Banks to Earn Millions from HEP Privatisation

Total Croatia News

No wonder that banks support the idea.

Possible partial privatisation of the Croatian Electric Company (HEP) would bring nearly 200 million kunas to local and foreign bankers, while various state institutions and the Zagreb Stock Exchange would get just pennies in fees, reports Večernji List on 8 August 2017.

HEP’s management will have to prepare an initial public offering (IPO) of a quarter of the company’s shares. Once a decision to list the company on the stock exchange is made, HEP will have to select the arranger of the listing, according to people who deal with financial markets. Considering the size of HEP’s IPO, it is likely that a consortium of local and foreign banks would be selected, instead of just one arranger.

For such transactions, the commission is usually between two and three percent of the amount earned on the stock exchange. At the beginning of the year, it was estimated that 25 percent of HEP could bring in about 6.5 billion kunas so the commission would be between 130 and 195 million kunas. However, sources say that the commission would probably be near the upper boundary of the range due to the potential involvement of foreign investors.

In that case, the IPO preparations would also need to involve foreign attorneys, which would further increase the overall cost of the IPO. Part of the IPO also includes the drafting of the listing prospectus – a document with all the information needed by investors. The prospectus must be approved by the Croatian Financial Services Supervisory Agency and, according to its regulations on the amount of fees and administrative charges, HEP would have to pay around 30,000 kunas in fees, and pay an additional administrative fee to the state budget in the amount of 3,000 kunas.

In the end, the company would have to pay the listing charge to the Zagreb Stock Exchange. “The fee for listings on the official market amounts to a maximum of 150,000 kunas and, in comparison to the other transaction costs, it is very low,” says CEO of the Zagreb Stock Exchange Ivana Gažić.

At the end of last year, HEP held more than three billion kunas of cash on its bank account, so the IPO would be a negligible expense for the company.

Translated from Večernji List.


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