EVEN THOUGH NUCLEAR ENERGY ISN'T "COOL" WITH INVESTORS The government starts the listing of Nuclearelectrica

The government wants to make a maximum of 300-350 million lei (66-78 million Euros) for the stake of 10% of din Nuclearelectrica, which it will sell through an IPO on the Bucharest Stock Exchange, according to the statements made yesterday by Constantin Niţă, the delegated minister for energy.

The government yesterday changed the decision no. 39/2012 for the approval of the strategy for the privatization of "Nuclearelectrica", by splitting the IPO in three segments.

Constantin Niţă said: "85% of the shares will be granted to the institutional investors, and the remaining 15% to retail investors, in two tranches, namely small subscriptions of up to 15,000 shares and 5% to those who buy more than 15,000 shares. We would like a subscription as high as possible, we are betting on the institutional investors subscribing 150% or more, and based on that we hope to get as a good a price as possible. I would like to obtain as much as possible, but we need to make a ratio based on the share capital which is somewhere in the vicinity of 2.5 billion lei, and what we can get considering that investors aren't too fond of nuclear energy. You know what happened in Japan, at Fukushima, and that had a negative influence on investors".

• The context isn't as favorable as it was at "Transgaz"

The market context for the IPO of Nuclearelectrica isn't as favorable as it was for the secondary offer of "Transgaz" in April, according to Simion Tihon, a broker with "Prime Transaction". He told us: "I think, however, that this has more to do with the attempt to stick with the privatization schedule agreed with the IMF than with a privatization conducted after a careful study on the opportunity of its timing. There is also the possibility of the market context improving by the time the prospectus is published.

On the retail investor segment, the interest will depend mostly on the price of the offer, and on the institutional investor segment, aside from the price, there are also the strategic objectives".

As the authorities officially acknowledge that this is not the best time for the offer of Nuclearelectrica, the question arises about the usefulness of this IPO.

The money in itself does not represent a stake, as the money the government expects to make does not represent a significant amount, and it will go to the company anyway, not to the budget.

For now, the Government is rushing to meet its commitments to the IMF, after dragging its feet for years when it comes to honoring its commitments.

Prime Minister Ponta advised the ministers to "work hard", prior to the visit of the IMF, and to convey the message that we are a reliable country.

• The price range will be centered around 13 lei/share

The government did not disclose the price range for the offer of Nuclearelectrica, as the Ministry for Energy mentioned that it will be approved in the General Meeting of Shareholders as well. According to some sources, the discount for small investors is less than 3%, and the price interval is centered around 13 lei/share.

The price range for subscription approved by the Romanian government will be mentioned in the prospectus to give both the Issuer as well as investors the comfort that there is enough flexibility to reach the balance point between demand and supply, so that the IPO can be completed, even in the context of a volatile market, yesterday's press release by the Government states.

Remus Vulpescu, the former head of the OPSPI (the Office for the State's Interests and Industrial Privatization), considers that the stake of this initial public offer would be the opening of Nuclearelectrica for private investors, and the share capital increase is small enough that it wont' raise any problems.

He said that the structure of the offer of Nuclearelectrica is the same as the one approved for "Transgaz", a fair model, which investors from all markets are familiar with and which can lead to the success of the IPO.

In the Argumentation Note for the Government Decision no. 39 /2012 for the approval of the strategy for the privatization of National Company "Nuclearelectrica" SA Bucureşti, it is stated that the Government has decided to conduct a share capital increase for attracting financial resources from subscribers (retail and institutional investors), needed for achieving the projects to modernize, develop and retool the company, which will affect the state's revenues over time, due to its stake in the company. The decision has also relied on the requests of the significant minority shareholder, the Proprietatea Fund, to get the company listed and based on the agreed upon measures, the measures agreed upon with the international financial institutions (the International Monetary Fund, the European Commission and the World Bank).

• The government concerned over the state of the stock market

The Government also states that the measures included in the privatization strategy of Nuclearelectrica are also considering the beneficial consequences on a macroeconomic level, referring to stimulating the interest of investors in the Romanian regulated equity market.

The argumentation note also states that the normative act will also affect the business sector, given the intention to strengthen the domestic stock market, its reinvigoration, as well as attracting financial resources from potential private and foreign investors, through mechanisms specific to the capital market.

Thus, following the privatization, the assets of the Proprietatea Fund will most likely shrink, as its stake in Nuclearelectrica will be booked at the market price.

The listing of Nuclearelectrica is intermediated by the consortium made up of brokerage firms Swiss Capital and BT Securities.

Currently, the Romanian state holds 90.3% of the capital of the company, and the Proprietatea Fund holds the remaining 9.7%. The privatization will be conducted through a share capital increase which the state will not participate in.

In 2012, the revenues from the sale of electricity have exceeded by about 0.8% the amount budgeted for 2012, and the volume of energy produced and delivered was about 1.5% times higher at the end of the year, than the volume budgeted in the beginning of 2012.

In 2012, "Nuclearelectrica" had an investment program of investments worth 70 million dollars, financed out of its own resources.