Italian energy group Enel has to pay EUR 401 million to Romania state for a 23.57% stake in the former electricity distribution and supply company Electrica Muntenia Sud, privatized in 2008, according to a decision of the International Court of Arbitration in Paris.

The Romanian state started the arbitration procedures against Enel in 2014 invoking a breach of the privatization contract, which bound the Italian group to buy the state's 23.57% remaining stake in the electricity distribution business when asked to.

In 2012, the Romanian Government asked Enel to pay EUR 521 million for the stake, invoking the clauses of a Put Option included in the privatization contract, but the Italian group was willing to pay less than EUR 300 million, according to Agerpres. The Put Option didn’t include a fixed price but a price formula, which was subject to interpretation. The two sides went to the arbitration court, which ruled that Enel should pay EUR 401 million.

The sum is still higher than what Enel paid to the Romanian state in 2008 for a 50% stake in Electrica Muntenia Sud, namely EUR 395 million. At that time, Enel also brought EUR 425 million into the company via a capital increase, which allowed it to increase its stake to 64.43%. The Romanian state kept a 23.57% stake in the company and the remaining 12% are held by investment fund Fondul Proprietatea.

Enel Romanian representatives confirmed the International Court of Arbitration’s decision and said the result was in line with what the company was expecting from this case.

Electrica Muntenia Sud was the most valuable electricity distribution and supply company in the state’s portfolio. After Enel took over the company, it was divided into two companies, one that took over the distribution, which is now called E-Distributie Muntenia, and the other one in charge of the supply, namely Enel Energie Muntenia, both having the same shareholding structure.

E-Distributie Muntenia is one of the most profitable companies in the local energy sector. It had operational revenues of EUR 232 million and a net profit of EUR 53.5 million in 2015. The company operates the electricity distribution grid that serves over 1.2 million clients in Romania’s capital Bucharest and the surrounding counties. Enel Energie Muntenia it the main electricity supplier in the same area, serving 1.2 million customers. It had a turnover of EUR 388 million and a net profit of EUR 5.6 million in 2015.

Enel also controls the electricity distribution companies in Romania’s Dobrogea and Banat regions, which include the Black Sea port of Constanta and Timisoara, the biggest city in Western Romania.

The Italian group serves a total of 2.7 million clients in Romania, in the three regions, and has over 3,100 employees.

In July 2016, the Romanian state lost a case against Enel at the International Court of Arbitration in Paris, in which it asked for EUR 920 million compensations from the Italian Group. Romania had to pay EUR 1.3 million arbitration costs to Enel in that case.

In August 2016, the Romanian state filed another arbitration case against Enel asking the group to compensations for not distributing dividends from Enel Distributie Banat's profits in 2012.

Enel wanted to sell its operations in Romania, in 2014, to balance the group's financials, but gave up the sale one year later.

editor@romania-insider.com