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Romanian Romgaz Starts IPO

Published: October 21, 2013; 06:00 · (Vindobona)

Tomorrow, Monday, the Romanian government sells a 15% stake in Romgaz via the stock exchange. In the last months, the IMF has urged Romania to accelerate the privatization policy.

Romanian Romgaz Starts IPO / Picture: © Vindobona.org

Tomorrow, BSE (Bucharest Stock Exchange) carries out the biggest IPO in its history. Romgaz, the state-owned producer of natural gas, will be partly privatized. In total, the Romanian government sells a 15% stake. The Romanian state will keep a 70% stake in Romgaz. Moreover, the state-owned property restitution fund holds a 15% stake.

Romania´s government expects to raise revenues between € 300 and € 450m. The expected share price ranges between € 5.3 and € 7.2. The offering expires on October 31. Goldman Sachs and Erste Group are acting as joint bookrunners.

According to Romania´s Minister of Energy Constantin Nita, the privatization of Romgaz is an important milestone for the reform of the energy sector. However, without the massive pressure coming from the IMF, Romania´s government would not have sold the stake in Romgaz. However, Romgaz is not the only privatization target. In spring, Romania sold a 15% stake in Transgaz, which is specialized in natural gas grids. One year before, the government sold a 15% stake in the energy group Transelectrica. The rail cargo division CFR Marfa may be sold until the end of October. In order to comply with the newly signed IMF agreement, Romania´s privatization program must be finished until the end of November.

With the privatization program, Romania opens its economy further to foreign investors. However, Romania´s economy is vulnerable to foreign investments and foreign sentiments. According to the Romanian Chamber of Commerce and Industry, the number of companies with foreign owners comes at 180,000. This corresponds to 40% of the total number of registered companies. Foreign investments (registered capital and re-invested profits) come at € 35bn. Moreover, the main exporters of Romania are owned by foreign multinational companies. The most important companies are automotive, energy and steel producers. In total, 60% of Romania´s exports are made by foreign companies.

Romgaz is Romania´s biggest producer of natural gaz. The company is expected to benefit substantially from the liberalization of the Romanian energy market. In the first six months of 2013, Romgaz recorded a net income of € 120m. Revenues reached € 430m.