On June 21 the Slovak Cabinet provided Paroplynovy Cyklus, a.s., Bratislava (PPC, an energy generation facility) with a state guarantee for a 100 million DEM loan from the European Investment Bank. The ten-year loan bears an interest rate of LIBOR plus 0.15%.
The guarantee brought to a close negotiations on the repayment of a 170 million DEM bridging loan taken by the PPC in 1997 which falls due on July 16.
PPC took the two-year bridging loan for the construction of its Bratislava plant at a rate of LIBOR plus 0.3%, despite the fact that the plant counted on a 10-year return on investments. Power producer Slovenské Elektrárne (SE), which owns a 10% stake in the PPC, provided guarantees for the loan, but is currently suffering from its own financial problems and would have been unable to come up with the outstanding 140 million DEM this July if PPC had been unable to make its payments. This could have meant a cross-default, and SE's creditors could have requested immediate repayment of debts totaling more than $800 million.
The PPC has thus far repaid only 20 million DEM of the bridging loan. A contract for the additional 100 million DEM loan was signed in September last year, but lenders insisted on a guarantee from the Slovak government. The PPC plans to obtain a minimum of 40 million DEM through a strategic investor within nine months, and will pay off the rest of the loan with revenues from energy sales.
The PPC project is suffering from undercapitalization, with share assets of only 600 million crowns and 85% of funds coming from a foreign syndicated loan. The company maintains that the weakening of the Slovak crown in 1998 cost the PPC an additional 420 million crowns.
ZSE, one of three regional power distribution companies in Slovakia, owns a 66% stake in the PPC. Other shareholders are Slovenský Plynárenský Priemysel (SPP-gas distribution company) with a 24% stake, and the SE with 10%.
