Energijos Skirstymo Operatorius AB
Further explanation regarding the delisting of Ignitis Group's subsidiaries shares and the potential IPO
The main shareholder of Energijos Skirstymo Operatorius AB Ignitis grupė UAB, considering the public interest about the planned delisting of its subsidiaries, provides further clarification for investors and members of the public about the share buyback rationale.
‘Due to the new strategies of the Lithuanian energy and Ignitis Group, we aim to proceed our contribution to the power grid synchronization, maintenance and digitalization of reliable distribution networks without raising cost to consumers on the same time ensuring sustainable dividend stream to our shareholders. For this to continue, we are considering the most efficient capital raising alternatives, and as of now see the entire group Initial Public Offering (IPO) as the most attractive.
However, Ignitis Group can expect to maximize the value from a possible (IPO) only once its subsidiaries Energijos Skirstymo Operatorius (ESO) and Ignitis Gamyba are delisted’ says Darius Maikstenas, CEO of Ignitis Group.
It is estimated, that if subsidiaries are not delisted, it may result in a loss of several hundred million euros during the potential IPO. This is due to the difference from the expected Ignitis Group growth and change in positioning. For example, the value multiplier for traditional energy companies such as ESO and Ignitis Gamyba in the CEE region is typically around 6 EBITDA (the profit of the company before interest rates, taxes, depreciation, and amortization). At the same time, value to EBITDA multiplier for renewable energy sector companies are around 10.
In addition, subsidiaries‘ shares conversion into Ignitis Group shares during IPO may also potentially cause loss. Due to the small free-float of subsidiaries shares listed in the market, speculation risk may arise. In this case the expectation of IPO may lead to unjustified price hike for ESO and Ignitis Gamyba shares causing unfair conversion rate. In that case, the minority shareholders would benefit at the expense of the main shareholder – State of Lithuania.
For the same reason plans on IPO were not disclosed to the market until the notification on delisting was released. Due to the risk of market speculation, delisting and IPO are treated as separate processes. We believe that the share buy-back price should be fair, and it should be distinguished from the Ignitis Group IPO expectations that ESO and Ignitis Gamyba minority shareholders might have. We continue to maintain a dialogue with the Investors Association and other minority shareholders to ensure a fair buy-back process for all stakeholders.
Ignitis Group announced about the potential IPO on 13 November when The Ministry of Finance, the sole shareholder of company, initiated a process of forming a working group which will assess Ignitis Group long-term financing alternatives, including IPO.