Electrica prices IPO at low end of range and raises 1.95 billion lei

Electrica announces a final offer price of 11 lei per share and 13.66 dollar per GDR (Global Depository Receipts), thus pricing its recently-closed initial public offering at low end of range. Romania’s leading distributor and supplier of electricity has succeeded to rise about 1.95 billion RON, making the IPO the biggest ever run on the Bucharest Stock Exchange.

The IPO comprising some 177.2 million equities in the form of shares, to be later traded on the Bucharest Stock Exchange or in the form of GDRs to be traded on the London Stock Exchang, one GDR representing an interest in four shares, was launched on June 16 and closed on June 25 with a subscription of 200 percent, announced yesterday Razvan Nicolescu, the Minister Delegate for Energy.

These shares represent 105 percent of the shares in issue prior to the registration of capital increase and 51.2 percent of the shares in issue upon completion of capital increase, so, while the IPO is valued at 1.95 billion lei, the company’s market cap comes to 3.81 billion lei, states a press release.

As anticipated, the high oversubsciption rate recorded in retail investors’ tranches determined the Selling Syndicate comprising Citigroup Global Markets Limited, Raiffeisen Bank S.A., Societe Generale Corporate and Investment Banking, BRD Group Societe Generale S.A. and SSIF Swiss Capital to approve a supplementation by 6 percent of the 15 percent quota initially assigned, transferring 10.6 million shares allotted to institutional investors to the retail tranche.

Small retail investors with guaranteed allocation for subscriptions that cumulatively do not exceed 1,000 shares per investor, up to a total of 10 million shares, will be alloted 8,269,977 shares at the final offer price, 11 lei.  The rest of retail investors will be assigned 11,220,785 shares at the same price, while those who had placed subscription orders by June 20 will be granted a 5 percent discount, so they will pay 10.45 lei per share.

On the large retail tranche, investors will be granted 17,781,875 securities in the form of shares and GDRs, at the final price, likewise the institutional investors who will be allocated 139,979,107 shares. According to Gabriel Dumitrascu, the Head of the General Directorate for Privatization and Management of Stakes in Energy held by the State, 25 percent of these subscriptions were placed by Romanian investors – pension funds and, a premiere, SIFs, institutional investors located in the UK account for 23 percent, while those from Poland and the US subscribed for 17 percent and 13 percent, respectively, of shares.

Also, given the subscription rate, small retail investors, except from those with guaranteed allocation, will be allotted shares on a pro-rata basis – an allocation rate of approximately 0.33, whereas on the large retail tranche the rate is 0.1475.

The effective listing on the Bucharest Stock Exchange and the London Stock Exchange is foreseen to start on or around July 4, 2014. 

Although it was initially expected to be priced above the low end of range, Electrica’s IPO is seen as a success in the context of another 22 IPOs under way in the same period.            

Via this IPO, the Ministry of Economy which is in control of Electrica sought to transfer the majority stake to private investors, however, the amount attracted will be added to the company’s finances and will be destined to investment projects, especially in the distribution sector.

Electrica is the leading distributor and supplier of electricity in the domestic market. The group's core business segments are the supply and distribution of electricity, in the first area operating through Electrica Distributie Muntenia Nord S.A., Electrica Distributie Transilvania Sud S.A., Electrica Distributie Transilvania Nord S.A. and the maintenance services company Electrica Serv. The supply segment operates through Electrica Furnizare and supplies electricity to consumers both on the regulated electricity market (in the regions where the distribution subsidiaries of the group operate) and on the competitive electricity market (throughout Romania).

The group's electricity distribution business is the largest in the domestic market both in terms of volume of electricity distributed to users and number of users.  According to ANRE, the National Energy Regulatory Authority, in 2013 the Electrica’s distribution business accounted for 39 percent of the electricity distributed in Romania – some 16 TWh of electric power which was distributed to about 3.6 million users. The supply operations included a similar number of users (around 3.56 million) and 9.7 TWh which represents 22.1 percent of the electric power supplied in the country.

Last year, Electrica posted consolidated revenues of approximately 5.2 billion lei (over 1.15 billion euro), while EBITDA amounted to 749 million lei (some 167 million euro).