FOR THE FAILURE TO CARRY OUT THE CONTRACTUAL TERMS, "Electrica" demands 50 million Euros in damages from E.ON

Due to failure to meet contractual clauses, "Electrica" is demanding 50 million Euros in damages from E.ON, which bought a branch of Electrica in 2005, said Ioan Folescu, the general manager of "Electrica". He said that, during the monitoring process it was found that the German investors did not carry out all of his obligations taken on through the privatization contract, it filed a lawsuit against E.ON in the International Court of Arbitrage of Paris. The lawsuit will be tried together with another, filed by E.ON against "Electrica", in which the former accuses the latter of being unwilling to negotiate with E.ON the sale of the shares it still owns in the former "Electrica" Moldova.

"E.ON wanted to buy the full stake of 27% owned by < Electrica >, but the state owned company said that according to the law, it can only sell 17% of its shares, because the remaining 10% is reserved for employees. Because of that, E.ON filed a lawsuit with the Arbitral Court of Paris", according to sources quoted by Mediafax.

The representatives of E.ON said: "There is indeed an ongoing lawsuit filed with the Court of Arbitrage of Paris. But until this proceeding is over, we can not make any comment on that subject; it is an ongoing trial".

Considering the fact that the privatization process of the former "Electrica" Moldova stipulates the reciprocal option to buy/sell the block of shares owned by "Electrica" - an option which can be exercised between 2008 and 2012 by either of the two companies - E.ON expressed its interest in buying the shares, in 2010, and made a similar request in 2011. However, on both occasions, "Electrica" declined to accept the offer of the German group, saying that the price was too low.

The general manager of "Electrica" Ioan Folescu said that the officials of E.ON have requested to buy the shares owned by "Electrica" based on the 2009 financial statements.

Mr. Folescu said that the lawsuits were filed in Paris last year, and a ruling should come in about a year and a half: "The first hearings should take place this year. The Court of Paris gets the job done in one or two hearings, they place emphasis on documents".

According to the quoted sources, the turnover and profit of E.ON were less than the numbers agreed upon through the privatization contract, which affected the company's market value, as well as the dividends which were due to shareholders, which received no dividends from the privatization of "Electrica" Moldova.

The value of the loss which Electrica claims it incurred amounts to half of what E.ON paid for the shares of "Electrica" Moldova and the share capital increase through which it took on control of the branch (100.8 million Euros).

In 2005, E.ON Energie, a division of E.ON, bought a stake of 24.26% of Electrica Moldova for 31.37 million Euros and participated with 68.6 million Euros in the share capital increase to 51%.

The quoted sources say that the price offered by E.ON for the minority stake which "Electrica" still owns is lower than the one paid upon privatization: "E.ON offered < Electrica > 2.6 Euros per share, and the people in < Electrica > did not accept the offer. < Electrica > ordered a report from an audit company which stated that a price closer to the fair value would be 3.4 Euros per share ", the sources said.

At the price of 2.6 Euros per share, the block of shares of 27% owned by Electrica in E.ON Moldova Distribuţie would cost 25 million Euros, whereas the price of 3.17 Euros puts its value at 42.7 million Euros.

In 2007, Electrica Moldova was divided into two companies - "E.ON Moldova Distribuţie" and "E.ON Moldova Furnizare". In 2010, "E.ON Moldova Furnizare" merged with "E.ON Gaz" Romania, and the new company was named "E.ON Energie" Romania.

51% of "E.ON Energie" Romania is controlled by E.ON Romania. The Ministry of the Economy owns 31.82%, Electrica owns 3.78%, and the Proprietatea Fund holds 13.4%.

In turn, E.ON Romania owns 51% of the shares of "E.ON Moldova Distribuţie". "Electrica" has a stake of 27% (13.5 million shares), and the Proprietatea Fund owns 22%.

Electrica has already been involved in another lawsuit with E.ON in 2011, which it won, the sources add.

In that lawsuit, Electrica accused E.ON of violating the clauses of the contract for the privatization of Electrica Moldova which prohibited the German group from concluding contracts worth more than 3 million Euros with companies in the group without the prior approval of the General Shareholder Meeting.

The court ruled in favor of Electrica SA and forced E.ON to pay over 1 million Euros in damages, the quoted sources said.

Electrica is controlled by the Romanian state, through the Ministry of the Economy.