Romanian investment fund Fondul Proprietatea, which has EUR 2.5 billion net assets, has sold its stakes in the local subsidiaries of the German utilities group E.ON, namely E.ON Distributie Romania and E.ON Energie Romania.

The stakes were valued at EUR 140 million, or 5.3% of Fondul Proprietatea’s net asset value (NAV) at the end of 2015. The Fund’s manager, Franklin Templeton Investment Management, didn’t disclose the value of this deal.

“The Fund has undertaken confidentiality obligations customary to such transactions so full details of the deal cannot be disclosed, but ensures its shareholders that the transaction is in line with the objectives set out in the Investment Policy Statement,” reads the fund’s note to investors.

Fondul Proprietatea held 18.3% of E.ON Distributie Romania, a company that manages the gas distribution network in the northern half of the country and the electricity distribution grid in the Moldova region, and 13.4% of E.ON Energie Romania, which supplies natural gas and electricity to consumers in those areas.

E.ON Distributie had a turnover of EUR 362 million and a net profit of EUR 58.6 million, in 2015. E.ON Energie recorded sales of EUR 1.09 billion and a net profit of EUR 25.2 million.

Fondul Proprietatea likely accepted a discount to the value at which the two stakes were registered in its portfolio. Thus, the value of this deal may be in the vicinity of EUR 125 million, based on similar negotiations with state-owned electricity holding Electrica, in which Fondul Proprietatea was willing to sell its minority stakes in Electrica’s subsidiaries at a 9% discount to their fair value.

The deal with Electrica didn’t go through, as the group offered to buy the fund’s minority stakes at an 18% discount, which was deemed unacceptable by the fund manager.

The E.ON deal is the first important transaction that Fondul Proprietatea has carried outside the capital market. The Fund’s manager, Franklin Templeton, has made little progress so far in selling its unlisted minority stakes in energy distribution companies controlled by state-owned Electrica, Italian group Enel, and French Engie.

However, Fondul Proprietatea has sold big chunks of its listed stakes in state-owned energy companies such as gas producer Romgaz, gas transporter Transgaz, power grid operator Transelectrica, and in oil&gas group OMV Petrom. These transactions have been carried out on the stock market, via private placements.

Fondul Proprietatea had net assets of EUR 2.5 billion, as of June 9, 2016. Listed shares make some 30% of its NAV while the unlisted portfolio is more than twice bigger, at 64% of the NAV. Its biggest holdings are in OMV Petrom, power producer Hidroelectrica, and electricity distributor Enel Distributie Banat.

Fondul Proprietatea is listed on the Bucharest Stock Exchange and London Stock Exchange and has a market capitalization of EUR 1.75 billion. Its shares and GDRs are trading at a 33% discount to its NAV per share.

Romania’s Fondul Proprietatea gets EUR 121 mln for Romgaz stake

What is Romanian Fondul Proprietatea’s biggest challenge five years after its listing on the Bucharest Stock Exchange?

Andrei Chirileasa, andrei@romania-insider.com