The IPO of electricity supplier Electrica marked one of the most important moments of the year on the Bucharest Stock Exchange, while the renewables sector started to see the effects of last year’s green certificates deferral.
Electrica makes biggest IPO in history of BVB
The initial public offering of electricity supplier and distributor Electrica raised RON 1.95 billion (EUR 444 million) from selling a 51 percent stake on the capital market. It is the biggest IPO in the history of the Bucharest Stock Exchange (BVB).
The final offering price for institutional and large retail investors was set at RON 11 per share (minimum price included in prospectus) and USD 13.66 per global depositary receipts (GDR).
The listing was carried out in Bucharest and London. At these prices, Electrica had a market capitalization of RON 3.81 billion (EUR 868 million). Electrica SA is the second Romanian privatized company to be listed in London; Romgaz SA debuted on the main market in November 2013.
Following consultations with the global coordinators of the offering, Electrica decided to reallocate close to 6 percent of the shares from large investors to retail investors, taking their tranche to over 20 percent of the offering. For small retail investors, Electrica granted up to 1,000 shares per buyer and provided a 5 percent discount in the first five days of the offering. The company had announced it would invest EUR 1.4 billion in energy distribution network efficiency, automation and expansion by 2018.
Electrica had Citigroup Global Markets Limited, Raiffeisen Bank and Societe Generale as global coordinators and joint bookrunners for the offering. BRD-Groupe Societe Generale was manager and SSIF Swiss Capital the distribution agent.
Enel announces exit from Romania
Italian utility firm Enel announced it would seek to sell its distribution and sales assets in Romania, as part of a wider EUR 6 billion asset sale program that was started in 2013, in a bid to reduce the group’s financial debt.
In Romania, the company aimed to sell a 64.4 percent stake in Enel Distributie Muntenia and Enel Energie Muntenia, a 51 percent stake in Enel Distributie Banat, Enel Distributie Dobrogea and Enel Energie, as well as its 100 percent interest in services company Enel Romania, which is controlled through Enel Investment Holding.
The company entered Romania in 2005, when it acquired the electricity distribution and supply companies Electrica Banat and Electrica Dobrogea, as part of a privatization program pursued by the government. In 2008, it took over the electricity supply of Bucharest through Electrica Muntenia Sud.
Enel said these companies had revenues of EUR 1.1 billion and EBITDA of EUR 289 million last year. They distributed 14TWh of electricity and had sales of 9TWh in 2013. The firm has 2.4 million residential customers in Romania, giving it a market share of 20 percent, while another 200,000 are businesses, with a market share of 38 percent.
The utility firm is also looking to sell its generation assets in Slovakia, where it controls the biggest electricity producer Slovenske Elektrarne. The company has 5,700 MW in installed capacities comprising nuclear, hydro and thermal facilities. Last year, the Slovak energy company posted revenues of EUR 2.8 billion and EBITDA of EUR 708 million.
Enel aims to raise EUR 4.4 billion from selling its operations in Romania and Slovakia, together with other non-strategic assets, under the debt reduction plan. The company has already cut its debt by EUR 1.6 billion to date.
Citigroup and UniCredit have been appointed financial advisors for the sale process in Romania.
The firm is also active in the local renewable sector, through Enel Green Power Energy. It had a portfolio of 498MW in wind and another 36W in solar installations at the end of 2013.
Hidroelectrica reports record profit
State-owned hydroelectricity producer Hidroelectrica reported a RON 124 million profit in October. For the first ten months of the year the company, currently under an insolvency reorganization plan, posted a profit of RON 943 million, up 23.64 percent compared to the same period of 2013. The firm says the growth is due to the higher energy sales and cost controls imposed by the legal administrator EuroInsol through its reorganization plan.
In the first ten months of this year, Hidroelectrica produced and delivered 15.5 TWh. For the whole of 2014 it estimates a production of minimum 17.5 TWh.
The company’s turnover at the end of October 2014 reached RON 2.7 billion, up 11.24 percent on the same period of the previous year. By the end of the year the company says it estimates a turnover of RON 3.2 billion.
More investments announced in oil & gas and nuclear sectors
Oil and gas producer OMV Petrom announced it would start the redevelopment of the Tazlau oil field, located in north-eastern Romania, in Bacau County. The project entails investments of around EUR 30 million over 2014-2015.Tazlau is a mature oil field, producing for more than 60 years, with a daily production of below 1 percent of OMV Petrom’s total oil production in Romania.
At the same time, Nuclearelectrica, the nuclear energy power producer, selected China General Nuclear Power Corporation (CGN) as investor for the development of two new nuclear reactors in Cernavoda, which will cost around EUR 6.5 billion.
The Chinese company was the only bidder in the tender procedure organized by Nuclearelectrica.
The Chinese investors will hold at least 51 percent of the joint venture, according to the project strategy. At present, the two nuclear reactors in Cernavoda cover roughly 20 percent of Romania’s electricity consumption annually.
Renewables sector starts seeing effects of green certificates deferral
After the government decided last year to alter the incentives for renewable energy producers, in a last ditch effort to rein in prices, the price of green certificates took a nosedive, putting the brakes on a fledgling industry that had thrived during the recession, attracting around EUR 4 billion in direct investments.
Under the bill, wind would remain with one certificate and recover the deferred one from January 2018. Until March 2017, small hydro producers will have to manage with two certificates as one is delayed, while solar plants will receive four certificates with two on the deferred list. Renewable energy producers qualify for green certificates for each mega-watt they feed into the grid, accounting for around two thirds of their revenues.
This year, the government approved a state aid scheme worth EUR 750 million that will provide partial exemption for the acquisition of green certificates by large industrial consumers, in a bid to prevent the relocation of production facilities and job losses. The measure, which was lobbied heavily for by the association of big energy consumers, will provide three exemption rates of 40 percent, 60 percent and 85 percent, depending on the energy consumption intensity.
Around 300 companies are expected to benefit from this measure, which is based on the draft guidelines on environmental and energy state aid for 2014-2020 promoted by the EC. The state aid scheme will be managed by the Ministry of Economy.
According to energy experts, the exemption will have an adverse effect on renewable producers which will have serious difficulties in selling their green certificates and keeping their projects profitable.