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NATURAL GAS GRID OPERATOR SPLITS UP INTO TRANSIT AND DISTRIBUTION UNITS TO MEET EU ORDER

SPP utility unbundles on eve of new government

SLOVAKIA is one step closer to having a liberalised gas market after its natural gas grid operator, Slovenský plynárenský priemysel (SPP), separated the natural gas transportation side of its business from its distribution channels as of July 1, shortly before Robert Fico's new government took office.

SLOVAKIA is one step closer to having a liberalised gas market after its natural gas grid operator, Slovenský plynárenský priemysel (SPP), separated the natural gas transportation side of its business from its distribution channels as of July 1, shortly before Robert Fico's new government took office.

Unbundling the state-owned monopoly is a necessary step in complying with European Union liberalisation laws to open the market to outside competition. Slovakia's unbundling deadline falls in 2007.

The EU legislation, which requires natural gas companies to unbundle their import, transit and distribution branches, aims to dismantle state-owned monopolies and thus allow customers to choose their own supplier.

The SPP is now divided into a gas trading parent company (SPP) and two subsidiaries - SPP Preprava, in charge of gas transport through Slovakia, and SPP Distribúcia, in charge of gas distribution in Slovakia.

"This step turns our company as of July into the SPP Group with two 100-percent daughter companies looking after the transport and distribution of gas. The SPP mother company will continue to deal with the gas trade and servicing," the outgoing head of the SPP board of directors, Philippe Boucly, told the press.

The unbundling also resulted in top management changes at the gas distribution operation. Jan Massmann replaced Boucly as the chairman of the board.

SPP Preprava is one of the operators of a 2,270-kilometre long transpor network ensuring the transit of gas from the Ukraine border to European markets.

The SPP distribution branch will manage the gas distribution network in Slovakia with a length of 30,566 kilometres, will be in charge of the sale and maintenance of gas networks, and will control gas consumption.

The state owns a 51 percent share of SPP, while the remaining 49 percent is owned by a consortium consisting of the German E.ON and Rurhgas and the French Gaz de France.

SPP officials claim that the SPP unbundling will not pump up gas prices in the country.

In April last year the first attempt to unbundle SPP failed, causing tensions between the then-ruling Christian Democratic Movement (KDH) and the New Citizens' Alliance (ANO). The KDH blocked the Economy Ministry's first unbundling proposal, which would have paid out €650 million in dividends to SPP's state stakeholders.

ANO had hoped to use the dividends to offer investment stimuli to big investors shopping around for a Central European home.

The KDH rejected Rusko's unbundling model, suggesting it could have led to increases in natural gas prices.

Last year the coalition also doubted that the unbundling model that re-appreciated SPP's assets to current market value and led to dividend payouts would be completed by the time parliamentary elections were held in 2006.

Originally, the Economy Ministry proposed a two-stage unbundling model. In the first stage, the transportation channels were to be unbundled from the SPP mother company by January 1, 2006, while in the second stage, the distribution channels were to be unbundled by June 31, 2007.

SPP closed last year with an after-tax profit of Sk20.6 billion (€549.3 million), down 4.6 percent year-on-year, while its revenues increased 15.2 percent to Sk93 billion (€2.5 billion).

The company's shareholders decided at a general assembly meeting on May 16 that Sk19.9 billion from last year's profits would be paid out in dividends, the SITA news agency wrote.

The state's 51 percent stake in SPP will allow it to collect Sk10.1 billion (€269.3 million) in dividends.

According to SPP's economy and finance division director, Libor Briška, SPP will pay a total of Sk15.5 billion to the state, of which Sk5 billion is in the form of corporate income tax.

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