Starting from the valuation of the Court in Paris, the former Electrica Muntenia Sud would now be the most valuable company in Romania, with a price of nearly EUR3 billion, about four times more than what the Romanian government got upon its privatization.
The government started the lawsuit in the summer of 2014 and some of the people most actively involved in this is Razvan Nicolescu, former energy minister, Borbely Karoly, former state secretary in charge of the electricity sector, and Gabriel Dumitrascu, former general manager of the department in charge of the management of energy companies and the key man behind some flotations like Romgaz and Electrica.
“Had the ruling of the Court in Paris shown the value of the minority stake in Electrica Muntenia Sud was any less than the offer we had on the table from Enel, I would have gone and turned myself in to the prosecutors,” says one of the people who contributed to this verdict.
“The ruling of the Court in Paris to award the Romanian government EUR401 million in the dispute with Enel is fair, which means the government gets an amount it could never have received by negotiations. The decision I made as energy minister in 2014 to go the Court of Arbitration turned out to be difficult but the right one to make,” former energy minister Razvan Nicolescu, now executive lead adviser on energy & sustainability with Deloitte, said in a post on his Facebook page.
The government was assisted by SCA Zamfirescu Racoti & Partners (ZRP) law firm and TPA Romania financial experts.
“The arbitration ruling is spectacular for the public because of the very high amount awarded,” says Cosmin Vasile, Zamfirescu Racoti & Partners.
In turn, Enel said it would comply with the decision of the Court, the amount in the ruling was in line with its own expectations.
The former Electrica Muntenia Sud, the so-called “Electrica crown jewel” was sold by the Romanian government in 2007 and the winner at the time was Italy’s Enel, a group that entered Romania by buying the former Electrica Banat and Electrica Dobrogea in 2005. Enel paid EUR395 million for 50% and the rest up to EUR820 million or 67.5% was a capital increase.
The privatization contract signed in 2007 allowed Electrica the right to sell and bound Enel to buy part or the entire 23.57% left of Electrica Muntenia Sud (Put option). Electrica currently owns 23.57% in Electrica Muntenia Sud, 10% of which are due to be transferred to the employees, under the privatization contract. Therefore, Enel is required to buy 13.57% in the former Electrica Muntenia Sud.
Although talk about the minority stake had not made much progress, in the summer of 2014, Enel surprisingly decided to sell its operations in Romania and Slovakia in an effort to reduce group debt.
Razvan Nicolescu, the energy minister at the time said the intent of the new management of Enel to reduce presence abroad was no surprise, and the sole concern of the Romanian government was to have the group comply with the privatization contract.
The decision of Enel to leave Romania came at a time when the group was accused of overcharging consumers in Bucharest. There were also doubts about privatization contract stipulations being met.
Shortly after the announcement of the Italian group, the company in charge of managing the energy company stakes of the government (SAPE), an offshoot of Electrica held by the Energy Ministry, took Enel to the Court of Arbitration in Paris, asking for EUR521.5 million for the minority stake in Muntenia Sud. On the other hand, Enel said the minority stake was worth less than what the Romania government demanded.
The government established SAPE to manage all the minority stakes it still has in the privatized electricity distribution and supply companies. Electrica’s listing prospectus said all the assets or liabilities that might arise from the suits and disputes Electrica is a party of against Enel, E. ON and CEZ or any previous suits and disputes would be transferred to the new company.
(English version by Loredana Fratila-Cristescu)