Romania will open a legal case against Italian group Enel asking it to pay EUR 521 million for the 23.6 percent stake that the Romanian state holds in the former electricity distribution company Electrica Muntenia Sud, which is now controlled by Enel, Romania’s Energy Department announced.

This comes after Enel announced at the beginning of July that it will sell its electricity distribution business in Romania.

The Energy Department said it will go to the International Court of Arbitration in Paris to settle this dispute with Enel. It claims that under the terms of the privatization contract of the former Electrica Muntenia Sud, the Romanian state has the right to sell and Enel has the obligation to buy the 23.57 percent stake that the state holds in the entities that resulted from the former energy distribution company. The Romanian state will ask Enel to pay EUR 521.6 million for the stake.

The decision was taken as negotiations between the state and Enel didn’t result in an agreement between the two.

Enel bought Electrica Muntenia Sud from the Romanian state in 2007. The Italian group paid EUR 395 million to the state for 50 percent of the company’s shares and then raised its stake to 64.4 percent following a EUR 425 million capital increase.

Enel made more than EUR 400 million in profits with Enel Energie Muntenia and Enel Distributie Muntenia, the companies resulted from Electrica Muntenia Sud, from 2008 to 2013, according to data from the Finance Ministry. The two companies had some EUR 456 million cash in their accounts at the end of 2013.

Enel Distributie Muntenia holds the monopoly for electricity distribution by medium and low voltage lines in Romania’s capital Bucharest and the surrounding counties. Enel Energie Muntenia is the main electricity supplier for the same region.

Enel also holds control over the electricity distribution and supply companies in the Romanian regions of Banat and Dobrogea. The companies controlled by Enel in Romania last year had consolidated revenues of EUR 1.12 billion and operational profit (EBITDA) of EUR 289 million.

The Romanian state holds minority stakes in all these companies and so does Romanian investment fund Fondul Proprietatea.

Andrei Chirileasa, andrei@romania-insider.com