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SPEEH Hidroelectrica: From Communist Megaproject to Europe's Largest IPO
How a state-owned utility, born from communist-era megaprojects and nearly destroyed by corruption, became Europe's largest IPO of 2023
I. Introduction: A Story of Transformation
Picture the scene: July 12, 2023, the trading floor of the Bucharest Stock Exchange. Diplomats, bankers, and Romanian government officials gather for what will become the defining financial event of the year in Europe. The bell rings, and Hidroelectrica—a company whose roots stretch back to the ideological ambitions of 1950s communist Romania—begins trading under the symbol H2O.
Franklin Templeton-managed Fondul Proprietatea raised 8.1 billion lei ($1.8 billion) in Romania's largest ever initial public offering and this year's biggest share listing in Europe. The moment represented far more than a successful capital raise. It marked the culmination of a seven-decade journey from Stalinist industrialization, through post-communist corruption, bankruptcy, restructuring, and ultimately, emergence as one of Europe's most compelling clean energy investment stories.
The listing of Hidroelectrica is the largest-ever IPO in Romania, the third-largest to date in the CEE region, and the largest in Europe so far in 2023. What made this offering remarkable wasn't just its size. While there are many pure clean energy producers, none are as large as Hidroelectrica (USD 10.3 billion). Of the larger European utilities companies, none offer 100% clean energy making Hidroelectrica one-of-a-kind.
The company operates at the intersection of several powerful investment themes: the European energy transition, Eastern European market development, and the ongoing professionalization of formerly communist state enterprises. Currently, the company provides approximately 29 percent of Romania's electricity demand. Hidroelectrica has a hydropower capacity of 6.3 GW, operates 108 MW onshore wind generation and covers 8 percent of the energy retail market in the country.
Yet to understand why Hidroelectrica matters—and why sophisticated investors should pay attention—requires grasping the full arc of its history. This is a story of nation-building through infrastructure, the corrosive effects of state ownership without accountability, the counterintuitive power of insolvency as a cleansing mechanism, and ultimately, the patient construction of a world-class renewable energy company.
For investors accustomed to the polished narratives of Western utilities, Hidroelectrica offers something different: a case study in how emerging market institutional reform can unlock tremendous value, and a window into whether such transformations prove durable.
II. The Communist Origins: Building a Hydraulic Nation (1950s-1989)
Romania's Electrification Dream
In the bitter winter of 1950, something unprecedented began taking shape in the mountains of northern Romania. At Bicaz, on the Bistrița river, work commenced on what would become Europe's fourth-largest dam. It is the first construction of this type erected in Romania through an immense human effort that lasted 10 years (1950-1960).
The newly installed communist regime had ambitious plans. The construction of the Bicaz dam lasted 10 years (1950 – 1960) with the development of the national electrification plan. The country was in need of electricity, jobs for the people over which the war had taken a toll on, and after the damages brought by the drought in 1947.
To understand the scale of human mobilization involved, consider this: 18,760 people (almost 2,300 households from 20 villages) were displaced to close the dam and build the reservoir. Some preferred not to leave their native places and dismantled their houses piece by piece, and where possible, rebuilt them higher up, away from the waters of the coming lake.
But the human cost ran deeper than displacement. Besides the laborers of the construction company, the construction of the dam and of the hydroelectric plant also used forced labor. Government Decree Nr.6 of January 14, 1950 created Units of forced labor, which were converted by Government Decree Nr. 1554 of August 22, 1952 into Labor Colonies. The people working in the forced labor camps were rich peasants (so called "chiaburi"), merchants sentenced for profiteering, former members of the Romanian right wing parties (known as "legionnaires") or of former non-communist political parties, relatives of "traitors of the motherland" (persons who had left Romania and settled abroad), peasants who opposed the process of colectivization of agriculture and other opponents of the regime.
When the Bicaz-Stejaru Hydroelectric Power Station finally came online in 1960, it has a height of 127 m (417 ft), a length of 435 m (1,427 ft), and a maximum width of 119 m (390 ft). The Bicaz Dam is 127 meters high and is the largest gravity dam on the inland rivers of Romania, being surpassed by Porțile de Fier/Iron Gates I, and is the third highest dam in the country. It is the 9th highest weight barrier in Europe.
The transformation in Romania's energy profile was dramatic. At the end of the 1960s, electricity produced by hydro-power plants accounted for just 1% of the entire supply in Romania, but grew to 12% by the mid-1970s as a result of an intense energy policy.
The Iron Gates: A Symbol of Socialist Ambition
If Bicaz represented Romania's domestic hydropower ambitions, the Iron Gates project on the Danube River embodied something grander: communist internationalism and "gigantomania." The project signaled the Ceaușescu regime's prioritization of "big installations," such as the largest dam, the "Iron Gates" (jointly built on the Danube with Yugoslavia), under the communist model of industrialization, electrification, urbanization and its "cult of scale."
The planning for the Iron Gate I Hydroelectric Power Station originated from a bilateral convention signed on 30 November 1963 in Belgrade by Romanian leader Gheorghe Gheorghiu-Dej and Yugoslav leader Josip Broz Tito. This agreement established a joint venture to construct and operate the Iron Gates Water Power and Navigation System on the Danube River.
The financial arrangements reflected the ideological commitment to equality between socialist states. The convention mandated equal financial contributions from both parties, with total investments estimated at approximately $400 million based on 1962 world market prices, split 50/50 regardless of specific work allocations.
The construction of the joint Romanian-Yugoslavian mega project commenced in 1964. In 1972 the Iron Gate I Dam was opened, followed by Iron Gate II Dam, in 1984, along with two hydroelectric power stations, two sluices and navigation locks for shipping.
The scale of the undertaking remains impressive even by today's standards. The Iron Gate I Hydroelectric Power Station is a major run-of-river hydroelectric facility situated on the Danube River within the Iron Gates gorge, straddling the border between Romania and Serbia. Constructed as a bilateral project between Romania and the former Yugoslavia from 1964 to 1972, it consists of two parallel powerhouses equipped with twelve Kaplan turbines, delivering a combined installed capacity of 2,306 MW—1,166.4 MW on the Romanian side and 1,140 MW on the Serbian side following recent upgrades—making it the largest hydroelectric installation on the Danube River and one of Europe's most significant hydropower complexes.
