Mind-blowing: Romanian state goes after state-owned listed company for EUR 1.3 bln damages

The company that manages the Romanian state’s portfolio in the energy sector – SAPE – which is 100% state owned, has sent a notification to electricity distributor Electrica asking it to pay about EUR 1.3 billion worth of damages. SAPE claimed that these damages were caused by Electrica’s historical failure to monitor the fulfillment of the post-privatization obligations undertaken by the investors who acquired shares issued by the privatized companies for which Electrica acted as seller”, according to an announcement posted by Electrica on the Bucharest Stock Exchange. Electrica is listed on the Bucharest Stock Exchange and London Stock Exchange. The Romanian state still owns 49% of the company’s shares. Before its listing, which took place in July 2014, following a EUR 440 million IPO, Electrica was fully owned by Romania’s Energy Ministry. Before the listing, Electrica transferred its minority stakes in the electricity distribution companies that had already been privatized to the newly established SAPE (Societatea de Administrare a Participatiilor in Energie). SAPE took over the minority stakes in electricity distribution and supply companies controlled by Italian group Enel and German group E.On, including all the assets and obligations that may result from the legal disputes that Electrica had with Enel, E.On and Czech group CEZ at that time, related to unfulfilled privatization obligations. In August, SAPE lost a court action against German group E.On at the Paris International Arbitration Court. The Romanian state had asked E.On to pay damages worth EUR 33 million for unfulfilled obligations. Instead, the Paris Court dismissed the case because the term for pursuing the obligations had expired, and ruled that the Romanian state should pay E.On EUR 1.8 million worth of legal expenses. The Romanian state also started a legal action against Italian group Enel, in 2014, asking for EUR 521 million worth of damages. Seeing that it has little chances of recovering anything from the international investors, SAPE decided to go against Electrica, which is now a listed company. Electrica’s management considers that SAPE’s request is “unreasonable and unsubstantiated”. Moreover, according to Electrica, SAPE hasn’t initiated any legal action, procedure, or measure against the company. However, such an announcement might trigger some alarm bells for the private investors who have invested more than EUR 440 million in Electrica’s shares and now own 51% of the company. The company has already failed to fulfill its promise to invest the money raised in the IPO and still sits on almost half a billion euros cash. The state would probably like nothing more than to get at least some of the money.