Romania: Approval of the privatisation strategy for the gas distribution sector 1

As part of its commitment to further privatisation of the energy sector, the Romanian Government has recently approved the privatisation strategy of the gas distribution sector.

The newly enacted Government Decision approves the privatisation strategy of the two key natural gas distributors in Romania: S.C. Distrigaz Sud S.A. Bucharest and S.C. Distrigaz Nord S.A. Targu Mures, two fully state owned enterprises which together have a near monopoly of the market. However, under Romanian law only the relevant ministry, the Ministry of Economy and Trade ("MEC") and the privatisation authority, the Office for State Equity Management and Privatisation in Industry ("OPSPI") are given details of the strategy which may not be made public.

The enactment of the Decision signals the start of the privatisation process. It represents the basis upon which the OPSPI will publish the announcement inviting participation in the company and draft the instructions for submission of the offers by interested parties.

The Decision also outlines the privatisation method, which involves the acquisition of 51% of the shares in any of the two companies by a strategic investor or by a consortium of investors. The acquisition will be made following a negotiation for the sale of shares, based on preliminary non-binding offers, and a subsequent increase in the registered share capital.

According to statements made by the Minister of Economy and Trade, Mr. Dan Ioan Popescu, Distrigaz Nord and Distrigaz Sud will be privatised by the direct sale of 33.34% of the shares to a strategic investor. The investor's stake will be increased to 51% by means of a capital increase. The privatisation will be conducted within the second tranche of the Private Sector Adjustment Loan - the loan facility made available by the World Bank to the Romanian Government to finance the costs in relation to preparing state owned assets for privatisation. It will be coordinated by a privatisation committee appointed through a government decision, under the supervision of the European Commission and in accordance with EU procedures.

At this point, four of the largest players in the field are reported to be interested in the privatisation of Distrigaz Nord and Distrigaz Sud: Enel from Italy, Ruhrgas and Wintershall from Germany, and Gazprom from the Russian Federation.

For further information please contact Ana Radnev at ana.radnev@cms-cmck.com or +40 21 2316470