Managing partners of Suciu Popa, Miruna Suciu and Luminita Popa, discuss their roles on the establishment of an energy investment fund by KMGI and the government of Romania, and the implications of the deal for Romania's energy sector, with Rajeeb Gurung
Was this deal the first time the firm worked with KMGI?
MS: We have done previous work for KMGI on various different projects since a few years back. So we knew the management and they knew us.
How did the firm win the mandate?
LP: We have quite a strong energy practice and have been advising on a number of deals in the market since we founded Suciu Popa almost three ago. Having this position enabled us to get retained for this mandate.
Did the nature of the project – essentially an agreement between two governments – and the clients involved create any specific challenges?
MS: The nature of the project which, apart from its commercial side, had a component of an agreement virtually between two states, did not particularly create specific difficulties for us. We are very used to working in many different environments, be they public or private, as both of us have done extensive work in the past in many landmark privatisation deals and generally in a significant number of projects involving a strong public or regulatory component.
Were there any unusual or innovative elements to the structure of the deal?
MS: The details of the deal are confidential but, generally speaking, the deal was structured in a way which is very transparent, very ‘fair and balanced’ to use the language used by the parties in the public statements made.
LP: Both parties participate not only in corporate structure of the company but also have the same rights of proposing projects in which the fund will invest in. It’s a very balanced mix in the sense that while the projects will basically be structured around projects which are synergetic with KMGI’s business, it is envisaged that the projects will benefit the energy sector and the entire Romanian economy overall.
What were the most significant challenges you faced when structuring the deal?
MS: I wouldn't say it was an easy deal, of course, primarily due to its size and importance. Nevertheless the parties have strived to achieve a structure which is both balanced and workable, while observing applicable legislation and both parties’ interests.
This fund was created as a result of MOU between KMGI and the Romanian state in 2013. Why did it take so long for the deal to reach completion? Where there any contentious points to the negotiations?
MS: The basis of this deal indeed originated in the MoU signed in 2013 but it wasn’t until a year later that the MoU was approved by the government. Additionally, Romania’s government has changed multiple times since then. At the time of the MOU, we were not on board so we have no visibility of other external reasons, but bear in mind this project was certainly a complex one, as generally the creation of a fund of this magnitude and importance is not an easy task.
LP: I think it is also quite innovative. Talking about structuring and incorporating investment funds with the involvement of the state, one can fairly state that nothing similar to this has been done before in Romania. It’s a first, but we are certainly positive that this model can be used as a precedent to structure future similar projects, as the state needs to promote and develop a number of sectors in need of investment.
In general, what impact do you think the deal will have on the energy sector in Romania? Do you anticipate it will create more mandates for the firm?
MS: We certainly expect that the fund will have a positive impact on the Romanian energy sector. Of course what will be needed is stability on the market in general and in the sector as well. Hopefully Romania won’t see any new crises or political hurdles. The investment period is seven years so, bearing that in mind, probably nobody should expect to see results in one or two years but in the medium term is where one can probably expect to see results.
In respect of other work, we do expect and hope to be able to help the client and the fund to take off, and we do believe there will be certain areas where we can definitely bring added value. Generally speaking the energy sector remains one of the flagships of Suciu Popa, where our proven experience and leadership will most likely continue to bring us at the forefront of future challenging projects.
LP: We do expect the impact of this project to be positive, and not only for the energy market. This sort of joint-venture arrangement can be replicated with this fund as the precedent. It should be a good signal generally for investors doing business in Romania.