State-owned Romanian power producer Hidroelectrica’s IPO, which had been under discussion for over a decade, was multiple times oversubscribed and priced slightly above mid-range of the price range. This results in a valuation of above EUR 9.4 billion, making the country’s largest electricity producer’s IPO the largest ever made on the Bucharest Stock Exchange (BVB), the largest in Europe and the third largest in the world so far this year.
The IPO attracted about EUR 1.2 billion from Romanian retail investors alone. In addition to strong local institutional investors, a broad range of international investors invested in Hidroelectrica, some of them as first-time investors in Romanian equities. The shares offered in the IPO consisted of the approximately 20% stake Romania’s Fondul Proprietatea held in Hidroelectrica (assuming the overallotment option is exercised in full); the remaining 80% stake in the utility will continue to be held by the Romanian state.
“This listing opens new opportunities both for the 8 million Romanians who invest indirectly on the stock market through privately managed pension funds, as well as for Romanians who want to invest in Romania’s strategic companies traded on the stock market, including the 500,000 customers of Hidroelectrica” Radu Hanga, President of the Board of Directors of the Bucharest Stock Exchange, stated.
“The completion of the IPO is not only a remarkable achievement for Hidroelectrica, but also proof of the immense potential that the Romanian capital market has in contributing to our growth as an economy, country, and nation” Bogdan Badea, President of the Board of Directors Hidroelectrica, said.
“Hidroelectrica’s effect also crosses Romania’s borders because a listing of such scope has significant implications on several levels, the market upgrade being one of them. MSCI’s decision regarding Romania’s promotion among Emerging Markets also depends on this success, but also on the fulfillment of the qualitative and quantitative criteria of the index provider. We are in dialogue with MSCI because our promotion to Emerging Market status on their behalf would be an additional recognition of all the efforts of the capital market stakeholders” Adrian Tanase, CEO of the Bucharest Stock Exchange, stated.
“I think in five to 10 years we’ll be looking back at this as a defining moment in the history of Romania’s capital market,” Johan Meyer, portfolio manager at Fondul Proprietatea, a fund managed by U.S. asset manager Franklin Templeton, said during the stock’s opening ceremony.
Erste Group, together with Citi, Jefferies and Morgan Stanley, acted as joint global coordinator on the listing of Hidroelectrica. Co-holders of the subscription register were Banca Comerciala Româna SA, Barclays Bank Ireland PLC, BofA Securities Europe SA, UBS Europe SE, UniCredit Bank AG Milan Branch, and WOOD & Company Financial Services. Coordinating intermediaries were Auerbach Grayson, BRD – Groupe Société Générale, S.S.I.F. BT Capital Partners S.A., and S.S.I.F. Swiss Capital S.A. The financial advisor to FP was appointed Rothschild & Co Equity Market Solutions Limited, while STJ Advisors was the financial advisor to H2O.
Founded in 2000, Hidroelectrica provides approximately 29% of Romania’s electricity demand and has a capacity of 6.3 gigawatts (GW) from 182 hydroelectric plants.
The utility plans to add another 2 GW of solar, 1 GW of wind and 300 MW of hydropower capacity in the coming years. Last year, Hidroelectrica’s adjusted EBITDA margin hit 64% of revenue, twice the 30% margin reported by Austria’s Verbund (VERB.VI), one of Europe’s largest generators of electricity from hydropower and its closest competitor.
This IPO represents a significant step forward in strengthening the capital markets in CEE and could inspire more Romanian companies to follow suit.