Negotiations for undertaking subsidiary holdings of Electrica from Fondul Proprietatea have failed

Electrica’s attempt to take back its subsidiaries’ holdings from Fondul Proprietatea (managed by Franklin Templeton Investment Management Limited UK- Bucharest Branch) has not crystalized into a transaction, after several rounds of negotiations between the two. The subject of Electrica’s request refers to the four companies where it now has the majority of shares - Electrica Distribuție Transilvania Sud SA ("EDTS"), Electrica Distribuție Transilvania Nord SA ("EDTN"), Electrica Distribuție Muntenia Nord SA ("EDMN"), and Electrica Furnizare SA ("EF").  

Several rounds of negotiations have not lead to any agreement between the Fund and ELECTRICA. At first, the price Electrica suggested for the 22% of the total shares was 790 million RON, including 106 million RON dividends that were supposed to be payed by subsidiaries to the Fund and later transferred towards Electrica. Basically, the price offered by Electrica was 684 million RON, a discount of 18% compared to their value of 841 million. But the Fund considered this price to be non-sustainable for such “valuable actives with significant cash flow”.

The final price requested by the Fund was 805 million RON and their availability to pay Electrica 36 million RON out of the total of 106 million that the Fund was supposed to get for 2015 from the subsidiaries as dividends – so, in conclusion, a total of 769 million as opposed to Electrica’s counteroffer of 684.

Despite the outcome of the negotiations, the Fund stated its position of reopening negotiations in the future with regard to this subject.

Franklin Templeton Investments took over the official position of investment manager and unique administrator of Fondul Proprietatea in 2010, as a consequence of international bidding. Fondul Proprietatea was created to compensate the Romanian citizens for the proprieties that were confiscated by the communist regime by granting them with shares to this fund (some of which, subsidiaries of Electrica), shares that are also listed at the Bucharest and London Stock Exchange.

By Mihaela Constatin