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AUDIT SHOWS ENEL OVERPAID FOR SE STAKE, MEDIA SPECULATES

State still has to iron out some wrinkles in Enel deal

IT TOOK Slovakia almost five difficult years to wrap up the sale of a 66-percent stake in power utility Slovenské Elektrárne, which supplies more than 80 percent of the domestic market, to the Italian power giant Enel. But now it seems that there are still some wrinkles in the deal for the state to iron out.
Slovakia will probably have to pay Sk2.5 billion (€74 million) back to Enel after auditing firm Deloitte & Touche found that the shares the Italian investor acquired for Sk31.4 billion have a lower value than the purchase price, the Slovak daily Pravda reported, quoting an anonymous source from one of the state institutions that acquired the audit.

IT TOOK Slovakia almost five difficult years to wrap up the sale of a 66-percent stake in power utility Slovenské Elektrárne, which supplies more than 80 percent of the domestic market, to the Italian power giant Enel. But now it seems that there are still some wrinkles in the deal for the state to iron out.

Slovakia will probably have to pay Sk2.5 billion (€74 million) back to Enel after auditing firm Deloitte & Touche found that the shares the Italian investor acquired for Sk31.4 billion have a lower value than the purchase price, the Slovak daily Pravda reported, quoting an anonymous source from one of the state institutions that acquired the audit.

The drop of the purchase value was caused by the fact that Slovenské Elektrárne had undervalued the cost of decommissioning power plants, Pravda wrote.

There were not enough financial reserves created in the bookkeeping for decommissioning the nuclear plant, said former economy minister Jirko Malchárek. He replaced Pavol Rusko, who negotiated the price adjustment with Enel, in the ministerial chair.

Both the country's privatisation agency, the National Property Fund (FNM), and Enel said they would not comment on unofficial information. The Economy Ministry said it would take a stand only after analysing the audit report.

"The results from this report are not public yet," Enel's international press officer, Roberta Vivenzio, told The Slovak Spectator. "I can only say we do not comment on press speculation.

"When and if the report is finalised and made public, we can comment on something more substantial than mere speculation."

The FNM would comment only following a thorough analysis and negotiations with all the parties involved, FNM spokesperson Tatjana Lesajová told the TASR newswire.

"We are discussing the issue with the Economy Ministry, Enel and the auditor," Lesajová said.

The possibility of an independent audit agreed to by both parties was included in the privatisation agreement, Peter Mitka of privatisation advisor PricewaterhouseCoopers told The Slovak Spectator.

"It is nothing unusual," said Mitka, who declined from commenting on the audit itself. "It is a normal proceeding in such contracts."

The Slovenské Elektrárne stake changed hands on April 28, 2006 after the Sk31.3 billion, transferred from Enel, arrived in the state's account. The state now holds 34 percent of the shares in the second-largest power utility in Central Europe.

The transaction was Enel's largest international acquisition of generating capacity to date.

"With this acquisition, Enel's largest-ever outside Italy, the company confirmed its expansion strategy into Eastern and Central Europe, a market which is recording continental Europe's highest growth rate," Enel head Fulvio Conti said of the deal in 2006.

"The Enel sale has been a Herculean task," said Mitka in 2006, shortly after completing the sale. "It was one of the most complicated privatisation deals that Slovakia has experienced."

What made it really complicated was that nuclear power facilities in Jaslovské Bohunice were part of the assets to be sold. There has been no other case in the world where a power utility was sold with a nuclear power facility to a strategic investor within a single deal, according to Mitka.

During the sale, the lack of legislation to govern the decommissioning of outdated nuclear facilities and the handling of nuclear waste was seen as the major stumbling block of the privatisation. The Nuclear Fund Act - which guarantees Enel that Slovak taxpayers, rather than the utility's new owner, would foot the bill for handling nuclear waste - was passed during the closing phase of the deal, when the strategic investor had already been chosen.

The decommissioning of the two nuclear power units of Jaslovské Bohunice must be completed by 2025.

Another factor complicating the deal was the length of time it took to hive off several Slovenské Elektrárne assets that were not part of the deal, the privatisation advisor said last year.

The sale was Slovakia's second-largest privatisation deal after the sale of gas utility Slovenský Plynárenský Priemysel (SPP) in 2001. It spanned two Slovak governments and several economy ministers, which also delayed the process.

Enel was selected as the preferred bidder in 2004, beating out the Czech ČEZ and Russian RAO UES consortium. The company paid 20 percent of the sales price (€168 million) on signing the contract in February 2005.

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