Fondul Proprietatea Listing On BSE Uncertain, Again

• Adjustments for Petrom cost 3.65 billion RON

Fondul Proprietatea concluded last year with losses of 3.41 billion RON, according to a preliminary, unaudited report. This is a breach of the conditions set for listing on the Bucharest Stock Exchange, namely that applicants must post a profit for two consecutive years prior to listing.

The Fund avoided a similar situation by a whisker in 2007, when the need to create provisions for the depreciation of the holdings in Nuclearelectrica and Hidroelectrica could have pushed the Fund in the red. At time, the Fund officials said they would rather pay a fine for not submitting the balance for 2007 on time and hope for an amicable settlement, than risk postponing the listing.

The need to further adjust for the loss in the value of various financial assets in the Fund"s portfolio entirely offset the Fund"s net profit in 2008, despite a gross operating profit of 472.6 million RON, up by 191.7% from 2007. The provisions for the holding in Petrom cost the Fund 3.65 billion RON, considering that shares in Petrom account for nearly 42% of the gross value of the Fund"s portfolio.

This time, the Fund is hoping that the National Securities Commission (CNVM) could change their Order no. 75/2005 forcing companies to include provisions in the profit & loss account. "We are not in a position to ask for such change, but, as far as we know, CNVM is considering doing it," Fondul Proprietatea CEO Daniela Lulache said on Friday. "If CNVM does make the change, the Fund will be able to report a net profit of 465.6 million RON and, only if it so happens, disburse 50% of the profit as dividends," Lulache added.

The losses are not the only factor hindering the Fund"s listing. The current decline of the market is an additional complication. "Although the listing remains one of our objectives, we should not regard it as a purpose in itself, but as a step towards further benefits to the shareholders," Lulache explained. "Our recommendation to the shareholders is to wait until the end of 2009 or the beginning of 2010 before listing," she said, adding that specialists estimated that the market would start to recover in the beginning of 2010.

The Fund also created provisions of 153.7 million RON for holdings in Transelectrica and of 79.6 million RON for holdings in ALRO Slatina.

• Fondul Proprietatea looks to the new Government for directions

Uncertainties caused by the ongoing economic crisis, the losses incurred in 2008 and the prospect of changes in the Supervisory Board of the Fund have determined FP representatives to indirectly ask the new Government for an official stand on the process of compensating the victims of communist confiscations.

"For the time being, we do not have a Government strategy regarding Fondul Proprietatea. It is very important to have a statement of the new Government expressing their stand on ownership in Romania," Lulache added. "Actions taken in connection to Fondul Proprietatea would become more fluent this way," she added, pointing out that the projects regarding the Fund needed further consideration and adjustments.

"We are having talks with governmental bodies to find solutions to increase the value of the shares in the Fund, or at least to preserve the current value," she said. She declined offering further details about the changes that could affect the Fund in 2009, saying the information would be released after being discussed with the Government first.

• FP shares book value drops below face value

Last year, the equity of Fondul Proprietatea decreased by 23.7% from 14.45 billion RON to 11.02 billion RON following the calculation of the accounting value of the losses incurred in 2007. Consequently, the book value of a FP share decreased from 1.02 RON to 0.77 RON, below the face value of 1 RON. Holders of FP shares are significantly affected, as the value of their compensation was calculated against the face value of 1 RON per share in the FP.

"Nobody wants to cheat the shareholders, but this is the market," Lulache said, announcing that a possible reduction of the share capital could repair the situation. FP"s results for last year will be presented to the shareholders for approval on 27 April.