Fondul Proprietatea announces that it strongly opposes the proposal of Nuclearelectrica’s Board to renew its mandate and maintain the same Board members and General Manager for another four-year term from 25 April 2017, as put forward for shareholder approval at the company’s General Shareholders Meeting (GSM) scheduled on 9 December 2016, states a release.
Fondul Proprietatea requests shareholders to vote against the mandate renewal of the current Board and General Manager and to approve the commencement of a recruitment process for a new Board by the Ministry of Energy, according to corporate governance requirements set by OUG 109/2011 and Law 111/2016. The Fund’s request has been submitted as an additional item on the GSM agenda and the updated agenda should be published by Nuclearelectrica according to Romanian legislation in force.
In addition, Fondul Proprietatea underscores that the mandate of Nuclearelectrica’s General Manager cannot be automatically renewed according to legislation in force and requires that the new Board, once appointed, organizes a separate selection process for these positions.
Greg Konieczny, CEO of FTIML and portfolio manager of Fondul Proprietatea commented: “We believe the proposed mandate renewal of Nuclearelectrica’s Board members and General Manager is unacceptable for shareholders given that the board failed to take any measures to tackle the market value decrease, which caused over RON 2 billion loss to shareholders since the company’s listing in September 2013. As a result, both the company’s profitability and its market value are, as of today, over 60% lower than in 2013, when the Board started its mandate.”
“After repeated and numerous meetings and engagement with the executive members of the Board over the last three years, we believe the current Board and General Manager of Nuclearelectrica have not been working towards the interests of its shareholders and we request that a new selection process for the board members based on Law 111/16 principles be initiated by the Ministry of Energy. Fondul Proprietatea also requires that a separate selection process for the General Manager of Nuclearelectrica be carried out by the new Board after its appointment” added Greg Konieczny.
Fondul Proprietatea’s request is based on the following detailed grounds:
- the company’s market value decreased by approx. 60% since its listing in 2013, which means over RON 2 billion (EUR 453 million) total losses incurred by Nuclearelectrica’s shareholders, out of which RON 1.68 billion (EUR 373 million) are the losses incurred by the Ministry of Energy, as the company’s majority shareholder ;
- the profitability of the company sharply declined during the mandate of the current board: the net profit decreased by 65% between 2013 and 2015, while the remuneration of executive and non-executive management increased by 46% during the same period, from RON 4.49 million RON to 6.59 million ;
- the current Board failed to neither propose nor implement any cost reduction programme to tackle the accelerated profitability decline of Nuclearelectrica. A diligent board, acting in the best interests of the company and its shareholders, is expected to implement cost-cutting measures to lessen impact on profit margins;
- the current Board did not propose nor implement any initiatives to tackle the steep depreciation of Nuclearelectrica’s share price, which could have helped to restore shareholders’ and investors’ confidence;
- the current Board has engaged in negotiations for the highly expensive project to build Reactors 3 and 4 and refused to disclose costs incurred so far with it, instead of securing financing for the refurbishment of Reactor 1;
- the current board failed to meet the performance objectives set in management plan assumed by the Board on 9 July 2013.
- Fondul Proprietatea expresses its hope that the Ministry of Energy will vote in favour of the Fund’s request and start the recruitment procedure of a new board according to corporate governance legislation, since the Ministry is the majority shareholder of Nuclearelectrica and therefore is directly impacted by the Board’s actions and company’s low performance, the release also states.
