The government will put up for sale 51% in the company and hopes to raise more than EUR390 million from investors on the local market and from those investing on the London Stock Exchange. Electrica’s IPO is expected to be the biggest on the Bucharest Stock Exchange, beating Romgaz’s (SNG.RO), which was conducted last year.
The government will guarantee 1,000 shares for the retail investors subscribing in the IPO, equal to about EUR3,600 if considering it as a portion of the EUR390 million the government seeks to raise. If the 51% do sell for EUR390 million, the entire Electrica would be worth EUR764 million, or seven times its 2012 net profit. Similar companies are trading at multiples of five to ten times their net profit on foreign exchanges.
The first 10,000 small investors subscribing to Electrica’s offer will get a guaranteed allocation of 1,000 shares. This is a big step forward the government has taken, which did no such thing for Romgaz, so the small investors got 17 times less than they subscribed due the very large subscriptions fuelled by bank loans mainly.
“By guaranteeing subscriptions, we want to encourage retail investors as well as Romanians who keep their money in the bank to participate in the IPO,” Gabriel Dumitrascu, head of the privatization division with the Department for Energy, who supervises Electrica’s privatization process on behalf of the government, told ZF.
The small investors subscribing in the first week will also get discounts as they were offered in the Romgaz IPO. Back then the discount for the retail tranche was 5% of the final price for the first-week subscriptions and 3% for the rest of the days.
“Guaranteed subscriptions to Electrica’s IPO are a good decision. I participated in the Romgaz IPO and out of the 10,000 lei (about EUR2,300) subscribed I merely got RON1,000 worth of the shares. I participated in the Romgaz offering because the bank interest had dropped too much, but the stake I got was less than expected,” said Lucian Patrasescu, Romgaz IPO investor.
Analysts say the attractiveness of Electrica’s shares for retail investors resides in the fact that the company has a regulated profit, therefore stable and predictable, pays dividends and unlike OMV Petrom (SNP.RO) is not under pressure to renew its reserves.
(English version by Loredana Fratila-Cristescu)