Romanian Daily Report - April 9

Fondul Proprietatea – Update on the litigations with Mrs. Sfiraiala; Fondul Proprietatea – The government aims to smooth the power output of CE Oltenia; Transgaz – Five people proposed as Board members; Electromagnetica 2013 budget

Fondul Proprietatea – Update on the litigations with Mrs. Sfiraiala
Fondul Proprietatea has informed that the Court has ruled in its favour in one of the many cases against Mrs. Sfiraiala. The Court ruled by rejecting the Litigant’s claim that the annulment of certain shareholder resolutions approved in September 2010 should retrospectively affect the validity of shareholders’ resolutions approved after this date. We view this piece of news as positive for Fondul Proprietatea’s shares since we consider that this decision of the Court could be a major breakthrough in its legal debate with Mrs. Sfiraiala, despite the fact that the decision could not be final.  


Fondul Proprietatea – The government aims to smooth the power output of CE Oltenia
The government has issued a draft ordinance whose purpose is to smooth the power output of CE Oltenia. Due to increased wind power delivered into the system, CE Oltenia’s power output is forced to decline during periods of high winds. This ordinance is guaranteeing CE Oltenia access to the national grid so that the company could have continuous production for at least 500 MW. To be enforceable, ANRE will have to issue a new set of regulations. It is not clear to whom this energy will be sold, as OPCOM market is not a solution, since according to the company’s representatives current prices are below its production costs. Moreover, according to the same sources, the quantity to be delivered on the regulated market has been reduces significantly by ANRE. The new ordinance is to be applied from April 15, 2013 to July 1, 2015. Despite the difficulty in quantifying the beneficial impact of this ordinance on CE Oltenia, we view this piece of news as rather positive for Fondul Proprietatea shares since it suggests that the government is trying to address some of the problems faced by CE Oltenia.


Transgaz – Five people proposed as Board members
According to an announcement posted on Transgaz website, the Office for State Participations and Privatizations in Industry (OPSPI) proposed four candidates for the board of Transgaz while SIF Moldova (SIF2) proposed a fifth candidate. The four candidates proposed by OPSPI were the result of the selection process initiated by OPSPI in accordance with government ordinance 109/2011 regarding corporate governance in state companies. The announcement regarding the selection process came in February and applications were due by March 13. The proposals include the former CEO of Tiriac Holding, a holding owned by a well-known local entrepreneur, a partner in a local law firm, a director of OPSPI and a director in another state entity for the administration of state assets. The shareholders will vote on the Board composition from these five proposals and the five current Board members.


Electromagnetica 2013 budget
Electricity trader and producer of electrical components Electromagnetica (ELMA) made public its 2013 budget which foresees a 17% yoy drop in sales to RON 374 mn, on lower sales of electricity (-19% yoy to RON 300 mn). The company intends to increase the research and development costs for 2013 to some EUR 2.6 mn, up 62% yoy, mostly dedicated to the new LED solutions developed by ELMA. LED sales amounted to EUR 3 mn during 2012, and are expected to almost double this year to EUR 6 mn.
Given the harder conditions negotiated last year in the contract with the main supplier of electricity, Hidroelectrica, operational profit is expected to shrink in 2013 by 38% yoy to RON 10 mn, while gross profit is budgeted to decrease by almost 43% yoy to RON 10.6 mn as the company also expects lower financial gains.