Romanian state owned electricity holding Electrica's initial public offering (IPO) could be the largest transaction of this kind ever to take place on the Bucharest Stock Exchange (BVB), energy minister Razvan Nicolescu said in a conference organized by Mediafax newswire.

„Electrica can become the largest listing on the Romanian capital market. The company has good financial results and no debt. It has a profit margin similar to that of other energy distributors and its business is regulated, therefore its stable,” Nicolescu said.

The company announced it plans to sell over 177 million shares representing 105 percent of its current capital. It hopes to get more than EUR 390 million, which is what the Romanian state got in October 2013 from the selling of a 15 percent stake in gas producer Romgaz Medias. The exact value of the transaction will be known after the Government approves the shares' sale price.

Following the offer, the Romanian state, represented by the Ministry of Economy acting through the Department for Energy, will hold an interest of 48.8 percent in the company. This is the first public offer in which the Romanian state sells a majority stake in a company it owns.

The Romgaz IPO was the largest ever IPO in Romania so far. Just like the Romgaz IPO, Electrica’s offer will be carried through both the Bucharest Stock Exchange and the London Stock Exchange, where the company will sell global depository receipts (GDRs) which will stand for four Electrica shares each. This way, the company aims to attract international investment funds which are not present on the Romanian market.

Last year, the group generated consolidated revenues of approximately RON 5.16 billion (EUR 1.17 billion), slightly lower than in the previous year. Operating profit before interest, amortization and depreciation (EBTDA) was RON 748 million (EUR 169 million), up 15 percent compared to 2012. However, net profit decreased by a quarter last year, to RON 314 million (EUR 71 million). The company’s net profit margin was 6 percent. The company’s shareholder’s equity at end December 2013 stood at EUR 1.34 billion.

The management's intention is to distribute dividends of approximately 85 percent of consolidated profit attributable to shareholders of Electrica, the company said in the announcement it posted on the London Stock Exchange.

Minister Razvan Nicolescu said that the Energy Department he runs is doing everything that the consultants have asked in order for this offer to be successful. Citigroup Global Markets Limited, Raiffeisen Bank Romania and Société Générale Corporate & Investment Banking are acting as joint global coordinators and joint bookrunners for the offer. BRD-Groupe Société Générale (Romania) has been appointed manager, while Swiss Capital, the largest Romanian brokerage house, has been appointed distribution agent.

The company will use the proceeds of the offer to implement its investment program. Out of the total expected capital expenditure for the group for the current five-year regulatory period lasting until December 2018, an estimated RON 4.7 billion (more than EUR 1 billion) is earmarked for capital investments in the group's regulated distribution business.

The management intends to develop the distribution network through refurbishment of its existing network infrastructure in order to reduce network losses, improve network flexibility and improve the quality, reliability and safety of the distribution network.

Andrei Chirileasa, andrei@romania-insider.com