No less than 8 million Romanians contribute directly to mandatory Pillar II private pension funds, and these have just become significantly more attractive, given an imminent transaction.
The Pillar II pension funds, in the next period, will become the second largest shareholder in Hidroelectrica, after the Romanian state. With the energy supplier poised to become the biggest player in the field after exploding in customer numbers and undercutting the competition, it shouldn’t come as a major surprise that it will list at stock market in the form of an IPO (initial public offering).
Private mandatory pension funds Pillar II, shareholder Hidroelectrica
Up to 18% of Hidroelectrica’s IPO could fall into the hands of pension funds. For reference, currently, the same funds are indirect shareholders of the energy supplier, due to the fact that they own 30% of the shares of Fondul Proprietatea, and the latter is a shareholder with 20% of the state company. This scenario came into the limelight after, on May 26, a note was published in the Official Gazette according to which, if P2 funds exceed the degree of risk assumed by the prospectus in the case of investing in a state company, they can fall back into a maximum of 180 of days.
As a reference, in Romania, approximately 8 million employees currently contribute 3.75% of their gross income to mandatory private pension funds, and in the next period, directly, they will be anchored in the energy market through actions at Hidroelectrica. This was impossible in the past, but the Ministry of Energy has doubled the exposure that Pillar II can take to state-owned companies.
The Financial Supervisory Authority (ASF) also played a role in making the above decision, facilitating the amendment of the legislation in the field of P2 funds. Until now, those funds could only invest 5% of the value of assets in a state-owned company, and now the limit has been increased to 10%.
