Nuclearelectrica negotiating with the Chinese

EVOLUTION Nuclearelectrica stocks are trending down at the Bucharest Stock Exchange, but the company managed to finish the first stage of the project for the Cernavoda plant’s third and fourth reactors

Nuclearelectrica ended the first stage of the selection process it started in order to find an investor for the third and fourth reactors at its Cernavoda nuclear power plant. The selected company was China General Nuclear Power Corporation. According to the official statements, only it took part in this stage of the process, as it fulfilled all the requirements.

But the project is far from being finalised. A new feasibility study should be drawn, an EU agreement for the aid the Romanian state is planning to offer has to be obtained, a new company where Nuclearelectrica and its Chinese partner will be associates has to be incorporated, and even some guarantees regarding a certain level of revenues have to be obtained from the state. And all these can’t be done unless the Chinese agree with the imposed conditions, which imply investments of more than four billion EUR. In case the schedule set by Nuclearelectrica will be observed, by the end of the year the new company should be already incorporated.

Meanwhile, the Nuclearlectrica stocks are trending down at the Bucharest Stock Exchange and their quotes are currently 30% below the November 2013 level, when the company was listed. The biggest disappointment for the investors was the almost 70% drop in profit for the first half of the year. The company intends to increase its subscribed capital by 50 million EUR, at a price of 10 RON per share, significantly above the current 7.80 RON quote. In case the project for the third and fourth Cernavoda reactors will be a success, i.e. the contract with the China General will be signed, the SNN quotes might go up.

Electrica, above expectation

Unlike SNN, the Electrica stocks were breaking record after record lately. Even if Electrica’s IPO wasn’t pointed at as being too cheap as it happened with the Nuclearelectrica’s IPO, the EL quote goes up and proves to be profitable for the investors. After the first market session, when the stocks were quoted at 11.25 RON, they went down until 10.7 RON, but then went up to 12.2 RON. The Electrica’s market capitalisation arrived this way to 4.22 billion RON, after a 9% increment during a just over two-month period. “The investors are currently waiting for a confirmation of the ambitious investment plan concerning the company’s distribution network”, the Tradeville analysts stated. The investors were not daunted by the 6% drop in profit in the first half of 2014, as it was generated by transferring to the government some of company’s participations in some branches and the operating profit went up by 14%. The Tradeville’s calculations indicate the dividend per share might reach 0.72 RON for 2014, which equates a gross yield of about 6.5%.

Anyway, Electrica keeps its buying recommendations, even the Reuters consensus indicating its stocks might go up by more than 12% in the next 12 months. The same growth potential is to be found at OMV Petrom.