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Romania’s state-backed hydropower company, Hidroelectrica, on Friday announced details of its initial public offering, one of the largest listings ever in eastern Europe that comes as the Ukraine war elevates energy security and the green transition.
State holding company Fondul Proprietatea has offered all of its 20 per cent stake at an indicative price range of 94 to 112 lei per share, putting the company’s valuation at about €8.5bn to €10.2bn, the company said in a statement.
That would make it the largest-ever Romanian IPO, at about €2bn, on a par with Poland’s largest-ever listing, ecommerce company Allegro, in 2020.
Hidroelectrica, which owns and operates 182 hydropower plants and covers a third of the country’s electricity production, is a communist-era holdover that has been modernised and reorganised several times in recent decades but remained in state hands.
Interest is intense: three institutional investors have committed to invest about €500mn in total and retail investors have also shown keen interest, said Cristian Tudorescu, chief executive of Explore Asset Management in Bucharest.
“The company is among the most profitable in Romania, producing all [renewable] energy, interesting for international investors focused on green energy and environment, social and governance issues,” he said. “[It] had a good first quarter, revenues and profits growing more than 30 per cent annually.”
Hidroelectrica’s listing comes as European IPOs have all but dried up amid the Ukraine war and rising interest rates in the continent. Analysts said Hidroelectrica’s listing might set the mood for further activity, although the Romanian company was an extraordinary case because its listing had been anticipated for so long.
“I am convinced it will be oversubscribed,” said Adrian Anghel, deputy chief executive of OTP Asset Management in Romania. “The company is very interesting and it can promote the upgrade of the local market to MSCI’s emerging category from its current standing as a frontier market.”
But he stressed that a successful Hidroelectrica IPO would not necessarily mean a breakthrough for eastern European, much less European listings more broadly, as investors on the Bucharest market had been going long on cash to participate in the offering.
“There isn’t another issuer of this size here,” he said. “But we hope to improve the market image and bring more IPOs. Regionally I am not sure, but for Romania this is the story we’ve been waiting for.”
Hidroelectrica’s chief executive Bogdan Badea said the company was “delighted with the strong investor interest”, noting that management had “plans to capitalise on the significant opportunities we see in the Romanian market”, including organic development and acquisitions.
Hidroelectrica plans to add 3.3 gigawatts of new capacity in the next few years — more than half of its current portfolio. Most of that will be solar and wind, Badea said, with only about 300 megawatts in new hydro developments.
Possible challenges include adverse weather conditions — extreme drought dented its 2022 output by 20 per cent — but also intense international competition in Romania’s open market.
Trading in Hidroelectrica shares is expected to start on the Bucharest Stock Exchange on or around July 12, the company said. Under a lock-up agreement the government will hold on to its 80 per cent for at least another year.
Romania, whose electricity market generates about €5bn in annual revenue, will dedicate €1.3bn per year from its modernisation fund to bolster the green switch, and €1bn annually to upgrade its grid to accommodate the new capacity.
“Romania is in the first row of a horror movie and we cannot go back to business as usual,” junior energy minister George Sergiu Niculescu told the Financial Times, referring to the war in Ukraine. “We are moving at full speed with the green transition and diversifying sources and routes as well.”