EXCLUSIVE The IPO of Nuclearelectrica stumbles over lawsuit

The labor union of the Cernavodă nuclear power plant has filed a statement of opposition at the Trade Registry, against the registration of the decision of the shareholders of Nuclearelectrica to increase the share capital of the company for the purpose of the IPO, several sources from within the company told us. The case will be tried by the Court of Bucharest and could delay the IPO of Nuclearelectrica SA, which the government plans to launch this month.

According to our sources, the union has filed the lawsuit claiming that the representative of the Proprietatea Fund (FP) in the General Shareholder Meeting of Nuclearelectrica did not have the mandate to vote for the share capital increase. In the union's vision, Franklin Templeton is not the de jure manager of the Proprietatea Fund, and the representative of the Proprietatea Fund at the General Shareholder Meeting of Nuclearelectrica should have been given a mandate by the General Shareholder Meeting of the Fund.

The Court of Appeal of Bucharest has issued contradictory rulings in the conflict between Franklin Templeton and lawyer Ioana Sfîrăială, who challenged the decision of the General Shareholder Meeting by which Franklin Templeton was appointed as the manager of the Proprietatea Fund, thus increasing the confusion over the management of the Proprietatea Fund. Most lileky, the Union relies on the ruling which was favorable to Ioana Sfîrăială.

Our sources say that the objective of the actions of the union are to obtain from the authorities the right to buy, on behalf of the employees of Nuclearelectrica, a small percentage (0.5% - or a maximum of 1%) of the shares of the company, but as part of the tranche allocated to institutional investors.

The Union of the Cernavodă Nuclearelectric plant is said to have agreed with the company to be granted a small percentage of the company's stock, but the Government Decision concerning the IPO by which 10% of the company will be listed on the BSE of 10% of Nuclearelectrica does not contain any such stipulation. Our sources claim that this provision concerning the subscriptions made by the employees of Nuclearelectrica through the union was removed at the request of the Ministry of Justice, which said that the employees should have created an employee association for acquiring shares.

The authorities have apparently already submitted a request for intervention for the Court of Bucharest to try the statement of opposition in an emergency regime, for the prospectus of the listing to be submitted to the approval of the Financial Supervision Authority. The quoted sources also say that the delay of the listing will be a minor one, of a week at most, and that there are great odds of the IPO taking place this month according to the plan.

On June 19th, the Government has amended the decision no. 39/2012 for the approval of the strategy for the privatization of "Nuclearelectrica", meaning splitting the stock offered in the IPO in three tranches.

At the time, Constantin Niţă said: "85% of the shares will be offered to institutional investors, and the remaining shares to retail investors, in two tranches, namely small subscriptions with a maximum value of at most 15,000 shares, and 5% for those looking to buy more than 15,000 shares. We would like a subscription rate as high as possible, we are betting it will reach about 150% or more for institutional investors, and based on that we are hoping the price will be as good as it possibly can be. I would like to get as much money as possible, but we need to make a ratio between the share capital, which is somewhere around 2.5 billion lei, and what we can, as nuclear energy isn't very popular with investors. Everyone knows what happened in Japan, at Fukushima, and that had a negative effect on investor perception".

The authorities have announced that the price range approved by the Government for institutional investors ranges is 11.20 lei/share to 15 lei/share, including the ends of the interval.

In the Emergency Ordinance for the ratification of the Letter of Intention signed by Romania with the IMF and approved by the Fund on June 26th, it is written that the IPO of Nuclearelectrica will be done by October this year. In the beginning, the IPO had been approved by mid-May, and then the Government announced that it will take place this month. The authorities are hoping to raise a maximum of 300-350 million lei (66-78 million Euros) for the stake of 10% of Nuclearelectrica.

The IPO of Nuclearelectrica is intermediated by brokerage firm Swiss Capital and BT Securities.

The Romanian state currently holds 90.3% of Nuclearelectrica SA, and the Proprietatea Fund holds the remaining 9.7%. The listing will take place through a share capital increase in which the government will not participate.

According to the evaluation of Nuclearelectrica made by the Proprietatea Fund, at the end of April, 10% of the company is worth about 666 million lei (154 million Euros).

According to the evaluation made by Fondul Proprietatea over Nuclearelectrica, at the end of April, the 10% stake in the energy maker is approximately 666 million lei (154 million Euros).