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An important group of foreign investors, including the Property Fund’s manager, Franklin Templeton, criticizes the decision of the regulatory body of energy market, ANRE, to reduce the rate of return on electricity distributors, which will affect their profits.

“Franklin Templeton … and Newtyn Management LLC, ING Pension, Evermore Global Advisors, LLC are worried about changes recently approved by the Regulatory Authority for Energy (” ANRE “) through the methodology for setting a regulated rate of return (“ROR”) and by the recently proposed reduction by ANREof the regulated rate of return for electricity distributors from 8.52% to 7.45%. If this regulated Rate of Return reduction is approved, future profitability of the distributors of electricity will be reduced by about 12.5%,” says a release sent to our newsroom.

“These changes affect especially some of the companies in the Property Fund portfolio, such as Electrica Muntenia Nord Distribution, Distribution Electrica Transilvania Sud, Electrica Transilvania Nord Distribution, Distribution EON Moldova, ENEL Distribution Banat, ENEL Distribution Dobrogea and Muntenia ENEL Distribution.”

Property Fund officials claim that “constant changes to the regulatory framework create an unstable and unpredictable business environment, thus preventing companies to undertake investment programs in the context in which the required rate of return on capital is uncertain.”

“Furthermore, these unexpected legislative, fiscal and commercial changes will banish investors, who will not be interested in providing capital in such an unpredictable regulatory environment.”

The proposed amendments come in less than 4 months from the Romanian state Electrica listing on the Bucharest Stock Exchange and the London Stock Exchange and take place after the introduction of tax on infrastructure shortly after the IPOs of Nuclearelectrica and Romgaz. Such negative changes could jeopardize the success of any listings or privatization of state enterprises in Romania on the local stock exchange BSE.

Autor: Bogdan Tudorache

Active in the economic and business press for the past 26 years, Bogdan graduated Law and then attended intensive courses in Economics and Business English. He went up to the position of editor-in-chief since 2006 and has provided management and editorial policy for numerous economic publications dedicated especially to the community of foreign investors in Romania. From 2003 to 2013 he was active mainly in the financial-banking sector. He started freelancing for Energynomics in 2013, notable for his advanced knowledge of markets, business communities and a mature editorial style, both in Romanian and English.