June 23, 2020 / 10:57 AM / 2 months ago

Hidroelectrica's plan to bid for CEZ assets could hurt its IPO: shareholder

BUCHAREST (Reuters) - Romanian state-owned hydro power producer Hidroelectrica’s plan to buy the local assets of Czech energy group CEZ (CEZP.PR) could hurt its listing plans and valuation, the firm’s minority shareholder Fondul Proprietatea (FP.BX) said on Tuesday.

The $2.2 billion investment fund, which holds a 20% stake in Hidroelectrica, amounting to almost half of its net asset value asked the government to reject the firm’s request to submit a binding offer for CEZ’s renewable and power supply assets.

Hidroelectrica, which is in the process of preparing for an initial public offering on the Bucharest Stock Exchange plans to ask its two shareholders to approve its binding bid on June 25.

“With its IPO in sight it is not opportune for the company to pursue any significant acquisition which may complicate this process,” Fondul manager and CEO of Franklin Templeton Investments Johan Meyer said in a statement.

“By pursuing large acquisitions at this point in time, Hidroelectrica risks delaying its listing or achieving a significantly lower price, which would be value destructive for the Romanian government as majority shareholder.”

Meyer also said the value of the transaction was not public and that Hidroelectrica did not have experience managing and integrating the supply business and renewables assets which would increase its costs and expose it to the riskier energy retail market.

Prior to the new coronavirus outbreak, the government aimed to list up to 20% of Hidroelectrica’s shares on the Bucharest Stock Exchange, with initial plans now likely postponed to next year.

CEZ is still aiming for closing a transaction for the disposal of assets in Romania by the end of this year as part of its divestment plans, Chief Financial Officer Martin Novak said in May.

Reporting by Luiza Ilie; editing by David Evans

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