Thursday, September 22, 2011

EU Urges Romania Complete Asset-Sale Plans Amid Market Turmoil

The European Union urged Romania to push ahead with its asset-sale plans after the Balkan country signaled it may put projects aside as the deepening euro-debt crisis makes investors wary of emerging-market holdings.

Romania, which promised international lenders it would sell company stakes this year, is waiting for the right moment to offer 15 percent ofTranselectrica SA (TEL) and may postpone asking for bids for a stake in Transgaz SA until next year because of adverse market conditions, said Victor Cazana, the Economy Ministry’s director in charge of the sales.

“Increased market volatility should not be an excuse for Romania to delay structural reforms but rather an opportunity to promote them in order to safeguard market competitiveness,” Istvan Szekely, the EU’s mission chief to the country, said in an e-mailed response to questions. “The government should continue to move decisively ahead with the reform agenda.”

Romania and other east European countries including Poland and Ukraine have put asset sales, designed to bolster state coffers and finance infrastructure projects, on hold because of global market turmoil. The largest Balkan nation’s government, which may face opposition to such sales before 2012 elections, rescheduled a 9.8 percent stake sale of oil company OMV Petrom SA (SNP) for next year after failing to get enough bids in July.

“We believe that privatization proceeds this year will be negligible,” Ilker Domac and Gultekin Isiklar, analysts at Citigroup Inc., wrote in a Sept. 19 note to clients. “We believe that the government is not very likely to become aggressive in privatization ahead of the 2012 elections due to the possibility of political backlash.”
Energy Sales

Romania wants to lure investors into buying its energy assets to improve infrastructure such as roads and bridges as it cuts spending to lower the budget deficit below 3 percent of gross domestic product next year and meet pledges to the International Monetary Fund and the EU as part of a precautionary loan agreement.

Citigroup said next year’s proceeds may be almost 1 billion euros ($1.3 billion) if the government completes its sale plans, compared with a record 2.5 billion euros in 2006, mostly from the sale of the country’s largest bank, Banca Comerciala Romana SA, to Erste Group Bank AG.

“We are doing our best to sell the Transelectrica stake this year,” said the Economy Ministry’s Cazana in an interview. “It may be too late for the Transgaz stake because we need a pause between the offers.”
Polish, Russian Plans

Poland canceled a plan in August to sell a stake in PKO Bank Polski SA, the country’s largest lender, valued at as much as 6.8 billion zloty ($2.1 billion). Russia also said it plans to raise 300 billion rubles ($9.5 billion) next year by selling stakes in state companies such as OAO Rosneft, the country’s biggest oil producer, and VTB Group, its second-biggest lender, as part of 1.16 trillion-ruble asset-sale program between 2012 and 2014.

“Currently, there is a fierce competition between different countries and regions of the world to maintain existing and attract new foreign investors,” Szekely said. In Romania, “structural reforms should not be stalled next year, but rather accelerated, by creating a competitive business environment” and “prioritizing strategic investments in infrastructure facilities.”

The former communist country wants to revive the stake sale in Petrom in the first half of next year and also sell a 15 percent stake in its natural-gas producer Romgaz SA, according to the ministry’s data. It will try to sell 20 percent stakes in CFR Marfa SA, an unprofitable rail-freight company, and state- owned airline TAROM SA.
Market Difficulties

The ministry gave up a plan to sell an additional 12 percent stake in Transelectrica this year, aimed at giving the company money for investments, after the Ministry of Justice didn’t approve the proposal, Cazana said.

“It’s very hard to place any offer in the market right now and at a reasonable price,” Florin Ilie, an equity analyst at ING Groep NV’s Romanian unit, said in a phone interview. “We know that the government is not keen on accepting lower prices, but this is the market now and it should not be discouraged by temporary obstacles and continue the privatization process.”

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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