* Shares hit 113.4 lei vs IPO price 104

* Europe's biggest IPO so far in 2023

* Energy transition drives interest

* Romanis hopes IPO will boost investor interest

BUCHAREST, July 12 (Reuters) - Shares in majority state-owned Romanian hydro power producer Hidroelectrica rose by around 9% on the Bucharest Stock Exchange on Wednesday in Europe's largest initial public offering (IPO) so far this year.

After a high of 113.4 lei in early trade, shares were up 8.75% at 113.1 lei at around 0815 GMT, above the IPO price of 104 lei that valued the state-owned company at 46.8 billion lei ($10.4 billion).

The placement was many times oversubscribed, with 80% of shares going to institutional investors. Trade volumes reached more than 300 million lei in the first hour, already three times the daily average for the entire bourse so far this year.

Hidroelectrica is among the companies in Europe rushing to list before the summer lull and as bankers hope for a market recovery after a surge in interest rates all but froze the market in 2022.

Romania expects the sale, which had been under discussion for over a decade, to unlock European Union recovery funds and officials hope it will inspire further investor demand in the country.

The government holds 80% in the the country's largest electricity producer, which has a capacity of 6.3 gigawatts from 182 hydroelectric plants.

The IPO floated existing stock held by sole minority shareholder Fondul Proprietatea, a fund managed by U.S. asset manager Franklin Templeton.

"Hidroelectrica's successful listing is expected to boost investment in Romania and raise the profile of the country as an attractive investment destination," Fondul said in a statement.

Bucharest's exchange head said the listing could help to lift it to "emerging market" status, from "frontier" market, in MSCI's indices.

Global index provider FTSE Russell upgraded the Bucharest bourse to "secondary emerging market" from "frontier" status in 2020.

With a stock market capitalisation of roughly $46.2 billion, the Bucharest Stock Exchange ranks among the smallest in central and eastern Europe and needs liquidity, as do private pension funds - some of its largest institutional investors.

The company's emissions-free fleet was a draw as Europe pursues decarbonisation.

As Germany seeks to accelerate its shift from natural gas, hydrogen company Thyssenkrupp Nucera started trading there last week.

Last year, Hidroelectrica's adjusted EBITDA margin hit 64% of revenue, twice the 30% margin reported by Austria's Verbund , one of Europe's largest generators of electricity from hydropower and its closest competitor. (Reporting by Luiza Ilie; Editing by Jason Hovet, Conor Humphries and Barbara Lewis)