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The state allows Transgaz eventually to issue bonds of up to 500 mil

Jul 7th 2015 at 12:16 AM

Shareholders of Transgaz, the national transmission system operator natural gas company controlled by Romanian State with 58.51% of shares approved in extraordinary AGM on Tuesday, triggering the company's procedures for the issuing of corporate bonds to a maximum of 500 million to finance the development program of Transgaz. The same proposal had been rejected by the majority shareholder in a similar AGM.

Money from the bond issue will finance construction of a pipeline that will interconnect the natural gas transportation systems in Bulgaria, Romania, Hungary and Austria, co-financed with EU funds.

"Approve the initiation of the procedure on issuance of corporate bonds, unsecured, non-convertible into shares, amounting to a maximum of 500 million, with a maximum interest rate of 4.5% with maturity of at least five years, to finance the development plan of the National System Transportation of natural gas in the period 2014-2023 ", shows the EGM decision of Tuesday, June 16 .

The judgment states that the company's management and administrative leadership "bears full responsibility for fulfilling the actions and for complying with all applicable legal provisions this operation so as not to cause harm to the company and its shareholders." The specification was necessary given that, according to the constitution of Transgaz, bond issuance is for the EGM.

P ccording to a report prepared by the Board of Directors of Transgaz , the expected duration of the ongoing process of bond issuance is estimated at 4.5 months after its start. The bonds will have a face value of 10,000 lei and will be listed on the Bucharest

Stock Exchange.

Costs of over 100 million lei

The costs to society of issuance will exceed 100 million, says the report. If bonds will carry a fixed annual interest of 4.5%, interest costs will rise to 22.5 million per year respectively 112,500,000 lei in 5 years, plus costs and capital market Intermediate 1.55 million, the total costs of issuance resulting from 114.05 million lei. If bonds will carry a fixed annual interest of 4.2%, interest costs will rise to 21 million per year, ie 105 million lei in 5 years, plus costs and capital market intermediary 1 55 million lei, the total costs of issuance resulting from 114.55 million lei.

"The estimate includes any costs which may be organized by organizing virtual rooms or hiring services of consultants", says the report.

Money from the EU for interconnection

At the end of April, the state as shareholder of Transgaz, rejected the company management's proposal to borrow up to 500 million through an issue of corporate bonds to finance the investment program in the company's development.

The day before, Transgaz shareholders had approved the proposal regarding the allocation of more than half of the net profit recorded by the company in 2014 as dividends. Thus, it approved a gross dividend of 21.80 lei / share. Thus, the net profit of 502.51 million lei recorded by Transgaz last year, 256.67 million lei will be distributed as dividends.

Later in May, general manager of Transgaz, Peter widow, said to Bloomberg , the state, the main shareholder of the company, initially rejected the bond issue plan, calling for deeper analysis. He said that money obtained by issuing bonds will finance the construction of a gas pipeline between southern Romania and Central Europe.

July Transgaz will require funding from the European Union to support the project of 560 million euros called Brua that will connect Bulgaria, Romania, Hungary and Austria, said the widow. If EU funding will be approved, Transgaz will have to cover half of the project cost from own resources.

So I can issue bonds in the autumn, to use the money in March," said the widow. Transgaz gas pipeline would extend later to the Black Sea, the project cost will grow to 1.1 billion euros so, said the widow. Romania is anticipated that exploration activities in the Black Sea of ​​ExxonMobil and OMV Petrom could lead to the discovery of new gas reserves.

Brua pipeline, with a length of 550 kilometers, would connect the town of Giurgiu Csanadpalota in Hungary and should be completed in 2019. The section to the Black Sea would add another 300 kilometers to the pipeline.

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