Romania’s Electrica IPO, two times oversubscribed, but demand from institutional investors was lower

The initial public offering (IPO) in which Romania’s state owned electricity distributor Electrica put 51 percent of its own shares for sale, was two times oversubscribed, according to the state’s officials. The demand for shares was higher on the individual investors’ tranches, which were strongly oversubscribed, while on the institutional investor tranche the demand was not that high and the oversubscription was significantly lower. “The offer was two times oversubscribed, but it wasn’t easy at all. The Electrica listing was an act of courage. It is the first privatization that we make solely through the stock exchange and this is an important thing for Romania. I’m satisfied with the level of subscription which is a comfortable one,” said Romania’s energy minister, Razvan Nicolescu. Some 26.6 million shares were initially allotted for the two tranches for individual investors. Total demand on these tranches amounted to 162.3 million shares, which is more than six times the total amount of shares offered. The total value of subscriptions on the retail tranches was almost EUR 500 million. On the institutional investor tranche, more than 150.6 million shares were available, while the demand was for some 200 million shares, according to calculations based on available data. This is why, the Romanian energy minister Razvan Nicolescu, yesterday announced that he wants to raise the allotment for the individual investors’ tranches from 15 percent to 22 percent of the total number of shares. This would leave a lower number of shares for institutional investors and the authorities hope this would also raise the final IPO price which was not yet announced. However, estimates show that the price will be close to the minimum of the IPO interval, which is RON 11. This would allow Electrica to gather the minimum of EUR 433 million it targeted in this IPO. The state’s representatives said that the international environment during the Electrica IPO was challenging, with lots of IPOs taking place at the same time in Europe. They also mentioned that the private placement in which Fondul Proprietatea sold 5 percent of gas producer Romgaz, in the very first day of the Electrica IPO, for some EUR 146 million took some money off the table and made it harder for Electrica. The Electrica IPO was managed by a consortium of international and local banks which was made of Citigroup, Societe Generale, Raiffeisen Bank Romania, BRD and local brokerage firm Swiss Capital. editor@romania-insider.com