Work on the Iron Gates started simultaneously on both the Yugoslav (now Serbian) and Romanian sides of the Danube, connected by a temporary bridge, and a workers' colony was soon established on the Danube bank to accommodate 15,000 people from all over the two countries. According to some statistics, about 100 of them died in work-related accidents during the construction of the dam and hydropower plant.
The Human Cost
Every dam carries a human dimension in its reservoir. The construction of the Iron Gate I Hydroelectric Power Station necessitated the displacement of approximately 23,000 people from villages and settlements along the Danube River in Romania and what was then Yugoslavia, as these areas were flooded to create the reservoir. This included the unique community on Ada Kaleh island, home to around 150 Turkish families who had maintained an Ottoman-influenced way of life, including tobacco trade and traditional architecture. The relocations occurred primarily between 1966 and 1972, affecting towns like Orșova in Romania and several villages in the Djerdap region of Serbia.
With the rise in the Danube level, 3,560 hectares were flooded on the Romanian side, affecting ten localities: Orșova, Ada-Kaleh, Eșelnița, Dubova, Vârciorova, Tufări, Jupalnic, Ogradena, Tișovița, and Plavișevița.
Perhaps the most evocative consequence was the flooding of Ada Kaleh. A former Turkish exclave, it had a mosque and a thousand twisting alleys, and was known as a free port and smuggler's nest. Many other ethnic groups lived there beside Turks. The submersion of these areas led to profound cultural losses, particularly the inundation of Ottoman-era sites on Ada Kaleh, such as its historic fortress, mosque, and bazaar, which represented a rare Turkish exclave in Europe.
In 1923, when the Ottoman monarchy had disappeared, the island was given to Romania in the Treaty of Lausanne. Before the construction of the Iron Gate Dam, the inhabitants of the island were given the choice of where to relocate. Most Ada Kaleh inhabitants emigrated to Turkey after the evacuation of the island. So sadly this quirky little island with all its history is now forever lost to the Danube.
The Complete System
By the mid-1980s, Romania had built one of Eastern Europe's most extensive hydropower systems. The construction of the joint Romanian-Yugoslavian mega project that would finally tame the river commenced in 1964. In 1972 the Iron Gate I Dam was opened, followed by the Iron Gate II Dam in 1984.
A joint development project of Romania and Yugoslavia on the Danube River (including a dam and hydroelectric power plant) was completed in 1972, providing equal amounts of energy to each country and quadrupling the annual tonnage of shipping.
Romania's share of these colossal assets would eventually form the backbone of Hidroelectrica. Today, Romania co-owns the Iron Gate I Hydroelectric Power Station on the Danube River located on the border between Romania and Serbia, which is one of the largest hydroelectric power plants in Europe with an installed generation capacity of 2,216 MW. The two countries also jointly operate the Iron Gate II Hydroelectric Power Station with an installed generation capacity of 537 MW.
The Iron Gates branch remains "the branch with the largest installed capacity of Hidroelectrica" at 1,458.4 MW.
The infrastructure Romania's communist regime built during these decades—controversial as its methods were—created the foundation for what would become Europe's largest pure-play hydropower company. But the road from communist showcase to publicly traded corporation would prove anything but smooth.
III. The Post-Communist Transition & Formation of Hidroelectrica (1989-2011)
Energy Sector Restructuring
The fall of communism in December 1989 left Romania with vast state-owned assets and no clear framework for managing them in a market economy. The energy sector underwent multiple reorganizations throughout the 1990s, with hydropower assets eventually being consolidated into a single entity.
Hidroelectrica is the largest energy producer in Romania, established in 2000 after the restructuring of the energy sector. Founded in 2000, Hidroelectrica became the main producer and supplier of energy in Romania and the main provider of technological system services. The company inherited a portfolio of communist-era plants spanning decades of construction, from the earliest Bicaz facility to the massive Iron Gates complexes.
The ownership structure that emerged from this period would shape the company's trajectory for the next two decades. At present, the share capital of the company is owned by the Romanian state through the Ministry of Energy in a proportion of 80.06% and by "Fondul Proprietatea" SA, which has a share of 19.94%.
Fondul was set up as a fund to compensate Romanians for assets seized under communism and holds minority stakes in a string of state firms, including 20% of Hidroelectrica. This minority stake would eventually prove crucial to forcing corporate reforms and ultimately enabling the 2023 IPO.
Early Challenges and Successes
Hidroelectrica's early years proved volatile. Soon after its launch, in 2003, the company was severely affected by drought, but counteracted potential negative effects by a relaunch strategy for 2004. The weather dependency inherent in hydropower would remain a recurring theme in the company's history—as events in 2024 and 2025 would dramatically demonstrate.
When conditions aligned favorably, however, the company's underlying strength became apparent. Favorable weather conditions and good management led to a record for the company's electricity production of 20.1 TWh in 2005, and the company was ranked the 6th in the "Top 100 most valuable companies in Romania."
The good results continued in subsequent years, proven by the second place in 2011 in the same ranking, with a value estimated at EUR 3.5 billion, and being considered the most dynamic state company in Romania.
The Seeds of Crisis: "Smart Guys" Contracts
Behind the headline achievements, however, a cancerous problem was metastasizing. Until 2012, the company recorded meager profits as it sold most of the energy produced at low prices to energy traders under long-term contracts.
The nickname 'smart guys', earned by firms that signed direct contracts with Hidroelectrica at below market prices, was first used by Romanian president Traian Basescu two years ago.
Some of the beneficiaries of the direct contracts in 2010 were Alro Slatina, Luxten Lightining, Energy Holding, Europec, Electromagnetica, Electrocarbon, ArcelorMittal Galaţi, among others.
The mechanism was straightforward: well-connected energy traders secured contracts to purchase electricity from Hidroelectrica at prices well below market rates, then resold the power at prevailing market prices, pocketing enormous margins. The state-owned company bore the losses while private intermediaries captured the value.
The parties involved are on the one hand, Hidroelectrica SA, the largest state-owned energy producer, and 10 energy traders/eligible consumers who have concluded long-term electricity sale purchase agreements from 2004 to 2018. Most of the respective PPAs have already been annulled in the context of insolvency procedures of Hidroelectrica SA.
