The FNM's Jozef Kojda.photo: TASR
A long-contested stake in gas storage company Nafta Gbely has finally found a home. The buyer is Slovak gas distribution company Slovenský Plynárenský Priemysel (SPP), which has agreed to pay 1.1 billion Slovak crowns ($26 million) to the FNM privatization agency in return for 45.9% of Nafta shares. The deal was announced on January 20 following a meeting between FNM President Jozef Kojda and SPP Director Pavol Kinčeš.
Through the deal, fixed at a share price of 750 crowns, the SPP will increase its current holdings in Nafta to 55.9%. Equity analysts said the purchase will finally give Nafta the strong shareholder it needs to restructure its loan portfolio and rebuild its aging storage tanks.
The purchase price will be paid in four instalments by December 31, 2000, beginning with a 500 million crown payment expected by February 15. The agreement becomes valid after its approval by the FNM and SPP supervisory bodies, expected in the first week of February.
Senior SPP and FNM officials said the transaction was a reasonable compromise reached by the two state-owned institutions. According to Rastislav Jamrich, SPP's Economic Director, the sale offered advantages to both SPP and Nafta Gbely. "We will finally have storage capacities in our portfolio, while Nafta will survive with a strong investor like SPP," he said. SPP is the only gas company in central Europe which doesn't have its own storage facilities.
The deal also benefits the cash-strapped FNM, which was unable to handle Nafta's financial problems on its own. "For us, the deal is good because it brings cash into the FNM from the SPP," said Peter Huňor, vice-chairman of the FNM.
Good price
The foreign investors who swarmed Nafta last year in competition for the 45.9% stake expressed surprise at the low price the SPP had paid. The inside value of Nafta, according to the FNM's Huňor, was 2,000 crowns per share, although market value is about 340 crowns per share.
Kevin Leahy, a manager at American energy giant Cinergy, which was in the running for the Nafta stake in 1999, said "I don't know about 2,000 crowns, but the share value was certainly higher than the 750 crowns the SPP paid."
But domestic analysts said the low share price was part of the government's attempt to increase the value of SPP, which is officially slated for privatisation this year. "The government is trying to maximise SPP's value before it is sold," said Michal Kustra, an equity analyst with Tatra Banka. According to Kustra, the Nafta transaction will boost the value of the SPP stake which will be offered to a future strategic partner.
The SPP's Jamrich agreed that the Nafta purchase would increase the utility's worth, and said SPP would immediately launch restructuring at Nafta. After securing a majority on Nafta's Supervisory Board and Board of Directors, he said, "we will consider increasing Nafta's basic capital by about one billion Slovak crowns, and restructure the company's credit portfolio. We have already started negotiations with Nafta's creditor banks."
According to Kustra, Nafta also has other desperate needs. "Apart from consolidation of the company, Nafta has to consider its future growth. Storage tanks are fully occupied, and building further capacities will cost Nafta about 10 billion Slovak crowns, which will have to be covered from SPP investments."
The FNM's Huňor said that SPP will sign a 30 year contract with Nafta on storage of gas in Nafta's underground reservoirs - a deal which will require extensive investment into modernisation and expansion.
But the SPP's Jamrich, who expecis the utility to make a 16 billion crowns operating profit for 1999, said any investments would be covered from "cash flow". Last year, SPP issued eurobonds in the value of 150 million crowns to restructure their credit portfolio, and Jamrich said the firm doesn't expect to take on any more debt this year.
The subtext to the Nafta deal is SPP's upcoming privatisation, which according to Economy Minister Ľubomír Harach should occur some time this year. But neither Jamrich nor Tatra Banka's Kustra believed the utility would be sold before then end of 2001 at the earliest.
Despite the late date, Jamrich claimed there had already been "huge interest" from foreign investors in buying a minority stake in the utility. The main players, he said, are "the biggest European companies and a strong investor from the US."
Cinergy's Leahy said that while his firm's core activity was gas transmission than storage, making it an unlikely candidate for a deal with SPP, American energy giant Enron might be one of the interested parties Jamrich had been talking about. "Enron is a very strong company and they are very good at risk management and investments," Leahy said.
