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Possible buyers jockey as pipeline sale nears

Privatisation of a 49% stake in the state-owned pipeline operator Transpetrol moved forward with the announcement of an official tender for the selection of a privatisation advisor December 5. Slovak refinery Slovnaft is now, sector analysts believe, likely to face its stiffest competition for the share from the American firm Chevron, after statements from Czech firm Česká rafinerská that it was unlikely to bid for the share.
A further twist was added to the sale on the day of the tender announcement when Prime Minister Mikuláš Dzurinda confirmed earlier statements from Ukrainian Prime Minister Viktor Juščenko, visiting Bratislava at the time, that Slovakia was interested in a new crude oil pipeline project connecting the Ukrainian Black Sea port of Odessa with western Europe.


Pipeline operator Transpetrol is likely to go under the hammer some six to nine months after an advisor for the privatisation is chosen.
photo: Ján Svrček

Privatisation of a 49% stake in the state-owned pipeline operator Transpetrol moved forward with the announcement of an official tender for the selection of a privatisation advisor December 5. Slovak refinery Slovnaft is now, sector analysts believe, likely to face its stiffest competition for the share from the American firm Chevron, after statements from Czech firm Česká rafinerská that it was unlikely to bid for the share.

A further twist was added to the sale on the day of the tender announcement when Prime Minister Mikuláš Dzurinda confirmed earlier statements from Ukrainian Prime Minister Viktor Juščenko, visiting Bratislava at the time, that Slovakia was interested in a new crude oil pipeline project connecting the Ukrainian Black Sea port of Odessa with western Europe.

While analysts said it was too early to tell exactly how the potential engagement of Slovakia in the pipeline may affect the chances of Slovnaft or any other firm in a tender, they did say that if the negotiations bore fruit and Slovakia did participate in such a pipeline, the government could expect a much larger price for Transpetrol when it is finally sold next year.

"The more diversity in transport sources the better," said Dušan Meszáros, analyst at Commerzbank Capital Markets in Prague. "It will obviously make the tender more interesting."

Slovnaft, Transpetrol's main customer, has made no secret of its interest in Transpetrol. The firm has said that it would like to acquire the state stake in its supplier. However, sources within the sector have said that Chevron, which is looking to transport large volumes of crude oil from Kazakhstan to western Europe, may look to mount a strong challenge to the domestic favourite for the share, especially in light of the news on the Odessa pipeline.

Kazakhstan has one of the world's biggest confirmed deposits of crude oil, with a capacity of 7 billion tons, and both the central Asian state and Azerbaijan plan to increase their annual exports of crude oil by up to 80 million tons by 2010. Chevron is currently constructing a pipeline running from Kazakhstan to the eastern Black Sea coast. From this line, experts say, oil could be transported via road links to Odessa.

Juraj Kotian, an analyst with SLSP state-owned bank, said that one of the other main contenders, Unipetrol, was unlikely to win the stake, even if it were to bid for it: "Unipetrol [a Czech firm possibly bidding - ed. note] doesn't have much money now, and this American company could be a strong competitor to Slovnaft," Kotian said.

Slovnaft's other potential rival in the bidding is its regional competitor, Česká rafinerská, Transpetrol's customer in the Czech Republic. "I think that they are as natural bidders for Transpetrol as Slovnaft is," Kotian said.

However, Česká rafinerská said that it was not interested in buying the 49% stake. "Our relations with Transpetrol will be as they are now, as our shareholders are not interested in having stakes in other companies. It might only be that our majority shareholder Unipetrol [the majority shareholder in which is the Czech National Property Fund - ed. note] would be interested in it, which I don't know about, " said Jaroslav Rúžek, a spokesperson for Česká rafinérska.

Post-privatisation

As the main Slovak customer for Transpetrol, some observers had commented, Slovnaft's acquisition of the minority stake may affect its prices of refined oil, and hence the Slovak economy. While SLSP's Kotian said that "by owning a 49% stake in Transpetrol any company would influence Transpetrol's policy", other analysts were sceptical of the effect that such a deal may have.

Miloš Božek, an analyst with J&T Securities, said that even if Slovnaft took the Transpetrol stake it would have to pay a fee to Transpetrol's owners, while it was a minority shareholder, for transfer of crude oil. "I don`t think that the government as majority shareholder would allow Slovnaft to do anything else, unless it sells its [the government's] stake or some part of it later on," he said.

Slovnaft spokesman Ľubomír Žitňan said that while the government held its majority in Transpetrol, his firm had little to fear from any rival taking a stake and trying to charge the Bratislava-based refinery more for its supplies of crude oil.

"The government will maintain a majority in Transpetrol. This is a sufficient guarantee for us that after the privatisation, things will be as they are now," Žitňan said.

According to Commerzbank's Meszaros, the anti-monoply office's regulation on prices should ensure that Slovnaft is not asked to pay an overtly high price for crude oil should another firm control supplies.

Michal Kustra, an analyst with Tatra Banka, added that little indeed would change for Slovnaft if it did not get Transpetrol's minority stake. "If that happens, Slovnaft will keep buying crude oil from Transpetrol as it is doing now, and I don't think much will change," Kustra said.

The government has yet to decide on the exact form of privatisation. The three options mooted so far include: direct sale to a strategic investor or consortium of investors, sale of the stake through capital markets, and a combination of the two. Analysts have said that the latter is most likely to benefit state coffers and breathe some life into a currently stagnant capital market.

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