If we deciphered correctly the press release, the main reproach brought by the authority is that Hidroelectrica offered electricity at low prices to the energy smart guys and locked 42-60% of the electricity on the competitive market for a period of 10-14 years thus depriving others of access to such a cheap source of energy.
This is just one of the corruption cases surrounding the state-owned power producer Hidroelectrica, one of the most valuable companies in Romania. Indeed, one businessman admitted that he intermediated a bribe from another businessman to Elena Udrea, a former minister of regional development and tourism, in 2011. The businessman promised to offer Udrea USD 5 million so that the former minister would help him renew the long-term contracts between his energy trading companies and state-owned power producer Hidroelectrica.
By 2011, the damage was becoming impossible to ignore. Hidroelectrica's gross profit dropped to 39.6 million lei in 2011 from 390.3 million lei a year earlier. For a company controlling nearly a third of Romania's electricity generation, these were shockingly thin margins.
IV. The 2012 Insolvency: Crisis as Catalyst
The Breaking Point
On June 26, 2012, Hidroelectrica made an announcement that shocked Romania's business community: the country's largest electricity producer was entering insolvency. It first became insolvent in 2012 after losing $1.4 billion over six years from contracts under which it sold the bulk of its output below market prices. It underwent restructuring, canceled those contracts and posted record high profits.
The company decided to enter insolvency in order to reorganize its activity, after financial problems due to large-scale investments which had a reduced energy component, harmful electricity purchase contracts concluded with other producers, losses from the sale of energy on the regulated market and exaggerated costs of maintenance and repair of hydropower plant equipment.
Romanian state-owned power producer was first forced into insolvency in 2012 by a severe drought, and a string of contracts under which it sold the bulk of its output below market prices, losing USD 1.4 billion over six years.
„In 2012 am preluat cea mai datornică companie din România, cu o datorie de un miliard de euro, o pierdere de 170 milioane de euro, o trezorerie negativă şi cu peste 500 de contracte împovărătoare, pentru că la Hidroelectrica nu au fost zece „băieţi deştepţi", ci 500. În primele luni am identificat 497 de contracte de prestaţii fictive şi achziţii de produse de proastă calitate." ("In 2012 I took over the most indebted company in Romania, with a debt of one billion euros, a loss of 170 million euros, negative cash flow and over 500 onerous contracts, because at Hidroelectrica there weren't ten 'smart guys,' but 500. In the first months I identified 497 fictitious service contracts and purchases of poor quality products.")
In 2012, Hidroelectrica era cea mai indatorata companie. In tabelul creantelor au fost recunoscute datorii de 4,3 miliarde de lei, valoare-record pentru un pasiv al unei companii. Hidroelectrica acumulase pierderi de 170 de milioane de euro in anii 2011 – 2012 si avea un minus in trezorerie de 763 de milioane de lei. ("In 2012, Hidroelectrica was the most indebted company. The creditor table recognized debts of 4.3 billion lei, a record value for a company's liabilities. Hidroelectrica had accumulated losses of 170 million euros in 2011-2012 and had a cash deficit of 763 million lei.")
The Restructuring Process
Hidroelectrica recorded a profit of around EUR 109 million (RON 481 million) in the first half of 2013, compared to a loss of RON 202 million reported in the same period in 2012, according to the company. The energy producer had a turnover of around EUR 383 million (RON 1.6 billion) in the first six months of this year, up 33 percent over the same period in 2012.
Local insolvency house Euro Insol was appointed Hidroelectrica's administrator, led by Remus Borza. According to information in the media, Borza's Euro Insol was to receive a EUR 2.2 million fee for steering the state – owned company out of insolvency.
The restructuring involved painful cuts. State-owned Romanian hydro power producer Hidroelectrica announced the dismissal of 650 employees by the end of 2013. On 21 May the company announced that the first 304 employees had been laid off. Hidroelectrica found itself in a judicial insolvency process and had approximately 4,800 employees.
Hidroelectrica began insolvency proceedings on 26 June 2012, and these ended on 26 June 2013. However, the resolution proved temporary. As of 25 February 2014, Hidroelectrica again began insolvency proceedings.
The company exited insolvency in 2013, after undergoing restructuring and cancelling the deals. But contract holders challenged their cancellation and a court ruling tipped the firm back into insolvency in early 2014, where it remains pending final court verdicts.
Hidroelectrica s-a aflat in insolventa din februarie 2014, pentru a doua oara. Compania a mai fost anterior in procedura de reorganizare judiciara in perioada iunie 2012 – iunie 2013. ("Hidroelectrica was in insolvency from February 2014, for the second time. The company had previously been in judicial reorganization between June 2012 – June 2013.")
Canceling the Corrupt Contracts
The most critical action during insolvency was breaking the toxic contracts.
Cea mai importanta masura din perioada insolventei a fost rezilierea celor 11 contracte bilaterale incheiate direct cu mai multi traderi de energie si consumatori finali, asa-numitii baieti destepti: Energy Holding, Alpiq Romindustries, Alpiq Romenergie, Energy Financing Team, Alro Slatina, ArcelorMittal Galati, Electromagnetica, Electrocarbon, Euro-Pec, Elsid, Luxten. ("The most important measure during the insolvency was the termination of the 11 bilateral contracts concluded directly with several energy traders and final consumers, the so-called smart guys: Energy Holding, Alpiq Romindustries, Alpiq Romenergie, Energy Financing Team, Alro Slatina, ArcelorMittal Galati, Electromagnetica, Electrocarbon, Euro-Pec, Elsid, Luxten.")
The long-term bilateral contracts led to damages of over 1.1 billion for Hidroelectrica, the report of the trustee regarding the causes of insolvency determined.
The legal services offered by his law firm to the insolvency company concerned canceling energy contracts with the so called 'smart guys', who bought cheap energy from the state, to re-sell it at much higher prices.
Astăzi, după patru ani de transformare profundă, de optimizare a costurilor, de tăiat în carne vie, vorbim de cea mai profitabilă companie din România. Astăzi Hidroelectrica nu mai datorează un leu nimănui. E o performanţă să plăteşti aproape un miliard de euro din forţe proprii. ("Today, after four years of profound transformation, cost optimization, cutting to the bone, we are talking about the most profitable company in Romania. Today Hidroelectrica doesn't owe a single leu to anyone. It is an achievement to pay almost one billion euros from your own resources.")
