BUCHAREST, April 25 (Reuters) - Romanian investment fund Fondul Proprietatea could sell some of the unlisted companies in its portfolio, which have attracted interest from buyers, rather than wait for the government to revive stalled listing plans, its manager said.
The $2.15 billion fund is managed by global investment manager Franklin Templeton and more than 70 percent of its portfolio consists of unlisted, mainly state-owned companies.
The structure of the portfolio has led to a discount between the fund’s share price and its net asset value. Fondul has narrowed this to 24.3 percent from roughly 56 percent in 2011 through share buybacks, financed by divesting small stakes in listed utilities like oil and gas group Petrom or gas producer Romgaz.
But at the urging of its investors, including activist shareholder Elliott Associates, it is pursuing a discount target of 15 percent. Elliott has about a 21 percent stake.
Franklin Templeton has encouraged successive governments in Romania to list state firms, including Bucharest Airports, salt monopoly Salrom and Constanta Port on the Black Sea.
But the Social Democrat government, which took power in December, has so far shown little interest in public offerings.
“There are challenges with the IPOs despite all our efforts, and of course we don’t give up on them but we always have to look at different scenarios,” Fondul’s manager Grzegorz Konieczny told Reuters.
“The prospects to further narrow the discount are really good because we do see strong demand for unlisted assets. It’s very difficult to say when or if these transactions might close, but we are very encouraged by the interest.”
He was referring to energy and transport infrastructure firms for which the fund could find buyers, either from controlling shareholders or third-party financial investors.
“We are talking especially about the electricity and gas distribution companies, but there is interest in companies like Bucharest airports and so on. If we can now get a high price for these assets, why should we wait for IPOs that may or may not happen in the future?”
Konieczny also said it would take a miracle for a planned listing of Romania’s biggest and cheapest power producer Hidroelectrica to happen this year. He said Fondul would be interested in selling some of its 20 percent stake in the firm.
The government is working on setting up a sovereign wealth fund, which Konieczny said could improve transparency and give the cabinet more impetus to push for IPOs.
More listings are also needed to deepen liquidity on the Bucharest Stock Exchange, which is vying to get reclassified as an emerging market from its current frontier status. Its capitalisation rose to roughly 148 billion lei ($35.69 billion) last year.
Konieczny, who expects Romania’s economy to grow more than 4 percent this year, estimated cash inflows on the Bucharest bourse could rise by at least $200-250 million with the upgrade, which he said could effectively happen in 2019-2020.
“But the decision to put the country on a watchlist for potential upgrade, this would already bring a lot more funds and people looking,” he said. “The road to getting to emerging market is much more interesting from an investing perspective and making money than the actual date of the upgrade.” (Editing by Jane Merriman)