Listing Hidroelectrica has been mentioned by Fondul Proprietatea from 2010. There were needed 12 years for having the first shareholders meeting of Hidroelectrica for approving the listing in March 2022. On 15 November the shareholders of Fondul Proprietatea will vote the way for Fondul Proprietatea to sell entirely or partially the shares hold in Hidroelectrica.
Who is selling shares in Hidroelectrica?
The listing of Hidroelectrica is not a privatisation – this is only a myth. The Romanian State is not selling any share hold in Hidroelectrica. Fondul Proprietatea (where Romanian state holds only 6%) intends to sell entirely or partially its shares in Hidroelectrica. That means that after Hidroelectrica listing, the Romanian State will continue to control 80% of Hidroelectrica, the same as currently.
Why listing Hidroelectrica is important?
Listing Hidroelectrica is important:
- for Romanian capital market as it brings a valuable issuer on the market, increases the liquidity, and it is ticking a box from PNRR
- for Romanian State, as Fondul Proprietatea was not a friendly minority shareholder in the past and holding 80% against a large base of shareholders is giving more power to Romanian State (we know that not all shareholders join general meetings regularly)
- for shareholders of Fondul Proprietatea because of the distributions expected from Hidroelectrica listing proceeds
- for the banks and consultants involved in the transaction as the expenses related to transactions with portfolio holdings of Fondul Proprietatea proposed for 2023 are at the highest level on Romanian market (over 300 million RON)
- for the management of Fondul Proprietatea because of the fees to be received after distribution of proceeds to its shareholders
- for Hidroelectrica, as a listed company, because is implementing high standards of corporate governance and transparency and
- for future investors in Hidroelectrica, the buyers of shares to be sold by Fondul Proprietatea. They are the most interested one as Hidroelectrica distributed during last 3 years huge amounts as dividends and 20% of such amounts went directly to Fondul Proprietatea (RON 564,601,016 in 2022, RON 256,552,599 in 2021 and RON 179,652,061 in 2020). After listing, the dividends will go directly to the future shareholders of Hidroelectrica (Romanian State for 80%, institutional and retail investors for the rest).
Is Hidroelectrica listing influencing the price of energy?
This is another myth. The reality is that the controlling shareholder continue to be Romanian State holding 80% after the listing of Hidroelectrica. The strategy for energy market is decided by the same public authorities, so listing is not influencing the price of the energy. Based on the information published on Hidroelectrica’s website, the strategy of Hidroelectrica for medium and long term was already approved by shareholders on 31 October 2022.
What scenarios are on the table?
There are 2 alternative votes proposed to shareholders of Fondul Proprietatea for 15 November 2022:
- Dual listing / sell using any other manner at the discretion of the Sole Director, as proposed by the management of Fondul Proprietatea (text is do flexible that includes even a selling without listing)
- Listing only on Bucharest Stock Exchange as proposed by the Romanian State (holding over 6% of total voting rights of Fondul Proprietatea). As an important note, Hidroelectrica shareholders’ approval from March 2022 is for listing only on Bucharest Stock Exchange and this resolution is part of the listing documentation to be filed with Romanian Financial Supervisory Authority.
What is next after Fondul Proprietatea vote in general meeting?
Depending on the vote of Fondul Proprietatea there are several scenarios.
1. The shareholders of Fondul Proprietatea vote the proposal for dual listing or sell using any other manner at the discretion of the Sole Director and against the proposal of Romanian State. There are two sub scenarios:
1.1. The vote has no direct effects on listing process as the document needed for the listing approval is Hidroelectrica shareholders’ resolution, and that one is only for Bucharest Stock Exchange listing (consistent with Romanian State proposal). However, the management of Fondul Proprietatea would try to push again for a dual listing. What are the chances to succeed? What would be the new timeline for Hidroelectrica listing? How supportive would Romanian State be for listing after a vote against its proposal?
1.2. The management of Fondul Proprietatea tries to push for a sell of a part of Hidroelectrica without listing. The transaction may take place only with the approval of the extraordinary general meeting of Hidroelectrica because this involves a change of the Articles of Association of Hidroelectrica. As Romanian State controls 80% of Hidroelectrica, what are the chances for Romanian State to accept such a transaction?
2. The shareholders of Fondul Proprietatea vote the proposal of Romanian State for a listing on Bucharest Stock Exchange. In this case the management of Fondul Proprietatea mentioned that the size of the offer may be lower because only Romanian market cannot absorb a big offer. Is it a problem for any of the beneficiaries mentioned above?
There are advantages and disadvantages for both types of listings, and clear disadvantages for a selling without listing. What is the interest of the Romanian institutional investors (mainly Romanian pension funds) for each type of listing? Based on the last announcement published by Fondul Proprietatea, as at 31 October 2022 Romanian institutional shareholders together with Romanian state control together 46% of voting rights.
The deadline for sending proxies and correspondence votes is tomorrow morning and on 15 November 2022 Fondul Proprietatea will announce the resolution approved by shareholders.