Fondul Proprietatea aims to sell EUR 0.5 bln worth of shares packages in Romanian energy companies

Romania's investment fund Fondul Proprietatea wants to sell its stakes in several energy companies in Romania, where it controls minority packages. The total value of these holdings is EUR 527 million, or 15 percent of the fund's net asset value.

The fund has mandated Citigroup as intermediary for the possible transactions. Fondul Proprietatea, managed by the US group Franklin Templeton and floating on the Bucharest Stock Exchange since 2011, aims to sell its share packages in several companies, where its shareholding varies between 12 and 24 percent: E.ON Moldova Distributie, E.ON Gaz Distributie, E.ON Energie Romania, Enel Distributie Muntenia, Enel Energie Muntenia, Enel Distributie Banat, Enel Distributie Dobrogea, Enel Energie, GDF Suez Energy Romania, Electrica Distributie Muntenia Nord, Electrica Distributie Transilvania Nord, Electrica Distributie Transilvania Sud, Electrica Furnizare. All these companies are not listed on any stock markets, and the sale's objective is to reduce the share of the unlisted part of Fondul Proprietatea’s portfolio, according to fund manager Greg Konieczny. “Through this action we hope to create additional value for our shareholders,” he goes on. This decision comes soon after a Fondul Proprietatea shareholder, Elliott Associates, the largest investor in the fund, asked the fund managers to start selling stakes in some Romanian companies in the next three years, in exchange of a higher fee. The shareholder proposed mid-February a higher fee should the fund management’s company allot special dividends to shareholders – meaning shared profits between 2012 and 2014 resulting from the sale of assets. Manchester Securities Corporation, owned by American hedging fund Elliott, says the Fondul Proprietatea Fund shareholders cannot make more money on their investments as long as the fund managers are paid with a 0.47 percent commission of the fund’s market capitalization. This fee structure determines Franklin Templeton to run the fund so as to keep the price of shares up, and re-invest the profit, rather than distribute it to shareholders. Manchester Securities Corporation is proposing a 1.5 percent fee of the supplementary dividends resulting from the sale of assets, should Franklin Templeton do this by 2013, and a 1 percent fee in 2014. The proposal, submitted to the Bucharest Stock Exchange, has been included on the agenda for the Fondul Proprietatea shareholders’ meeting in April this year. The fund was created to compensate the owners of properties confiscated during the communist period, when the compensation was no longer possible in kind. The only individual who owns a larger share in the fund is Georgia Palade van Dusen, with 6.13 percent. The City of London also owns 7.21 percent in the fund. The fund’s portfolio is focused on the electrical energy sector, oil and natural gas – around 88 percent of its net assets. The biggest unlisted company in its portfolio of shares is Hidroelectrica, while the biggest listed company where Fondul Proprietatea owns shares is OMV Petrom.