In 2012, Hidroelectrica went into insolvency and canceled all those contracts, to become one of the most profitable companies in Romania.
V. The Turnaround: From Insolvency to IPO Candidate (2014-2022)
Record Profits Emerge
Immediately after the announcement, Fondul Proprietatea greeted the company's termination of insolvency and called for its rapid listing. The decision is not final, but it is enforceable, Remus Borza, the trustee of Hidroelectrica. "We want to congratulate Remus Borza trustee of Hidroelectrica for the remarkable results achieved in the last four years and for the dedication, commitment and contribution to the company's restructuring. Out of a company with losses, Hidroelectrica was turned into a highly profitable, efficient and competitive."
The Ministry of Energy has expressed its satisfaction for the company emerging out of insolvency: "We welcome the court's decision on the conditions being met for ending insolvency period of Hidroelectrica, one of the most important companies in the energy industry. It was a complex process of restructuring that has made Hidroelectrica a pillar of the National Energy System, a profitable company with real aspirations to become a regional leader in this sector".
The company ended 2014 with the highest turnover in its history and with the highest profit ever recorded. Thus, in 2016 Hidroelectrica occupied the first place in the Top 100 most valuable companies in Romania, for the first time.
Leadership Transition
Numele lui Bogdan-Nicolae Badea, numit CEO interimar al Hidroelectrica în seara de 19 septembrie, a fost legat de transformarea şi consolidarea Hidroelectrica în ultimul deceniu. Inginer de profesie, cu un master în diplomaţie de apărare pe tema „Globalizarea, integrarea europeană şi securitatea energetică a României", el a preluat funcţia de preşedinte al directoratului, echivalent cu poziţia de CEO, în anul 2017. Reconfirmat în funcţie în 2019, pentru un mandat de patru ani, Bogdan Badea a condus compania până în noiembrie 2023. Mandatul său a coincis cu o perioadă în care Hidroelectrica a atins performanţe financiare istorice: profituri de peste 4 miliarde de lei în 2022 şi de 6,3 miliarde de lei în 2023, cel mai ridicat nivel înregistrat vreodată de companie. ("The name of Bogdan-Nicolae Badea, appointed interim CEO of Hidroelectrica on the evening of September 19, has been linked to the transformation and consolidation of Hidroelectrica over the last decade. An engineer by profession, with a master's degree in defense diplomacy on 'Globalization, European integration and Romania's energy security,' he took the position of chairman of the board, equivalent to the CEO position, in 2017. Reconfirmed in office in 2019, for a four-year term, Bogdan Badea led the company until November 2023. His mandate coincided with a period in which Hidroelectrica achieved historic financial performance: profits of over 4 billion lei in 2022 and 6.3 billion lei in 2023, the highest level ever recorded by the company.")
Absolvent de inginerie al Universităţii Tehnice de Construcţii Bucureşti, Bogdan Badea ocupă din iulie 2017 funcţia de preşedinte al directoratului Hidroelectrica. Înainte de a deveni CEO al Hidroelectrica, Bogdan Badea a coordonat între 2016 şi 2017 activitatea de management de proiect din cadrul societăţii. ("A graduate in engineering from the Technical University of Civil Engineering Bucharest, Bogdan Badea has held the position of chairman of the board of Hidroelectrica since July 2017. Before becoming CEO of Hidroelectrica, Bogdan Badea coordinated project management activities within the company between 2016 and 2017.")
Pre-IPO Financial Performance
The financial trajectory in the years before the IPO demonstrated the company's transformation. In the years ended at 31 December 2022, 2021 and 2020, Hidroelectrica generated consolidated revenues in the amount of 9.45 billion RON, 6.49 billion RON and 3.84 billion RON respectively. In the same period, the company reported annual profits of 4.46 billion RON, 3.12 billion RON and 1.56 billion RON respectively.
Hidroelectrica was in the top of the most valuable Romanian companies in 2022, after seeing a doubling of its value in less than a year, hitting EUR 12.4 billion.
Un moment de cotitură pentru companie a fost listarea la Bursa de Valori Bucureşti, în iulie 2023, cea mai mare ofertă publică iniţială din Europa acelui an. Procesul a plasat Hidroelectrica în liga marilor emitenţi regionali şi a confirmat statutul său de „perlă" a economiei româneşti. ("A turning point for the company was the listing on the Bucharest Stock Exchange, in July 2023, the largest initial public offering in Europe that year. The process placed Hidroelectrica in the league of major regional issuers and confirmed its status as the 'pearl' of the Romanian economy.")
VI. The IPO: Europe's Biggest Listing of 2023
The Offering Structure
Hidroelectrica (H2O), the leader in electricity production and the main provider of technological services needed in the National Energy System, successfully concluded the largest initial public offering (IPO) ever made on the Bucharest Stock Exchange (BVB), in an operation that attracted a total of RON 9.28 billion (EUR 1.87 billion, USD 2.04 billion) for 89.7 million shares representing 19.94% of the total number of shares.
The Initial Public Offering (IPO) unfolded on the Bucharest Stock Exchange (BVB) through which Fondul Proprietatea sold its entire 19.94% stake in Hidroelectrica shares.
Fondul Proprietatea, managed by US-based Franklin Templeton, has raised RON9.3 billion (EUR1.9 billion) by entirely selling on the bourse the 20% stake it held in Hidroelectrica, the biggest hydropower producer in the region, in Europe's largest IPO in 2023.
Hidroelectrica was evaluated at between RON 42.3 bln and RON 50.4 bln (EUR 8.5 bln to 10 bln), i.e. between 8.6 times and 10.2 times the net profit registered in the last 12 months (Q2/2022 – Q1/2023), according to the Prospectus.
Hidroelectrica debuted on July 12, 2023, on the BVB's Regulated Market and entered trading under the symbol H2O. The price per share set in the IPO was RON 104 (EUR 21, USD 23.1), which gave the company a capitalization of RON 46.77 billion (EUR 9.45 billion, USD 10.35 billion).
Erste Group, together with Citi, Jefferies and Morgan Stanley, acted as joint global coordinator on the 1.9 billion euro listing of Hidroelectrica.
