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Privatisation: SPP the big catch this year

The year 2001 promises to be one of the most important for privatisation in this government's term, if not in Slovakia's short history. Last year saw the closure of the first large privatisation to a foreign buyer in Slovakia - the sale of a 51% stake in Slovenské telekomunikácie (ST). The process was long, drawn-out and often controversial. However, the end result was a one billion euro price tag the government would have hoped for and an investor, Deutsche Telekom, that it would have been more than pleased with when it started its search for a buyer.

The year 2001 promises to be one of the most important for privatisation in this government's term, if not in Slovakia's short history. Last year saw the closure of the first large privatisation to a foreign buyer in Slovakia - the sale of a 51% stake in Slovenské telekomunikácie (ST). The process was long, drawn-out and often controversial. However, the end result was a one billion euro price tag the government would have hoped for and an investor, Deutsche Telekom, that it would have been more than pleased with when it started its search for a buyer.

On its privatisation list this year is its biggest possible catch - gas distribution firm Slovenský plynárenský priemysel (SPP). Asking around 100 billion crowns for a 49% stake, the government could well do with the revenues. The sale is also expected to bring not just money but another important step in clearing any links to the state from the management of Slovakia's biggest firms.

"The SPP privatisation will be the key privatisation in 2001 because there will be a change of ownership in the most important company in Slovakia, something ultimately very significant," said Miloš Božek, analyst at J & T Securities.

The sale received a boost on December 22 when the government selected Credit Suisse First Boston as advisor. There are now hopes that the sale can be completed by the end of the year after concerns at the end of 2000 that the government was dragging its heels in selling a large stake in its cash-cow.

SPP's privatisation is also likely to present a tricky political decision to the government.

The government will want to look west, and a consortium of Gaz de France, Ruhrgas and Italy's SNAM have said they are interested. However, the Russian giant Gazprom is also after the stake, and the possibility of construction of a new pipeline to transport Gazprom's supplies from Russia across central Europe running (either through Slovakia or not, as the Russians will see fit) is likely to play on the minds of ministers whenever they finally come to pick an investor.

Indeed, there are fears that politics may play an unwelcome part in privatisation throughout the year.

"The government's privatisation success in the year 2001 depends on whether political interests and pressure will dominate over politicians' reasonable thinking," said Božek.

Pipeline plans may also affect the sale of the pipeline operator Transpetrol, supplier to Slovakia's successful refinery, Slovnaft. The eventual buyers of the state stake will have to bear in mind plans for a crude oil pipeline connecting the Black Sea port of Odessa with western Europe. At the moment Slovnaft looks to be facing its stiffest competition for the stake from the American company Chevron.

Interestingly, the government may take a dual benefit from the sale. If it opts for selling only part of the 49% stake, it could put the rest on the capital markets - something many dealers would welcome on a largely lifeless bourse.

Energy sector privatisation is expected to begin this year as well. Under current government plans the sector privatisation project proposes selling 49% stakes in all power and heat distribution companies over the next 12 to 18 months, followed by a gradual full liberalisation of the market after that. A regulatory body for the energy market is due to start operating as of April 1, to ensure price-setting is free from political manipulation and guarantee that all participants of the market have the same access to the transmission network - something many analysts have said is crucial not just for the sector, but for confidence in privatisation generally.

"From the government's point of view this institution [regulatory body] is absolutely key, and we [the government] realise that it is the same from the point of view of future investors," Vladimír Tvaroška, an advisor to Deputy Prime Minister for the Economy Ivan Mikloš, said of the new body.

A litmus test for this privatisation is expected to be the sale of a stake in heating utility Západoslovenské energetické závody, due sometime this year. If successful, it could speed the liberalisation of the sector forward.

"The liberalisation on the energy market will begin with these sales of the three companies," added Božek.

Privatisation prospects in the banking sector were buoyed by the sale of an 87% stake in Slovenská sporiteľňa (SLSP) at the end of the year, three weeks ahead of schedule. The 18 billion crown purchase by the Austrian Erste Bank was heralded as a success. However, the end is not yet in sight for Investičná a rozvojová banka (IRB).

The first of three major banks to go under the hammer in 2000, it has failed to attract any real interest, and the government has been forced to put back the deadlines for offers and its eventual sale more than once. The bank should have been sold by the end of 2000. At present it is uncertain when the bank will be sold.

The sale of the other big bank up for grabs - Všeobecná úverová banka - was, many have said, wisely delayed until 2001 so as not to compete with SLSP's sale. The bank is due to be privatised before the end of 1H2001.

But while the omens may seem good following the success of SLSP's sale not everyone is convinced that the success can be repeated.

"I hope the sale is a success, it would be good for the banking sector, but SLSP and VÚB are the two biggest banks in Slovakia and only three bidders were interested in SLSP. Bank Austria [one of the losing two bidders for SLSP ed. note] said it won't bid for VÚB, which makes one question what level of interest VÚB will attract," said Tomáš Kmeť, analyst at Slovenská sporiteľňa.

"But it's just too early to say right now. It's difficult to say exactly what will happen with VÚB."


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