in April that he’d be open to bidding for Enel’s stake if it came up for sale.

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