Fondul Proprietatea, the biggest investment fund in Romania, advocates for the quick listing of state-owned hydropower producer Hidroelectrica.

The fund holds a 20% stake in Hidroelectrica, while the state controls the remaining 80%.

The company has already drawn the interest of large investment funds and will certainly not be undervalued due to the pandemic, argued Marius Dan, a senior vice president at Franklin Templeton Investments Romania, the manager of Fondul Proprietatea (FP), Economica.net reported.

Hidroelectrica has taken several steps to prepare the listing, such as selecting an equity advisor and a legal consultant. However, a new law passed by the Parliament, which bans the sale of state assets for two years, is likely to freeze the process once again. The logic of this law, authored by the Social Democrats and validated by the Constitutional Court, was that the assets would generally be undervalued during the complicated economic period during and after the coronavirus pandemic.

The economic crisis does not threaten Hidroelectrica's value, rather the opposite, Marius Dan argued. The slight deterioration in the company's earnings was due to the emergency ordinance OUG 114/2018 (also authored by the Social Democrats), not the pandemic, he explained.

He also stressed that Hidroelectrica is a unique company, at least in Europe, thanks to its concentration on hydropower energy, and argued that listing its shares would increase the liquidity at Bucharest Stock Exchange.

The last two arguments open, however, the door to relevant questions such as why the other hydropower companies in Europe have already diversified into other segments (as planned by Hidroelectrica but opposed by Fondul Proprietatea) and will Hidroelectrica's listing really increase the liquidity or will the share be kept by investors as rare assets? After the general elections, the new Government, backed by a robust parliamentary majority, will have the opportunity to revise the law 314/2020 and assess its opportunity under the new circumstances. A very relevant argument is pension funds' expansion and their need to invest in valuable local assets.

iulian@romania-insider.com

(Photo source: Facebook/Hidroelectrica)