The EBRD has participated in the Initial Public Offering organized by Electrica SA, for the issuance of new shares representing 105 per cent of the company’s share capital and floated on the Bucharest Stock Exchange as well as on the London Stock Exchange, via Global Depository Receipts (“GDRs”).
According to an EBRD press release, the proceeds will be used by Electrica to, "fund an investment plan targeting the development of the distribution network through the installation of smart grid infrastructure, improving operating efficiencies and refurbishing its existing network infrastructure.” The Bank participated with EUR 75 million of the total IPO value of EUR 444 million. The EBRD now holds approximately 8.6 per cent of the company.
Electrica S.A. is the holding company of a group which distributes and supplies electricity to residential and industrial consumers in the geographical area of Northern Muntenia, and Northern and Southern Transylvania. The Bank also helped the company draw up a corporate governance action plan, setting out robust risk assessment and mitigation measures and protecting the rights of minority shareholders.
The Romanian government sold 51.2 per cent of its stake in Electrica in the IPO on July 4, raising USD 605 million, but it remains the biggest single shareholder.
Gian Piero Cigna, Senior Counsel — Corporate Governance at the EBRD, explained that the Electrica corporate government action plan: "ensures that Electrica will operate with the same level of good governance as any western company. In particular, it provides for the nomination of three qualified and independent directors, out of the five who sit on the board. This ensures that the board includes people with appropriate qualifications and who can view matters objectively, without any conflict of interest.” The action plan also sets out Electrica’s position on its nomination and remuneration policies, board committees, articles of incorporation and internal control framework.
Cigna feels the action plan was critical to the positive results of the IPO: “We don’t yet have a rating for Electrica, but I suspect that the corporate governance action plan was one factor in the success of this latest IPO.”
The EBRD notes that the project was undertaken by Electrica through the signing of a Framework Agreement with the Bank. The EBRD expects the project to increase private ownership, as this is the first majority privatization of a state-owned company via the Romanian stock exchange, and the Bank expects the IPO to contribute to the liquidity and depth of the Bucharest Stock Exchange.
EBRD lawyer Enrico Canzio was the Bank’s Senior Counsel on the deal, and he reports that no outside counsel was involved.