Unprecedented Retail Investor Demand
The IPO revealed something remarkable about Romania's evolving capital markets culture. During the 8 days of the offer, retail investors placed almost 52,000 subscription orders worth approximately RON 6.3 billion (EUR 1.27 billion, USD 1.39 billion), a record level compared to the orders placed by this investor type in the previous IPOs in Romania. Out of the 89.7 million shares sold, 20% of the shares were allocated to retail investors. For every 100 shares subscribed, retail investors received 32 shares.
"Hidroelectrica's IPO achieved a performance that was difficult for analysts to predict: it moved 2% of the total types of deposits, expressed in all types of currencies, that the population held in banks after the total subscriptions on the retail tranche reached RON 6.3 billion. This indicator shows what potential the capital market has to attract from the savings of the population in case of significant offers."
The small investors that placed their money to buy Hidroelectrica shares (BVB: H2O) were eventually allotted a 20% portion of the total number of shares sold by Fondul Proprietatea (BVB: FP), up from 15% from a smaller total IPO initially announced. The IPO managers, with FP's consent, used the entire amount of 11.7 million shares to increase the size of the offering from 78 million shares to 89.7 million shares. This resulted in 53% more shares for small investors (17.9 million) and 8.2% more shares for institutional investors (71.8 million) compared to the initial distribution. Small investors will thus get 32 shares for every 100 shares subscribed, a pro-rata allocation 53% larger than estimated before the release of the IPO outcome.
An individual investor contributed an average of RON 35,000 (EUR 7,000) in the share listing offer through which Fondul Proprietatea sold its 20% stake in the electricity producer Hidroelectrica, according to the calculation of Ziarul Financiar. But the average reflects both orders with a minimum threshold of 50 shares worth RON 5,200 and huge orders of several hundred thousand shares.
Market Impact
The number of investors in the Romanian capital market continued to grow and reached almost 160,000 investors at the end of the first semester of 2023. By comparison, in 2019 there were almost 54,000 investors. This represents a 200% increase over the past five years.
Hidroelectrica became the largest Romanian company listed on BVB, representing about 22% of the total capitalization of the stock exchange based on the level posted at the end of the first half of the year. The company was included in the BET index and other BVB indices since the first day of trading.
During mid-July already, Hidroelectrica was included in the FTSE Global All-World Index, FTSE Global Large Cap Index, and FTSE Emerging Index. Secondly, MSCI announced that also during July 2023, Hidroelectrica's shares would be included in the MSCI Frontier and MSCI Romania indices. Finally, Romania should become an emerging market with Hidroelectrica being the tipping point needed for Romania to be classified as "Emerging" by MSCI.
After the listing, Hidroelectrica immediately became the largest company listed on the Bucharest Stock Exchange with a market cap of >EUR 10bn. Let us just briefly remind you that this kind of strategy for development has still not been developed and implemented in Croatia, while Slovenia implemented it recently. Back to the topic – Hidroelectrica is the 7th Romanian company included in the FTSE Global All-World Index, FTSE Global Large Cap Index, and FTSE Emerging Index.
VII. The Modern Hidroelectrica: Operations & Strategy (2023-Present)
Current Operations
S.P.E.E.H. Hidroelectrica S.A. produces and supplies hydro, wind, and energy electricity in Romania. It operates 187 hydropower plants and microhydropower plants; 5 pumping stations with an installed capacity of 91.5 MW; and 36 oil turbines with an installed capacity of 108 MW. The company is based in Bucharest, Romania.
SPEEH Hidroelectrica SA is the electricity producer in Romania in terms of electricity produced, a large hydro player in Europe and the main provider of ancillary services in Romania, playing an instrumental role in the security of the NES. The Company is the only producer of electricity from a hydro source that operates dispatchable production units in Romania.
In 2024, according to the latest ANRE report, Hidroelectrica remained the number one electricity supplier to end-users on the Romanian competitive market, registering a market share of 14.66% at the end of December 2024.
Hidroelectrica states that, with a total of 188 power plants and a hydropower capacity of 6,3 GW, as well as a wind farm at Crucea (108 MW), Hidroelectrica ensures a significant share of Romania's renewable energy production and provides essential technological services for the National Energy System.
The company has 7 hydroelectric branches and one branch that manages the Crucea wind farm, the Iron Gates (Portile de Fier) and Valcea being the most important for the Group in terms of their capacity to produce electricity and their share in the Group's total energy production.
Diversification Strategy: Wind and Solar
Against the background of recent developments in the renewable energy production sector (wind and photovoltaic) at the European and global level, Hidroelectrica maintains its prudent development strategy in the field of renewable energy.
The utility plans to add another 2 GW of solar, 1 GW of wind and 300 MW of hydropower capacity in the coming years.
Bogdan Badea, the company's general manager, said Hidroelectrica is in various due diligence phases for wind and solar photovoltaic projects with a planned capacity of 2 GW in total.
18 August 2025 - Romania's hydropower plant operator Hidroelectrica plans to take over a 250 MW wind project and 270 MW of solar projects.
Hidroelectrica's plan is to acquire the companies that own the rights, permits, land, and other assets related to the renewable energy projects under development, according to a report by Profit.ro. The plan is to acquire the companies developing the wind and solar projects.
Prime Batteries Technology and Enevo Group won Hidroelectrica's tender for the installation of a battery energy storage system of 36 MW. Hidroelectrica launched a small battery first, only to publish a tender four months ago for contractors for a system of 36 MW in operating power and 72 MWh in capacity. The news is that the utility signed a EUR 16 million deal with Prime Batteries Technology and Enevo Group, the consortium with the best bid.
Partnership with Masdar
Romania-based Hidroelectrica and UAE-based Masdar are setting up a joint venture (JV) to collaborate on the implementation of floating solar projects, among other things, with plans to explore opportunities in other technologies such as offshore wind.
The parties plan to work together on the implementation of onshore and floating photovoltaic solar projects, as well as energy storage systems in batteries, under technological exclusivity, for a period of three years. The collaboration may be extended for another three years if the joint venture meets certain conditions during the initial three-year period. These conditions include reaching cumulative investments of 2,000 MW in greenfield or brownfield projects.
Additionally, the joint venture plans to explore business opportunities in other technologies, such as onshore and offshore wind, or geographical areas, outside Romania for example, with decisions made case by case.
2024-2025 Performance: The Hydrology Challenge
The company's performance in 2024 and 2025 illustrated hydropower's fundamental vulnerability to weather conditions.
