Looking to boost its privatisation programme, the government May 24 gave the go-ahead for the privatisation of the state's cash-cow, gas monopoly Slovenský plynárenský priemysel (SPP), asking 100 billion crowns ($2.12 billion) for a 49% stake in the world's second largest gas distributor.
Key points in SPP's transformation plan include the creation of a joint stock company, the separation of the transit, distribution and natural gas trading arms within the accounting of the company, liberalisation of foreign trading of gas, opening of the domestic market and a re-evaluation of the present price tariffs for natural gas.
The high price tag on the stake, announced by Economy Minister Ľubomír Harach, drew immediate reactions from analysts who were divided on whether the figure reflected the true value of the share or a ploy to get interested buyers to bid down.
Dušan Meszáros, an analyst with Commerzbank Capital Markets in Prague, said that the former was more likely to be behind the released figure, and said the price would likely drop in the future.
"Harach threw out a price which, after all, could fall lower," he said.
However, an analyst at Tatra banka, Michal Kustra, said that the asking price was close to the price which would be eventually offered by a bidder. "It [the price] is at the level where it could eventually be [bought]," Kustra said.
Deputy Premier for the Economy Ivan Mikloš refused to comment on the price of the stake quoted by Harach. "It's not reasonable to release any price estimations in advance because it raises certain expectations, which is not helpful," he said.
Despite the fact that no concrete steps on SPP's privatisation are expected to be even presented to the government by the economy and privatisation ministries before mid-June, international gas giants have already shown interest in the stake, including Germany's Ruhrgas, the Italian company SNAM and the French firm Gaz de France.
The main priority for the government in setting firm plans for the sale will be deciding exactly how the stake will be sold. The three options under consideration include placing shares on the stock exchange, selling the stake directly to a single investor or consortium of investors, or a combination of both.
Mikloš said that the placing of shares on the capital market was a distinct possibility. "When the stake is placed on the capital market it is sold quite fast, it is very transparent and also the price is better," Mikloš said. "I certainly wouldn't prefer the idea of a sale only to a strategic partner. SPP privatisation should also revive the Slovak capital market."
Mikloš added that price would not be the only issue under consideration when deciding on SPP privatisation.
The Deputy PM's opinion was shared by SPP General Manager Pavol Kinčeš, who said in an interview for SPP journal Modrý plameň (Blue Flame) that the price of the stake was important, but was not the crucial issue of the sale. "First in the hierarchy of importance is the stability of revenues and investment. We can achieve this stability only when we merge with companies that show interest in the stability of SPP in this country," he said.
Analysts were equally divided on the issue of the best approach to the sale of the stake.
Meszáros said that a strong investor in SPP might have more interest in the development of the company than a portfolio investor who would not hold such a significant amount of shares in the company. "I think that a strong investor or consortium of investors can improve the management of the company and bring with it better [market and management] know-how," the analyst said.
However, Kustra said that portfolio investors would have just as much interest in the development of SPP as a significant strategic partner. "After they [portfolio investors] bought SPP shares they could form groups of shareholders and thus take part in managing the company," he explained.
The best option, however, according to Kustra would be a sale involving both a strategic partner and a few portfolio investors. "If the government wants to support the capital market it would be best if it puts 5% or 10% of SPP shares on the stock exchange and then sells the rest to a strong foreign investor."
Ruhrgas, Gaz de France and SNAM have shown an interest in creating a consortium of investors to bid for the stake, in line with a growing number of similar groupings across the region in various sectors. In the Czech Republic a group of investors comprising of Shell, Agip and Conoco holds a 49% stake in the Česká rafinérska refinery.
The privatisation of SPP will be a litmus test both of the government's future commitment to full liberalisation of the energy sector in Slovakia and the existence of any politics in any decision on the company's future. Both portfolio and strategic investors will be looking hard at the course of the privatisation.
"Business independence in Slovakia is by far and away more important than if a company has a strategic or portfolio investor," said Matthew Thomas, an analyst at ING Barings in London.
