The privatization program cannot be put off forever because foreign investors will penalize us, warns Lucian Anghel, president of the Bucharest Stock Exchange. The political changes could put off by a few weeks the listings of state-run companies, but it is important for them to continue with preparations in order to launch the offers when the other issues are settled, explains Tom Attenborough, managing director for Central and South-Eastern Europe at Citi. Companies should first get listed in their own country, says Luca Payrano, head for Continental Europe of the London Stock Exchange.
Capital market specialists are worried that the new government, led by Victor Ponta, could delay the program of selling the state’s stakes, considering that back when they were in the opposition, the leaders of USL criticized the offerings to sell 9.84% of Petrom (SNP.RO), which failed last year, and 15% of Transelectrica (TEL.RO), which was finalized in April 2012, and saw the state collect a price lower than the market price.
Moreover, although they declare they will continue the privatizations program that Emil Boc and Mihai Razvan Ungureanu Governments committed to with the International Monetary Fund, the new members of the government have already announced modifications in the structure of the privatizations program, which could lead to significant delays.
For instance, economy minister Daniel Chitoiu said energy “pearls” Romgaz, Hidroelectrica and Nuclearelectrica would be privatized through double listings, on the Bucharest stock exchange and on a foreign market. He added that by this he attempted to get a better price for the state assets, and that renegotiations of the contracts sealed with the intermediaries would be necessary.
“Brokerage contracts have been signed with Goldman Sachs and Citi, which are international players, and one cannot put the offerings off endlessly because these names can tarnish your image internationally and we will need further financing from the markets over the coming years. The sentiment of international investors is king at this time on the markets, and this can bring a country to its knees. You saw what happened with Greece,” said Lucian Anghel, president of the Bucharest Stock Exchange at the round table on “The Romanian capital market and international capital markets,” organized by the London Stock Exchange, Citi, KPMG and Salans in collaboration with the Association of Brokers and the Bucharest Stock Exchange.
Anghel added that it was very important for the future financing of the Romanian economy that the state’s public offerings take place according to the original plan.
He believes the stock exchange should become a financing alternative for the Romanian economy considering that over the next few years foreign loans will decline, direct foreign investment will stagnate around the level reached in 2011, the budget deficit will decline, and the state will start to pay back the external loans taken out from the IMF and the European Union, so that the economy’s sources of financing will be increasingly narrow down.
Tom Attenborough, Citigroup managing director for Central and South-Eastern Europe, says most consultants will continue to work with the company’s management to prepare them for listing, so that when the other conditions are met, the privatizations can get going, after a few weeks’ delay. He believes despite the challenges facing the market at present, investors want to focus on the markets and on companies with a growth potential, and that they are willing to gloss over the current situation and look at future prospects if they like the story the companies are selling.
Market listing should not be first option for local companies
Although the new minister of the Economy, Daniel Chitoiu, hopes the double listing will get a better price for the companies in the state’s portfolio, specialists say it is preferable for any company to first be listed in its own country. The London stock exchange should be a complementary source of financing, not an alternative to the local stock exchange, says Luca Payrano, head of the London Stock Exchange for Continental Europe.
The London stock exchange has recently signed a cooperation agreement with the Bucharest stock exchange, according to which the British-based stock exchange will provide support to the local stock exchange in the future events promoting Romanian companies and the state’s offerings to London investors. “We are hoping to organize an event of the Bucharest Stock Exchange in London over the next 2-3 months,” Payrano said.
How can the state obtain a better price for the shares?
Romania is a very important market for investors, but one of its problems is its low liquidity and the fact that major investment opportunities have been few and far between. The main obstacles include high trading costs, bureaucracy in terms of settling transactions and solving these problems will help draw more investors, explains Tom Attenborough.
Specialists also say in order to be attractive for investors companies joining the market need to have standards of international corporate governance.
“Companies that want to get listed should reconvert their financial statements from previous years to international standards, which investors understand. They also have to decide how they want to present themselves in front of investors. (…) You have to build a story that attracts investors,” explained Aura Giurcaneanu, head of the audit department and partner of KPMG Romania. KPMG is auditor for three of the companies for which the state wants to conduct public offerings on the stock exchange over the coming period.
(English version by Daniela Stoican)