Europe's biggest IPO prudently tests the water

VERBUND AG

05/07/2023 12:05

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       LONDON, July 5 (Reuters Breakingviews) - Europe’s
biggest listing this year is off to a cautious start.
Hidroelectrica, Romania’s top hydropower producer, priced on
Wednesday its initial public offering (IPO) at 104 lei
($22.87)per share, the middle of a proposed range, raising 1.8
billion euros. That values the whole utility at 46.8 billion
lei, or 9.4 billion euros. It also suggests the company would
trade at 10.5 times its 2022 earnings per share, a multiple 30%
lower than the 14.8 times Austrian peer Verbund  VERB.VI  is
currently trading at.
    To entice investors, Hidroelectrica is promising to
distribute at least 90% of its earnings in dividends. But the
ample discount suggests impatience by CEO Bogdan Nicolae Badea
to get the deal over the line: Bucharest is under pressure to
list the state-owned company as soon as possible to access
European Union funds. The gap also reflects governance concerns:
the Romanian government will remain firmly in control with an
80% stake, limiting minority shareholders’ influence. Finally,
power prices have fallen from post-Ukraine crisis peaks. And
temperatures are expected to soar across large parts of the
world, making hydropower plants more vulnerable to droughts.
It's wise to be prudent. (By Yawen Chen)

     Follow @Breakingviews on Twitter
    
    Capital Calls - More concise insights on global finance:
    Italy’s hottest financial saga gets new twist  urn:newsml:reuters.com:*:nL4N38P2F8
    China plays it safe with new central bank chief  urn:newsml:reuters.com:*:nL4N38P2DG
    KKR wins $2 bln bidding war the old-fashioned way
 urn:newsml:reuters.com:*:nL4N38M3DT
    US threat gives ASML new headache on China exports
 urn:newsml:reuters.com:*:nL4N38M2D6
    Meituan’s insider AI deal does not compute  urn:newsml:reuters.com:*:nL4N38M0RT
    

 (Editing by Lisa Jucca and Pranav Kiran)
 ((SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe
 |))