The so-called "privatization" of Electrica SA, the largest IPO in the history of the BSE ended - 51% of shares were sold to investors, the company will charge about half a billion euros. Here's what it means, and that does not mean this news.
Listing on which we witnessed was a way to get cash for the company. The state does not receive the money directly, but its benefit comes from the fact that half of the remaining company would be worth about as much as the old whole. How money is needed to invest in the company, the alternative was a loan from the bank.
Electrical profitability of the order of 10 to 15 million per year, which would translate into an interest rate of 2-3%, so listing was the cheapest option.
On the other hand, state management, lacks torque and pressure stimuls from a private company producing below potential profitability and hence the value of the entire company undervalued (and now, the leadership they are given a lot of cash on hand without even scrutinizing eyes being accompanied by a bank). Theoretically, this problem should solve privatization, but.
The listing that we have seen was not a true privatization, however not in the sense generally accepted. Yes, the state has left with 49% of the company and is entitled to only 49% of future dividends.
But still has control of the company, which he can not lose. As will be ever dissatisfied shareholders 'majority', a scenario is virtually impossible to mobilize all and change management.
At this level of dissipation shareholder to show the possibility that another majority to coalesce, it would require the state to stake down somewhere below 30%. Is this the way forward? The decision is not at all simple, here are questions to be taken into account.
Electrica SA is a company that until 6-8 years now control the entire network of supply and distribution of electricity in Romania. But of the eight subsidiaries, majority stakes to 5 of them have been sold in 2005, it took 2008. 3 of the took ENEL (South Muntenia, Banat, Dobrogea), a CEZ (Oltenia) and one E. (Moldova) .
Remaining minority stakes of Electrica SA aren't of the privatization barely completed, is to be separated and put into a fund administration held exclusively by the state. So in Electrica SA remained that distribution companies supplying Northern Transylvania, Transylvania and Muntenia Nord Sud.
What does it mean "supply" and "distribution"? Distribution component is the physical network through which electricity is taken from the network and delivered to the final consumer. Transelectrica with associated technical services: maintenance, troubleshooting, etc.. It is a natural monopoly and finance a fixed transport fee established by ANRE.
Provision is current commercial activity of buying from producers and resale to the consumer, business services associated: meter reading, bill collection etc.. Specifically, if a power failure due to a malfunction, the distributor is liable, but if is cutt of for the non-payment the decision is at the provider.
This separation was made at the behest of a European directive whose heart is open to competition even where it is - the idea is that any provider to have access without discrimination to any distributor network so that consumers can choose from who to buy even if he can not choose who brings the electricity at his home.
How materialized competition? Almost all. Directive leaves a loophole that Romania has used it to the full. Company supply and distribution may belong to the same owner.
That is, in reality, the separation is purely formal, and sometimes funny. Just like satire about bureaucracy extreme supplier empowerment requires new customers to connect to the distributor, even if staffed same employee sends and receives paper.
At the macro level, the effort providers to expand the networks of other distributors is void from the beginning even discourage the few customers who require an offer. So far, they have failed to elect independent providers distributor below 1 per thousand of small customers (but most are still well above average consumption). Basically, the EU plan to open competition failed completely.
Other effects of privatization? Positive, not too much, predictable in a context where competition is lacking. Service quality has not improved noticeably, buyers have delayed investments promised as much, some were suspected of having siphoned the profit not to give dividends to the state and no way for better prices!
Even when they charged extra money mistakenly they complained that will become insolvent if they have to give too quickly the monay back. In these circumstances, what the state learned? This is the case to go forward or retreat? In fact, there are at least four options. Here they are, in order of increasing complexity:
1. Stops privatization. Things are as they are now - the state owns 49% of shares and de-facto control of the three branches of Electrica SA.
Minus: Continue undervaluing the company.
Plus: In the long term decision could be positive for the public budget and the direct costs and opportunity - to see! - Not as large as they might think.
2. Continuing privatization on stock exchange. They sell for at least 20% of the shares, so that they can show majority dynamic to come up with alternative management strategies.
Less controlled release is without a natural bonus price.
Plus: Performance is continuously measured by the amount of shares so that management errors can be corrected sooner.
3. Package 49% is sold to a strategic investor. A big buyer would be willing to pay a substantial bonus de-facto control of the company.
Minus: repeat mistakes made privatization a few years ago.
Plus: A large utility company can bring know-how more and more investment commitments from the other variants.
4. Electrica SA proposes an exchange - gives the three companies supply to the three private operators already on the market (ENEL, CEZ, E.ON) and claims instead return distribution companies. Where appropriate balancing are financial packages. The end result would be complete separation of supply distribution.
Activity distribution monopoly, remains under the control of the neutral state. Providing nationwide is divided between three major private operators. They have started delimited territorial coverage, but each will become more interested to extend even to the detriment of others.
Minus: It's complicated.
Plus finally start competition.
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