Monday, November 22, 2010

Templeton threatens legal action over Romania's Romgaz

LONDON Nov 19 (Reuters) - Fund manager Franklin Templeton on Friday threatened legal action if Romania forces energy firm Romgaz to make a donation towards the budget deficit, and said the issue risked damaging the country's investment reputation.

Romgaz, Romania's main gas producer, is one of the portfolio holdings of the Fondul Proprietatea, a 3.4 billion euro fund that Templeton manages. It was created to compensate citizens whose properties were confiscated by the communist government.

Romania's government, struggling to raise funds to finance its budget, was originally set to propose a donation of up to 400 million lei ($130 million) from Romgaz at general shareholder meetings (GSM) on Sept. 14 and Oct. 18.

While the motion was withdrawn at the time, Templeton said the proposal was back on the agenda for the Nov. 22 GSM.

Templeton accused the Economy Ministry of using its position as Romgaz' main shareholder to the detriment of other owners. The amount that could be extracted represents about 4.5 percent of shareholder equity as of end-2009, it said.

"This is a very serious issue which could damage Romania's reputation globally as an investment destination. It raises very serious questions about conflicts of interests," Templeton Executive Chairman Mark Mobius said in a statement.

A government ordinance giving majority state-owned firms the option to donate to help cover the budget deficit breached free market principles as well as Romanian law, Mobius said, noting it may also hit plans to list Romgaz on the stock market.

"It sets a very negative precedent.

"Templeton will take all legal action necessary in order to revoke any GSM decision approving such a donation," Mobius added in the statement.

Romania's Economy Minister Ion Ariton declined to immediately comment when contacted by Reuters.

Templeton suggested instead that Romgaz pay a special dividend to all shareholders which it said would result in an extra cost to the company of 70.6 million lei.

It was not immediately clear what stake Fondul Proprietatea held in Romgaz. (Reporting by Sujata Rao; Additional reporting by Radu Marinas in Bucharest)

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