Fondul Proprietatea manager: Romanian state-owned Electrica’s new strategy endagers planned IPO

The new governance strategy of Romanian state controlled electricity company Electrica endangers the company’s initial public offering scheduled for June, according to the manager of Fondul Proprietatea, which owns a minority stake in the company.

Franklin Templeton Investments, manager of the fund, said it was “highly concerned” about the recently adopted unitary corporate governance strategy which bolstered the State’s interests over other shareholders’.

In its statement, the Fund manager urged a swift review to avoid a compromised IPO.

“The new corporate governance strategy offers the majority shareholder, the Romanian State through Electrica, a privileged position, and violates the rights of the minority shareholders by allowing interference of the State in the current activity of the four subsidiaries,” the company’s statement read.

The new strategy violated a number of laws and corporate governance principles by increasing the State’s role in day-to-day operations and annihilating the subsidiaries’ autonomy, according to Franklin Templeton’s statement.

It also blocked minority shareholders from decision-making and information, breaching the principle of equal shareholders rights.

According to the statement, Electrica has also instructed the Board members of the subsidiaries to sign paid consultancy and representation contracts with itself, as majority shareholder.

This breaches the BVB Corporate Governance Code, which underlines that transactions with related parties must be evaluated by independent directors and experts.

“Electrica’s plan to increase revenues through paid strategic consultancy and management contracts, would increase the costs and decrease the profitability of the subsidiaries, negatively impacting the financial benefits of all shareholders,” the statement read.

Shaun Turton [email protected]

 

 

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