Electric services group Hidroelectrica, the largest company on the Bucharest Stock Exchange (BVB), reported a net profit of RON 4.1 billion in 2024, down 35%, and revenues of RON 9.1 billion, 25% lower than in 2023, according to financial data published on Wednesday, February 26. Hidroelectrica said its results were influenced by the decline in electricity production, the amount of electricity sold, and the decrease in electricity sale prices, which implicitly led to a drop in energy sales revenues.
"The results obtained in 2024 reflect the expectations set in the approved budget for the year 2024, being slightly lower than expected due to hydrology below expectations. Electricity production decreased by 22%," states the report of the electricity producer.
The company's EBITDA decreased by 31% to 5.5 billion RON, and the operating margin was 59%, down 15%. The energy produced and sold (net production) registered a decline of approximately 22% in 2024 compared to 2023.
The net profit reported by Hidroelectrica (BVB: H2O) contracted by 35% y/y to RON 4.12 billion (EUR 800 million) in 2024, influenced by less favorable hydrological conditions. State-controlled hydropower group Hidroelectrica expects its net profit to decrease by 13% y/y to RON 3.55 billion (EUR 700 million) in 2025 despite the expected 2% y/y increase in revenues to RON 10.3 billion.
The first nine months of 2025 confirmed continuing challenges:
The company's net profit fell by 34% y/y, to RON 2.3 billion, and earnings per share were RON 5.14, from RON 7.85 in the first nine months of 2024. Revenues totaled RON 6.7 billion, 7% less than in the same period of the previous year.
For Q3/2025, Hidroelectrica reported a net electricity production of 2,405 GWh, 13% below the level in Q3 2024, while energy sold rose by 13%, to 3,388 GWh, as a result of increased energy purchases from the market, which increased by 293%, to 983 GWh.
The operating margin was 39%, and the net margin was 35%, which reflects the "shrinking of the traditional competitive advantage resulting from the low cost of own hydro production," according to Hidroelectrica data quoted by Ziarul Financiar.
Hidroelectrica now sees its revenues 4% smaller and its expenditures 5% larger – resulting in a 15% lower net profit, namely RON 3 billion (approximately EUR 600 million). Hidroelectrica (BVB: H2O), the largest electricity producer in Romania, has revised its revenue and expenditure budget for this year, envisaging a 15% smaller net profit due to the drought that forced it to increase the volumes of energy purchased from the market for its customers. Thus, compared to the initial budget planning, Hidroelectrica now sees its revenues 4% smaller and its expenditures 5% larger – resulting in a 15% lower net profit, namely RON 3 billion (approximately EUR 600 million).
Net electricity production fell by 38% y/y in Q1, to 2,656 GWh, while total electricity sold fell by 36% to 2,843 GWh, Hidroelectrica said in its quarterly operational update. Purchases increased by 10% to 196 GWh.
Dividend Policy
Hidroelectrica (H2O), cel mai mare producător de energie electrică din România, îşi va menţine angajamentul faţă de acţionari în privinţa politicii de acordare a dividendelor astfel că „minimum 90% din profitul net va fi distribuit şi de această dată fără a influenţa capacitatea companiei de a-şi finanţa investiţiile." ("Hidroelectrica, the largest electricity producer in Romania, will maintain its commitment to shareholders regarding the dividend policy so that 'at least 90% of the net profit will be distributed this time as well without influencing the company's ability to finance its investments.'")
The Romanian hydropower group Hidroelectrica (BVB: H2O) called shareholders on April 29 to approve the distribution of RON 4 billion as dividends, according to a note to investors. The proposed dividend accounts for almost the entire RON 4.1 billion net profit achieved last year. The gross dividend per share is to be set at RON 8.99, down from RON 13.99 last year. The company's net profit plunged 35% y/y in 2024 amid adverse weather. According to calculations based on the current trading price of the shares, the dividend yield would be 7.3%, compared to 11.4% last year.
Despite recent performance challenges, Hidroelectrica confirmed it will distribute over €800 million in dividends, drawn from its 2024 net profit of €824 million. This represents a gross dividend yield of 7.4%, based on the closing share price as of April 29.
The company paid, out of its 2024 profit, a dividend resulting in a dividend yield of 7.4%.
Leadership Transition in 2025
Hidroelectrica announces that the Supervisory Board decided, as a result of the vacancies of the two positions within the Management Board and in order to ensure the stability of the Company's governance and operations, to assign the CEO responsibilities to Bogdan Badea, Member of the Management Board, and the CFO responsibilities to Radu Constantin, Member of the Management Board. Following the meeting held on 19 September, the Supervisory Board, together with Karoly Borbely – Chairman of the Management Board/CEO, and Marian Fetița – Member of the Management Board/CFO, agreed by mutual consent to terminate their mandate contracts, effective as of 19 September 2025.
Consiliul de Supraveghere al Hidroelectrica a decis, în cele din urmă, ceea ce Comisia Europeană a cerut insistent: încheierea amiabilă a mandatelor directorului general Karoly Borbely și a directorului financiar Marian Fetița. Decizia vine într-un context tensionat, în care Bruxelles-ul avertizează că netransparența și numirile controversate din conducerea marilor companii energetice românești pun în pericol zeci de milioane de euro din Planul Național de Redresare și Reziliență (PNRR). ("The Supervisory Board of Hidroelectrica finally decided what the European Commission had been insistently requesting: the amicable termination of the mandates of CEO Karoly Borbely and CFO Marian Fetița. The decision comes in a tense context, where Brussels warns that the lack of transparency and controversial appointments in the leadership of major Romanian energy companies endanger tens of millions of euros from the National Recovery and Resilience Plan.")
Din noiembrie 2023, după numirea în funcţie a lui Károly Borbély, Bogdan Badea a preluat funcţia de Chief Investment Officer, coordonând strategia de investiţii a companiei. Parcursul său profesional a îmbinat experienţa în administraţia publică – a fost secretar de stat în Ministerul Economiei şi Ministerul Energiei – cu rolurile de management din companii energetice. La Hidroelectrica, între 2017 şi 2023, a fost omul care a condus tranziţia companiei de la etapa post-insolvenţă la cea a consolidării ca lider regional în energie verde. ("From November 2023, after the appointment of Károly Borbély, Bogdan Badea took over the position of Chief Investment Officer, coordinating the company's investment strategy. His professional career combined experience in public administration – he was a state secretary in the Ministry of Economy and the Ministry of Energy – with management roles in energy companies. At Hidroelectrica, between 2017 and 2023, he was the man who led the company's transition from the post-insolvency stage to consolidation as a regional leader in green energy.")
