The government will take the energy distribution branches of Electrica public

Yesterday, the government decided to begin the procedure for listing 15% stakes in Electrica Distribuţie Transilvania Sud, Electrica Distribuţie Transilvania Nord and Electrica Distribuţie Muntenia Nord on the Bucharest Stock Exchange, government spokesman Dan Suciu announced. In the beginning of this month, Franklin Templeton, the manager of the Proprietatea Fund, announced that it had appointed Citigroup Global Markets Limited to intermediate the potential sale of unlisted energy distribution and provision companies, including the three companies which were mentioned by the government.

The government and the Proprietatea Fund must consider each other's plans when setting up their offerings. Analysts earlier said that their sales of shares may hinder each other.

But considering that last Friday, the officials of Franklin met prime-minister Mihai Răzvan Ungureanu, it is quite likely that the government and FT have agreed on supporting each other. According to a press release, the two parties mentioned their interest in the successful sale of the minority stakes in several state owned companies. "All these approaches can help the economic consolidation and the stimulation of the domestic stock market, where the Proprietatea Fund plays an extremely important role", the press release also says.

In February, when investment fund Elliott, the largest shareholder of the Proprietatea Fund, spoke in favor of encouraging Franklin Templeton to sell the holdings which the Proprietatea Fund has in various companies, the analysts consulted by BURSA expressed their opinions on the overlap of the offerings of the government and those of the Proprietatea Fund.

For example, investment consultant Victor Cionga told us that the free float of certain companies which are of interest to investors will increase: "As an example, if Romgaz gets listed, then its free-float will 30%, not 15%", Mr. Cionga explained: "Obviously, the price of the IPO may be negatively affected, if Franklin Templeton doesn't sign a < lock-up > commitment for at least six months (ed. note: a promise not to sell its shares for at least six months after the listing); but I think that the interest of Templeton will be to raise the company's value rather than hurry to sell immediately after the listing".

In February, Nicolae Gherguş, the president of Confident Invest, said that, considering the fact that the Proprietatea Fund is a shareholder along with the state, creates competition between the two entities, which will help lower those prices. He said that "the Proprietatea Fund may watch the privatizations of the State and may later intervene where the demand for stocks will be high, by selling stock if saw significant interest from buyers, but the two offerings will obviously hinder each other".

The sale of the governments' stakes in the two companies was agreed by the Government with the IMF.

The price at which each share will be sold will be approved by each general shareholder meeting in part, based on the recommendations of the intermediaries.

Also, the price will have to be at least equal to the reference price usable in a mechanism for the discovery of the offering price, mechanism approved by the National Securities Commission.

Electrica SA owns 78% in each of the three companies, and the remaining 22% is owned by the Proprietatea Fund.

The total amount of the shares present on the list of companies the Proprietatea Fund is looking to sell is 527.6 million Euros, or at least about 15% of the NAV, according to the latest NAV calculation of the Proprietatea Fund, calculated on January 31st, 2012.