Government blocks hostile takeovers of energy companies

The dependence of our country on energy imports, in certain periods, and the need for capitalization of companies in the energy sector, so that they can increase the energy production capacity at national level, are the reasons why the Ministry of Energy launched, last Thursday, in the debate publishes a draft emergency ordinance aimed at amending the legislation in such a way that the state can directly acquire shares issued by strategic companies in this field of activity.

The Ministry invokes several essential aspects to justify the GEO project, among which are the tense international context and the instability of the financial markets, but also the increase in hostile takeover attempts of strategic Romanian companies listed on the stock exchange. The document mentions that, in the last semester, there has been an increase of approximately 10% in hostile takeover attempts of companies of strategic interest, whose capital is quoted on regulated markets.

This situation, the Ministry claims, represents a significant risk for national economic security, given the possible sharp decapitalization of the main state companies. This decapitalization was mainly determined by the negative fluctuations of the capital markets, according to the financial audit reports carried out on the activity of these companies. Fluctuations significantly affect equity, which exposes companies to the risk of hostile takeovers and erodes state control over vital economic sectors, the draft law states.

The Ministry of Energy emphasizes the need for the state to be able to act quickly and efficiently to prevent the risks associated with such hostile takeovers and decapitalizations. The draft GEO proposes the consolidation of the equity capital of strategic companies through the purchase of additional shares, as an essential preventive measure to strengthen Romania's economic resilience and energy independence. Another important argument invoked in the substantiation of this project is the volatility of capital markets at the international level, affected by global geopolitical and economic uncertainties. According to the data presented by the Ministry of Energy, fluctuations of over 20% on the capital markets in recent months have generated significant risks of depreciation of the value of Romanian companies with state participation. In this context, the importance of the state being prepared to intervene quickly and acquire additional shares in strategic economic operators, depending on market conditions and national interest, is emphasized. Energy independence and economic security are national priorities, and state interventions in this direction are essential for maintaining control over critical resources and infrastructure.

In the substantiation note of the draft normative act, the Ministry of Energy also mentions an alarming increase in Romania's dependence on energy imports, which increased by 107% in the first half of 2024, compared to the same period in 2023. This development requires measures urgent for the capitalization and control of companies in the energy sector so that energy production capacity can be increased nationally.

Therefore, among the main measures provided for in this draft ordinance is the direct purchase of shares by the relevant ministries in the companies in which the state holds the status of shareholder. This derogation from GEO no. 88/1997 on the privatization of companies allows ministries exercising tutelary authority over state-owned companies to buy shares without the previous legal restrictions, which required that such purchases be made only through sovereign funds.

Decisions to buy shares will be made based on an order of the relevant minister and will require the approval of the Government by Memorandum. For these procedures, related expenses (such as those for law firms and other specific operations) will be covered from the privatization budgets of the ministries involved.

The project also refers to the need to improve the current legislation, underlining the fact that currently, Law 173/2020 allows the state to acquire stakes in certain companies, but does not clearly regulate the conditions and procedures for the direct acquisition of shares issued by them.

The adoption by GEO of this normative act is justified by the fact that energy infrastructure and control over strategic companies are considered key elements for ensuring the stability and long-term development of the country, and the Romanian state intends to be prepared to face challenges such as war or other exceptional situations, which could affect the economy and national security too.

Through this legislative measure, the Government aims to strengthen its capacity to effectively intervene in supporting strategic economic operators, thus strengthening the national security and economic independence of the country.

The draft normative act is in public consultation until October 21, 2024, by which date interested persons can send written proposals, suggestions, opinions with recommendation value, to the address of the Ministry of Energy in Bucharest, str. Academiei no. 39-41, sector 1 or to the following e-mail addresses: office.dgpapse@energie.gov.ro and juridic@energie.gov.ro.

• Gheorghe Piperea: "The government must defend national interests"

European deputy Gheorghe Piperea declared on the day the Ministry of Energy launched the draft law that the Government must defend national interests in the field of energy.

According to a press release posted on the website of the Alliance for the Union of Romanians (AUR) party, Gheorghe Piperea said: "In recent weeks, a possible commercial transaction with profound implications for Romania's energy security has appeared in the public space. It is about the sale of the gas and electricity supply company E.ON Romania to the Hungarian state company MVM, directly controlled by the Viktor Orban government. Although the subject is treated with an apparent lack of interest by the mass media, this transaction could have serious consequences for Romania, and the national authorities must intervene before things get out of hand. While the press in Hungary presents this acquisition as a national success, in Romania, the statements of Minister Sebastian Burduja are surprisingly relaxed. According to him, there is still no decision to sell, and the supply of energy and gas is considered by him as a simple "bill factory", without recognizing the strategic importance of this critical infrastructure for national security".

However, the European deputy states that the reality is completely different, because E.ON Romania controls approximately 41% of the energy and natural gas supply market in our country, serving no less than 3.4 million consumers.

Gheorghe Piperea pointed out: "Allowing such an important portion of the national energy market to be acquired by the Hungarian state, which maintains close relations with Russia and China, could put Romania in an extremely vulnerable position. Such a strategic transaction raises major concerns about Romania's ability to maintain control over essential energy resources in crisis situations. While Minister Burduja seems to underestimate the importance of this transaction, the economic and political reality in Hungary shows us that Budapest does not make the mistakes that Romania made in the past". The European deputy states that during this time Hungary is playing aggressively on the markets of Central and Eastern Europe, "and the acquisition of a company with a significant share on the Romanian energy market is not only a commercial opportunity, but also a strategic tool".

Furthermore, the AUR representative mentions that E.ON Romania can no longer return to the control of the Romanian state, although it remains an essential part of the country's energy infrastructure, even if the said company registers significant losses, losses which the European deputy states come from the annual transfer of considerable sums to E.ON Germany, through the practice of so-called fiscal optimization.

Gheorghe Piperea continues: Ironically, the Hungarian company that wants to acquire E.ON Romania recorded a profit of 20%, proving that it has the expertise and resources to do profitable business. In this context, the question remains: why is a Romanian company not interested in taking over this strategic asset? Or, more importantly, why isn't the Romanian state trying to regain control of a company that manages a significant part of Romania's energy and natural gas supply? Romania should not passively accept this transaction, especially since European legislation provides clear precedents that allow member states to block such takeovers when strategic national interests are at stake. For example, the Court of Justice of the European Union (CJEU) decided in similar cases that "safeguarding the supply of products or services in case of crisis can justify an obstacle to the free movement of capital". Faced with this imminent danger to energy security, the Romanian government must show courage and defend its national interests. Minister Burduja and the entire political class have the responsibility to protect Romanian consumers and to ensure the continuity of the supply of energy and gas in a way that does not compromise the security of the country".

His lordship concluded by saying that our country cannot afford it to become a pawn in the geopolitical games of other states, given that energy security is not a luxury, but an essential necessity for the stability and well-being of the nation.