ENEL bought Electrica

The Italian group ENEL will pay 112 million euros for the majority stake in two of the Electrica regional subsidiaries: Electrica Banat and Electrica Dobrogea. ENEL will thus control a fifth of the electrical power grid in Romania.

ENEL will have control over the electrical power supply for 1.4 million households in eight counties: Arad, Timis, Hunedoara, Caras-Severin, Constanta, Tulcea, Calarasi, and Ialomita. Romania has eight million households connected to the electrical power grid.

Of the 112 million euros, 36 million euros will go for 24.6% of the shares in each of the two subsidiaries, while the remaining 76 million will pay the issuing of new shares which accompanies the deal, with the aim to raise to 51% the stake ENEL will hold.

According to Electrica web-site, the Electrica Banat subsidiary has a capital share of 73 million euros, and the Electrica Dobrogea subsidiary has a capital share of 53 million euros. In other words, the Italians might have gotten 88.8% of the stock for the money they paid; as it is, it seems the Romanian government struck a good deal.

Still, the 136 million euros value of the deal also means that the Italians paid only 3,971 lei on top of the nominal value of a share, which stays at 100,000 lei. As for the other 76 million euros which go for the issuing of new bonds, these are actually going back into the coffers of the issuing company, according to the very straightforward rules of capital markets.
Thus 67.8% of the value negotiatied for the take-over deal goes back to the new owner for investments. As the details of the deal are not yet public we will have to wait for it to be signed in order for the experts to make a full evaluation.

The privatization deal means not only paying for the stock. Electrica Banat and Electrica Dobrogea last year ripped 18% of the company’s revenues, that is two billion euros. And that is to go from now on to the new owner too.

Last year, of the 8.5 million consumers connected to the electrical power grid, some 7.9 million were households; there were also 600,083 small industrial consumers, and 9,473 big ones. It is logic to assume that for the 1.4 million consumers the terms of the contracts will change for the better, with a raise in the quality of service, even though at a price 9as the price for the electrical power is likely to go up, in spite of official claims to the contrary).
Part of the negotiated deal with ENEL was for its future clients to make an advance deposit worth the electricity bills of the last two months.

The National Authority for Regulation in the field of electrical power will implement by January 1st, 2005, new regulations for the subsidiaries of Electrica. The other Electrica subsidiaries - Muntenia Sud, Oltenia and Moldova - will be privatized too. Lucian Boghiu, general manger of Electrica, stated recently that by year-end new shares will be issued on the stock market on behalf of the Transilvania and Muntenia Sud subsidiaries. Furthermore, no one buyer would be able to hold the majority stake over more than two subsidiaries at a time.