Following the decision of Fondul Proprietatea (FP) to oppose “vehemently” the renewal of the Board of Directors of the National Company Nuclearelectrica (SNN), as well as complaints about the lack of results, SNN claims that are renewed management takes place under legal conditions, and results are due to market developments.
The proposal of renewing the mandates of management was carried out “under the law” and FP performs the “dissemination of information in the public space, leading to the formation of negative perceptions of the issuer”, said SNN.
At the same time, construction of reactors 3 and 4 is “healthy” and has “long-term benefits,” says SNN.
“The sole proposal to the FP was consistently the same – to give up the Project of Reactors 3 and 4.”
SNN refused to report, at the request FP, upon spending so far with the project of Reactors 3 and 4. According to the Energy Ministry, the Romanian state would have spent already (before and after 1990) about 1 billion US dollars with this project.
“The public pressure from a minority shareholder to guide business strategy mainly towards short-term results without concern for long-term objectives or control rules such as requirements for nuclear safety are not compatible with any issuer,” say SNN representatives.
“FP publicly stated repeatedly that it is interested in maximizing the return to stakeholders of SNN and that, starting from this premise, vehemently opposes any long-term project of the company, notably Project of the 3 and 4 units of Cernavoda CNE, since it would lower the earnings of shareholders. ”
Greg Konieczny, FTIML CEO and portfolio manager of the Fund accused in a release SNN Nuclearelectrica that its market value fell, causing losses of over 2 billion lei shareholders from its listing in September 2013.
“As a result, both profitability and its market value are now more than 60% below the 2013 level, when the current Board took office,” said Konieczny.
“After many meetings and discussions with the executive members of the Council over the past three years, we believe that the current Board of Directors and current general manager of Nuclearelectrica did not act in the interests of shareholders,” added Konieczny.
In response, SNN argues that “it is an energy producer, with a constant production capacity, limited to 1,400 MWh of installed capacity by the technical features of the two nuclear units that are in operation; therefore production can not be increased to offset the major decline in electricity prices in the period 2013-2016 (today). ”
“SNN is already working to the highest standard of nuclear excellence involving a capacity factor above average in the nuclear industry which places the two units among the first in the world, thus increasing net production resulting from the operation of the two units is not possible,” SNN officials said, explaining that market prices have declined steadily.
Another charge of FP is that profitability has decreased dramatically during the term of the present Council: between 2013 and 2015 net profit fell 65%, while total remuneration of senior executives and non-executive increased by 46% over the same period, from 4.49 million lei to 6.59 million lei.
SNN believes, however, that the correct assessment of the company’s results can only be done carefully analyzing the market context, the revenue, the profit, which come mainly from energy sales.
“We are convinced that as a shareholder of SNN, FP knows very well these aspects of the market or can be checked by analysis required to specialists in the energy market. In this context, SNN believes that management’s efforts to maximize market correction and thus increase the company needed a similar position to FP’s, given the constantly sustained cause: to maximize shareholder earnings.
“The context of market characterized mainly by the massive drop in energy prices significantly impacted the financial result negatively, mostly SNN revenue from sale of electricity.
“SNN developed sales strategies adapted to the new market context … but not enough to compensate for the huge price differences between 2012 and 2016,” SNN officials said.
SNN also says that there isn’t an increase in the total value of remuneration of board members and executive management in the years 2014 and 2015, as compared with 2013, the difference in value perceived resulting simply from the fact that 2013 was exercised only eight months mandate to 12 months thereafter.
Finally, SNN says it cut expenses, but not to a level that would affect nuclear safety.
