The Chinese discreetly analyzing the assets of Enel in Romania

The Chinese have allegedly asked the Enel officials for access to the data room of the assets of the Italian group in Romania, sources close to the situation claim. Allegedly, Electrica SA has made the same request for the Enel companies created through the privatization of its former branch Muntenia Sud, our sources further say. According to the privatization contract, the Romanian government has the right of first refusal for the acquisition of the majority stakes which Enel holds in the entities which took place in Electrica Muntenia Sud.

The Italians of Enel have recently put up for sale the electricity supply and and distribution companies they own in Romania, which they have acquired following the privatization of Electrica Dobrogea, Electrica Banat and Electrica Muntenia Sud.

When asked if they have received any concrete offers from buyers of their Romanian companies, the representatives of Enel Italia told us: "We do not provide details about the sale process and we do not disclose the names of potential bidders. The sale process is ongoing. There is no deadline for submitting the bids, even though the management of the group has announced that it expects to earn 4.4 billion Euros by the end of this year it for the assets put up for sale in Romania and Slovakia".

In the market, some are saying that the acquisition of the assets of Enel România by the Chinese is a done deal, saying that the odds of the Romanian government being able to afford to buy the minority stake in Muntenia Sud are very slim. Those voices are of the opinion that the Romanian distribution network would have a lot to gain from the significant funds that the Chinese have at their disposal.

Others claim that the chances of Europe and the Romanian state accepting a massive inflow of Chinese capital in the energy sector are slim, as it would involve not only imports of Chinese equipment, but a large workforce as well. "We don't know what their business model in this sector is like, even if we are talking about a regulated activity. Thus, there is a great risk for the future quality of the electricity distribution and supply services", the quoted sources say, which do not rule out the possibility of the government succeeding in "buying back" Muntenia Sud for a reasonable amount.

Sources close to the situation told us that the representatives of the Chinese company interested in the assets of Enel România have asked questions about the contracts for the concessioning of the distribution of electricity, which were not published as such in the Official Gazette, as well as the possibility of the change of the distribution tariffs, amid recent pressures from consumers and taking into account the fact that European studies indicate that Romania has the highest network tariffs in this region of Europe.

Our sources also say that, after the appointment of the new members of the Board of Directors of Electrica SA, the management of the company will propose to shareholders analyzing the acquisition of Muntenia Sud from Enel, assuming that by then, the Italians will have made an offer to the Romanian party.

The listing of Electrica SA, which raised 435 million Euros, will help Enel sell its assets in Romania and Slovakia for 4.4 billion Euros, several analysts quoted by Bloomberg say. Cosma Panzacchi, an analyst at Sanford C. Bernstein Ltd London, recently said that the listing of Electrica serves as a useful gauge of the investors' interest and shows that Enel could raise two billion Euros or more for its assets in Romania.

In Romania, Enel wants to sell 64.4% of Enel Distribuţie Muntenia and Enel Energie Muntenia, 51% of Enel Distribuţie Banat, Enel Distribuţie Dobrogea and Enel Energie, as well as 100% of the shares of Enel România.

Potential buyers include Electrica, as well as investment funds, State Grid Corporation of China, RWE AG and Electricite de France, according to Bernstein and RBC Capital Markets. "Enel will successfully achieve its plan to sell its assets", says Cosma Panzacchi.

Analysts claim that the sale of the assets of the Italian group could be delayed, after the Company for the Management of Interests in Energy (SAPE), a company spun off from Electrica and which answers to the Department for Energy, has announced that it would file a lawsuit against Enel with the Internatioal Court of Arbitration of Paris. The lawsuit concerns the sale by Electrica SA of the minority stake in the former branch of Muntenia Sud, as the Romanian state is demanding a payment of 521.583 million Euros from the Italian company.

Enel does not expect this lawsuit to affect the asset divestment process, a spokesperson of the Italian company recently said.

According to data from Enel, its Romanian companies manage a network of 91,000 kilometers that distributes approximately 14 TWh per year (with a market share of 34%) and which sell approximately 9TWh/year to a number of approximately 2.6 million customers, of which 2.4 million are residential customers (approximately 20% of the retail market) and 200,000 are companies.

In 2013, these companies had revenues of 1.118 billion Euros and generated an operating profit of 289 million Euros.