THE CHANGE of drivers at the wheel of government in July re-opened the issue of privatisation in Slovakia. Compared to the negative attitude of former prime minister Robert Fico, the Iveta Radičová government wants to sell stakes held by the state in selected companies. But in its four-year programme it has excluded privatisation of what it calls strategic companies.
Even though any final decision has yet to be made, analysts, experts and politicians are already calling for the proceeds from privatisation to be used to patch up holes in the old-age pension saving scheme and in the general government budget.
Many analysts support the privatisation plans of the Radičová government.
“Basically there is no reason for the state to own any stakes in companies whose main activity is the sale of services which can be secured by the private sphere,” Juraj Karpiš, analyst with the Institute of Economic and Social Studies (INESS) told The Slovak Spectator. “Making business in these segments [heating, telecommunications, transport, etc.] does not belong among the basic functions of the state.”
“Moreover, the state is an ineffective administrator of companies with regards to discordance in the motivations of taxpayers and state officials installed into managerial positions. This is why ineffective handling of public funds, cronyism and corruption occurs more often in state companies,” Karpiš added.
The analyst believes that privatisation would, on the one hand, mean an end to ineffective management in these companies and, on the other hand, privatisation proceeds would cover part of the state’s expenses.
“This means that on constant public expenditures, we will have to pay less in taxes and levies,” said Karpiš. “Thus we welcome privatisation.”
After several waves of privatisation following the fall of the communist regime, the state still holds stakes in companies operating in transport, energy, heating, forestry, health care, postal services and other segments. It holds them either via the National Property Fund (FNM) state privatisation agency or via individual ministries responsible for various sectors of the economy. In the recent past, Bratislava Airport and the railway companies have been most frequently cited as potential targets for privatisation.
Both the FNM and the Economy Ministry have already submitted reports about the operation of companies in which they hold stakes. Now the reports are awaiting discussion by the Slovak cabinet.
Unlike the FNM, the ministry does not directly propose any privatisation.
The FNM proposes to sell its stakes in Slovak Telekom, heating plants as well in regional bus companies. Based on current nominal values, this could raise hundreds of millions of euros. The FNM sees the sale of the stakes as a way to raise money from the sale itself as well as by the removal of the public sector’s influence and thus the acceleration of commercial activities in respective segments, according to the report. The privatisation agency also proposes the sale of the stakes as part of the government’s plans to dissolve the FNM itself.
According to the ministry report, the Ministry of Economy holds 100-percent stakes in two companies: the Nuclear Decommissioning Company (JAVYS) and the crude-oil pipeline operator Transpetrol. It also holds a 34-percent share in Slovak Telekom.
“All the companies report in the long run a positive economic performance and a positive return on capital,” the ministry wrote in its report, as cited by TASR on January 3. “They pay out dividends into the state budget annually, apart from Transpetrol. The companies’ results do not indicate an unambiguous need for their privatisation.”
On the other hand, the FNM proposes to sell the 15-percent stake, with a nominal value of €130 million, that it holds in Slovak Telekom. A majority stake of 51 percent is owned by private operator Deutsche Telekom.
“From the viewpoint of the FNM, the sale of the stake presents the most rational alternative,” the FNM wrote in its submission, recalling the recent liberalisation of the Slovak telecom market and the decreasing market share of the company. “With regards to development on telecommunications markets in general, growth in the value of the stake held by the FNM and the state is improbable. A positive development in profitability and thus also in expected dividends is not probable. The FNM together with the Economy Ministry do not have, as minority shareholders .. any real reach on the heading of the company.”
The ministry agrees with the FNM’s arguments, pointing to the decreasing position of the one-time monopoly operator.
“In case of the sale of the whole stake held by the Slovak shareholder, i.e. the stakes of the ministry and FNM, the Ministry of Economy proposes to sell a portion of it to a strategic investor and a portion via the capital market,” the ministry writes, as quoted by TASR.
According to the SITA newswire, Deutsche Telekom has declined to comment on any privatisation plans for now.
Other stakes for sale
The FNM also proposes to sell its 100-percent stakes in all six local heating plants (in Trnava, Žilina, Košice, Martin, Bratislava and Zvolen). Their aggregate nominal value is around €166.7 million. The FNM argues that the heating companies are not able to cover their operating costs despite the extensive sale of real estate and are forced to draw on outside sources to secure their further existence. The FNM also points to the investments the companies need to remain competitive and meet increasingly tough environmental requirements. The FNM proposes to sell the heating companies in the form of an international tender. Their sale was part of the programme of the 2002-2006 Mikuláš Dzurinda government, but was not carried out due to the early parliamentary election held in 2006.
The FNM also proposes to sell minority stakes in regional bus companies. It holds stakes of between 37.84 percent and 44.01 percent in 17 bus companies, with an aggregate nominal value of around €72.13 million.
Among other companies in which the FNM has stakes it wants to sell is the Bratislava Stock Exchange (BCPB), in which it holds 75.94 percent, the Kúpele Sliač spa (67 percent) and the Polyclinics Tehelná in Bratislava (100 percent).
The FNM has not proposed, for now, the sale of stakes it holds in Letisko MR Štefánika – Airport Bratislava as well as water utility companies.
Based on the applicable legislation, the FNM also leaves it to the Slovak cabinet to decide on the stakes it holds in companies which act as natural monopolies.
These companies include three regional power distributors in which the FNM holds 51-percent stakes, gas utility SPP, in which it holds 51 percent, and Slovak electricity grid operator Slovenská Elektrizačná Prenosová Sústava (SEPS), in which the FNM holds 100 percent.
