ENERGO: Hidroelectrica IPO in Romania heavily oversubscribed

Individual investors placed orders for 48.4mn Hidroelectrica shares worth RON5.4bn (€1.1bn) in the first five days of the eight-day IPO, more than four times the stake earmarked for them. Meanwhile, inflows by large foreign investors participating in the IPO are of a magnitude that might strengthen the local currency, analysts quoted by Bloomberg said.

Fondul Proprietatea, managed by Franklin Templeton Investments, is selling about 17.3% of its 20% stake in Hidroelectrica on the Bucharest Stock Exchange, and possibly its entire 19.9% stake if the demand is strong enough. 

In total, Fondul Proprietatea put up for sale 78mn Hidroelectrica shares. Most of the stake, 85%, is being offered to institutional investors, who are also the ones who will decide the final price of the offer, with only 15% for retail investors.

Individual investors have placed orders to buy nearly 11% of Hidroelectrica. According to Ziarul Financiar, the interest is just as high on the tranche for institutional investors, where the offer is already oversubscribed at a price towards the upper limit of the range (RON94 to RON112).

There are three subscription days left, until July 4 inclusive, if the minority shareholder Fondul Proprietatea does not decide to close the IPO early or to supplement the number of shares put up for sale (to its entire 19.9% stake) and, possibly, the subscription period.

Hidroelectrica IPO-related forex inflows may strengthen Romania’s currency, analysts quoted by Bloomberg said.

The foreign currency inflows in the amount of hundreds of millions of euros during the Hidroelectrica IPO are expected to put pressure on the local currency market in the coming weeks, according to a Bloomberg report that also notes the National Bank of Romania (BNR) traditionally keeping the exchange rate under a managed floating regime.

The leu (RON) will probably see inflows when foreign investors exchange funds to buy shares in Hidroelectrica. The BNR will probably intervene to temper the appreciation and keep the leu stable below or close to RON5 against the euro this year, according to analysts quoted by Bloomberg.

 "It is reasonable to assume that of the more than €1bn estimated as inflows from institutional investors, a large part will be fresh money on the Romanian market," said Valentin Tataru, ING Bank Romania chief economist.