Procedura de selecție transparenta și competitiva pentru poziția de Director General (CEO) la Hidroelectrica s-a încheiat fără propunere de numire a candidaților selectați pe lista scurtă. Astfel, țînând cont de contextul operațional și strategic actual al companiei și de complexitatea mandatului, în cadrul ședinței din data de 26 noiembrie 2025, Consiliul de Supraveghere a constatat că niciun candidat nu se aliniază pe deplin cerințelor asociate funcției de CEO în acest moment. ("The transparent and competitive selection procedure for the position of CEO at Hidroelectrica has ended without a proposal for the appointment of the shortlisted candidates. Thus, taking into account the current operational and strategic context of the company and the complexity of the mandate, at the meeting on November 26, 2025, the Supervisory Board found that no candidate fully meets the requirements associated with the CEO position at this moment.")
VIII. Competitive Landscape & Industry Position
Romania's Energy Market
According to a recent report published on 11 September 2024 by the European Commission (EC), Romania has an energy mix based on 71% fossil fuel, which places the country above the level of the EU average (69%). However, when it comes to electricity mix, renewables are leading with a share of 42.4%, while fossil fuels have a 37.6% quota and nuclear accounts for 19.9%.
One of the key elements of the Romanian energy market that aligns with EU policies is the diversification of energy sources in order to avoid reliance on imports and to reach energy independence, mostly considering the complex conflict in the nearby region. Since Romania has considerable wind (onshore and offshore) and solar resources as compared to other countries in south-eastern Europe, focusing on increasing the share of renewable electricity seems to be the right approach.
Romania is seen as a fast-growing hydropower market in Southeast Europe. According to the International Renewable Energy Agency (IRENA) Renewable Energy Statistics 2024, the total capacity of hydropower energy sources was 6,666 MW.
CO2-free sources represented 69% of the power mix in 2024. Romania targets 38% of renewables in its final energy consumption in 2030 and aims to become carbon neutral between 2045 and 2050.
Competitive Dynamics
The Romanian power market is moderately fragmented. Some of the key players in the market are Romelectro SA, SGS SA, Enel SpA, Siemens Gamesa Renewable Energy SA, and Vestas Wind Systems AS.
Most power generation is 100% state-owned. Electrica and PPC (Greek utility) are the two largest electricity distributors.
The competitive landscape is evolving rapidly:
December 2024: OMV Petrom completed the acquisition of a 710 MW solar portfolio from Jantzen Energy for an undisclosed amount, expanding renewable capacity to support petrochemical operations and corporate sustainability targets across Romania. November 2024: Huadian Romania acquired the 134 MW Studina solar project from a local developer, marking the Chinese state-owned enterprise's entry into the Romanian renewable market with plans for an additional 300 MW by 2026.
Market Development and MSCI Classification
In a significant recognition of Romania's financial market progress, MSCI, one of the major global index providers, has upgraded Romania's capital market classification to an Advanced Frontier Market. The decision follows MSCI's 2025 Global Market Accessibility Review published earlier this month and represents an important milestone on Romania's path toward achieving Emerging Market status. The reclassification places Romania alongside Slovenia, Estonia, Lithuania, and Latvia in the newly created Advanced Frontier Markets category. "This subcategory identifies Frontier Markets that demonstrate market accessibility characteristics closely aligned with those of Developed Markets but remain classified as Frontier Markets due to their size and liquidity constraints," states the MSCI report. Romanian companies are expected to hold the largest share within MSCI's Advanced Frontier Market indices, underscoring the country's prominence in this subset of markets.
Under MSCI's new rules, any country aiming for EM status must now have at least three companies that consistently meet three quantitative criteria: a market capitalization of at least USD 2.964 billion, a free float of at least USD 1.482 billion, and an annual traded value ratio (ATVR) of at least 15%. These conditions must be met for eight consecutive semi-annual reviews, effectively locking in a two-year minimum waiting period even under ideal conditions. The requirement for consistency, not just reaching the metrics once, but maintaining them over time, makes the new framework far more precise and demanding than in the past. As of mid-2025, Romania has only one company, Hidroelectrica, that meets all three MSCI criteria.
IX. Bull and Bear Case Analysis
Bull Case
1. Unmatched Clean Energy Profile While there are many pure clean energy producers, none are as large as Hidroelectrica (USD 10.3 billion). Of the larger European utilities companies, none offer 100% clean energy making Hidroelectrica one-of-a-kind. In an era of intensifying ESG scrutiny, this profile commands a scarcity premium.
2. Low-Cost Producer Advantage Hydropower's near-zero marginal cost of production creates structural competitive advantage. When generation normalizes, the spread between market prices and Hidroelectrica's production cost flows directly to profit.
3. Attractive Dividend Yield Hidroelectrica commits to distribute "minimum 90% of net profit" as dividends, providing income-oriented investors with yields exceeding 7% even in challenging years. This payout ratio is sustainable given the company's minimal debt and strong cash generation.
4. Strategic Diversification The expansion into wind, solar, and battery storage should reduce weather dependency over time. The utility plans to add another 2 GW of solar, 1 GW of wind and 300 MW of hydropower capacity in the coming years.
5. Romania's Capital Market Development In terms of investment flows, Romania's inclusion in the MSCI Emerging Markets Index would result in a transition from being a medium fish in a small pond to a small fish in a big pond. Assuming Hidroelectrica is included, Romania will move from having a sizable projected 12.2% weight in the MSCI Frontier Markets Index to a 0.10 – 0.15% estimated weight in the much larger MSCI Emerging Markets Index. Putting the picture together, the net passive inflows into Romania are projected to be USD 182 million.
6. Grid Stability Services The Company is the only producer of electricity from a hydro source that operates dispatchable production units in Romania, providing ancillary services that become more valuable as intermittent renewables grow.
Bear Case
1. Weather Dependency The 2024-2025 experience demonstrated hydropower's fundamental vulnerability. Electricity production decreased by 22% due to drought conditions. Climate change may increase such variability over time.
