Thursday, December 2, 2010

Franklin Templeton to start legal action over Romgaz

By Marius Zaharia and Sebastian Tong

BUCHAREST/LONDON, Dec 1 (Reuters) - Fund manager Franklin Templeton said it would take legal action against Romania for forcing energy firm Romgaz to make a donation to the state budget, adding the government had damaged investor confidence. Romgaz, Romania's main gas producer, is one of the holdings of Fondul Proprietatea, a 3.4 billion euro ($4.4 billion) fund created to compensate citizens whose properties were confiscated during communism and which is managed by Templeton.

Templeton said on Wednesday Fondul Proprietatea had voted against the 400 million lei ($122 million) donation at a Nov. 30 shareholders meeting but was overruled by the government, which has an 85 percent stake in Romgaz.

The donation was a result of a government order that gave majority state-owned firms an option to help cover Romania's budget shortfall.

"We understand the need of the government to finance its budget deficit, but such decisions should only be taken with a long-term perspective in mind," Templeton Emerging Markets Group Executive Chairman Mark Mobius said. "Now that the donation has been endorsed by the minister of economy, we can only foresee detrimental effects to Romania's investment environment. We would add that it could even affect Romania's ability to maintain its current credit rating," Mobius said.

Romgaz and the economy ministry were not available to comment. Economy minister Ion Ariton has previously declined comment on Templeton's accusations Romania was using its position as Romgaz's main shareholder to the detriment of other owners.

Proprietatea is seen as a prized asset in eastern Europe, where investors may soon get a chance to snap up bargains in areas such as energy and banking as the region's governments unload assets to rescue their budgets.

The fund, which Templeton may list on the Bucharest stock exchange in late January, targets a 207 million lei net profit next year against 195 million in 2010. [ID:nLDE6AT090]

The Romanian government holds a 43 percent stake in Fondul Proprietatea. (Editing by Mike Dolan and David Holmes) ($1 = 3.292 lei = 0.7676 euro)

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