2. State Ownership Overhang With 80.06% government ownership, Hidroelectrica remains subject to political interference. The recent leadership turmoil involving the European Commission and PNRR funds illustrates ongoing governance risks.
3. Declining Competitive Advantage The operating margin was 39%, and the net margin was 35%, which reflects the "shrinking of the traditional competitive advantage resulting from the low cost of own hydro production." As electricity prices normalize post-energy crisis, the spread over hydro production costs compresses.
4. Limited Float and Liquidity As of mid-2025, Romania has only one company, Hidroelectrica, that meets all three MSCI criteria, and the path to full emerging market status remains uncertain. This limits index-driven passive demand.
5. Regulatory Risk Romania's energy market remains subject to price caps, windfall taxes, and regulatory interventions. Romania has extended price caps that enabled to limit the growth in electricity and gas prices, but prices remain much higher than their pre-crisis levels.
6. Expansion Execution Risk Diversification into wind and solar requires capabilities different from hydropower operations. Acquisition integration and greenfield development carry execution risk.
Porter's Five Forces Analysis
Supplier Power: LOW Water flows freely from rivers; the primary "supplier" is nature itself. Equipment suppliers for maintenance face competition.
Buyer Power: MODERATE Large industrial customers have bargaining power, but residential customers are fragmented. Hidroelectrica's supply business growing to 613,767 consumption sites provides diversification.
Threat of New Entrants: LOW to MODERATE New hydropower development faces significant permitting and environmental hurdles. However, solar and wind projects offer lower barriers, with new entrants competing for renewable capacity.
Threat of Substitutes: INCREASING Solar and wind power are increasingly cost-competitive. However, hydropower offers dispatchability and storage capability (via pumped storage) that intermittent sources cannot match.
Competitive Rivalry: MODERATE The Romanian electricity generation market is moderately fragmented, with Hidroelectrica dominant in hydro but facing growing competition from thermal and other renewable producers.
Hamilton Helmer's 7 Powers Framework
Scale Economies: PRESENT but LIMITED Hydropower plants have high fixed costs and low marginal costs, creating scale benefits. However, geography constrains further expansion of the core hydro business.
Network Effects: ABSENT Electricity is a commodity; network effects don't apply.
Counter-Positioning: POTENTIALLY PRESENT Hidroelectrica's 100% clean energy profile may position it advantageously if carbon pricing intensifies. Incumbent thermal generators cannot easily match this without abandoning existing assets.
Switching Costs: LOW Electricity supply is highly commoditized, limiting customer lock-in.
Branding: LIMITED While the company name carries recognition in Romania, electricity is not a branded product.
Cornered Resource: PRESENT The hydropower capacity on Romania's major rivers represents a cornered resource—no competitor can replicate the Iron Gates or other major facilities.
Process Power: DEVELOPING Decades of operating experience provide operational know-how, particularly in managing complex systems like Iron Gates. Whether this extends to wind/solar operations remains uncertain.
X. Key Metrics and Investment Considerations
Critical KPIs to Track
1. Electricity Production Volume (GWh) This single metric captures weather impact, operational efficiency, and capacity utilization. Given hydropower's low marginal cost, production volume directly drives profitability. Watch for normalization after the drought-affected 2024-2025 period.
2. Average Selling Price (RON/MWh) Tracks the company's ability to capture value in competitive markets. Compare against Romanian wholesale electricity prices to assess trading and hedging effectiveness.
Financial Snapshot
| Metric | 2023 | 2024 | 9M 2025 |
|---|---|---|---|
| Revenue (RON bn) | 12.2 | 9.1 | 6.7 |
| Net Profit (RON bn) | 6.3 | 4.1 | 2.3 |
| Net Margin | ~52% | ~45% | ~35% |
| Dividend/Share (RON) | 13.99 | 8.99 | - |
| Dividend Yield | ~11% | ~7.3% | - |
Valuation Context
The company's market capitalisation is RON 55 billion (EUR 11 billion) after the price of its shares dropped by 2.6% y/y.
Hidroelectrica is valued by investors at RON 54.6 billion and is 80% controlled by the Romanian state through the Ministry of Energy.
Material Risks and Regulatory Matters
PNRR Compliance: The European Commission's concerns about corporate governance at Romanian state companies, including Hidroelectrica, represent a material overhang. Brussels warns that lack of transparency and controversial appointments in the leadership of major Romanian energy companies endanger tens of millions of euros from the National Recovery and Resilience Plan.
Pending CEO Selection: The Supervisory Board found that no candidate fully meets the requirements associated with the CEO position at this moment. Leadership uncertainty creates execution risk for the company's expansion strategy.
Climate Risk: Increasing weather variability poses long-term risks to hydropower production consistency. The company's diversification into wind and solar represents a partial hedge.
XI. Conclusion: The Path Forward
Hidroelectrica's journey from communist megaproject to European ESG darling encapsulates the opportunities and risks of investing in transforming emerging markets. The company's 2012 insolvency proved to be not a death knell but a cleansing fire, enabling the cancellation of corrupt contracts and the emergence of a genuinely profitable enterprise.
The 2023 IPO validated this transformation, drawing record demand from both Romanian retail investors and international institutions. Yet the subsequent two years have tested the bull thesis, as drought conditions revealed the fundamental weather dependency inherent in hydropower.
For long-term fundamental investors, Hidroelectrica offers a unique combination: Europe's largest pure-play renewable energy company, operating essential infrastructure in an EU member state pursuing ambitious energy transition goals, with generous dividend distributions and optionality around further MSCI index inclusion.
The risks are equally distinctive: state ownership creating governance uncertainty, weather variability affecting year-to-year results, and the ongoing challenge of executing diversification into new technologies while maintaining operational excellence in the core hydropower business.
The next chapter of the Hidroelectrica story will be written by hydrology, leadership stability, and execution on the renewable expansion strategy. Investors who understand the historical context—how crisis catalyzed transformation before—may be better positioned to evaluate whether the current challenges represent temporary headwinds or structural concerns.
What remains beyond dispute is that Romania's "pearl" has earned its place as a case study in how emerging market infrastructure companies can transition from state-owned underperformers to world-class publicly traded enterprises. Whether the stock price adequately reflects this transformation, and the risks that accompany it, is the question each investor must answer for themselves.
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