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JOBS IN DANGER AS SPP LOOKS TO PRE-SALE HIKES

The price of privatisation

Chemical industry chiefs have warned that existing jobs may be lost if plans to hike gas prices for chemical firms as of May 1 are implemented.
Exempted from a February 1 set of gas hikes for industry, chemical firms are now facing the prospect of an 11% rise in gas costs after a recent Finance Ministry change to price legislation. The move allows soon-to-be privatised gas firm Slovenský plynárenský priemysel (SPP) to put chemicals producers on an equal price footing with other industry customers.
Jozef Kollár, president of the Association of Chemical and Pharmaceuticals Producers (ZCFP) and general director of the Duslo Šaľa industrial chemicals firm, said chemical producers would fight the rises, and questioned their economic justification.


Chemko Strážske may be eight million crowns worse off if SPP goes ahead with planned price rises.
photo: TASR

Chemical industry chiefs have warned that existing jobs may be lost if plans to hike gas prices for chemical firms as of May 1 are implemented.

Exempted from a February 1 set of gas hikes for industry, chemical firms are now facing the prospect of an 11% rise in gas costs after a recent Finance Ministry change to price legislation. The move allows soon-to-be privatised gas firm Slovenský plynárenský priemysel (SPP) to put chemicals producers on an equal price footing with other industry customers.

Jozef Kollár, president of the Association of Chemical and Pharmaceuticals Producers (ZCFP) and general director of the Duslo Šaľa industrial chemicals firm, said chemical producers would fight the rises, and questioned their economic justification.

"World prices of crude oil have decreased and gas prices usually follow. But despite this, SPP wants to increase prices," Kollár said after the news was announced by SPP April 16. He added that the moves must first be discussed by the tripartite [a meeting of government, business and trade union representatives] before any decision could be approved.

Duslo and the firm Chemko Strážske, SPP's second largest customer from the chemicals industry, would have to pay a further 90 million ($1.87 million) and 8 million crowns respectively after the rises, SPP said.

Sticking to its guns

SPP faced a similar conflict over price rises with wider industry bodies before the February 1 hikes were approved.

At that time, SPP called for a 30% rise in prices of gas for industry consumers, but following strong opposition from producers the government approved only a 25% price increase.


ZCFP president Kollár (right) has said jobs may be on the line if SPP goes ahead with its plans to raise gas prices for chemicals producers.
photo: TASR

SPP is determined to stick to its guns, however, insisting that chemical producers cannot have a different tariff than firms in other sectors, regardless of the potential effects the increase in company costs may have on employment.

"Mr Kollár may have his own socio-political opinions on the possibility of unemployment at his firm, but that is his own personal opinion," Helena Polaková, spokeswoman for SPP, told The Slovak Spectator April 23.

Government ministers have been largely silent on the dispute so far. However, when contacted April 24, spokeswoman at the Economy Ministry Dagmar Hlavatá said that as yet they had no information on whether a tripartite discussion was planned or needed.

"So far, this matter is between SPP and chemical producers," she said.

Prices up for privatisation

In what would be the biggest state sell-off in Slovak history, the government is hoping to see the sale of a 49% stake in SPP this year. The state has made it clear in comments following the last two of four gas price rises since coming to power in October 1998 that it is no longer prepared to subsidise SPP gas retail prices.

Economic analysts have said that any moves to raise gas prices would be sensible in the run-up to the company's sale, adding that it would illustrate cabinet willingness to push through the sale while risking unpopular price rises as elections in 2002 draw closer.

Transporting much of the gas which flows from Russia to western Europe, SPP has been a cash-cow for successive Slovak governments, and has been valued at between $6 and $8 billion crowns.

However, last year the firm recorded an operating profit of five billion crowns, dropping from the 12.4 billion crowns it made in 1999. The firm's bosses have blamed the fall almost entirely on low gas prices for domestic customers.

Analysts now say that the move is an economic necessity for SPP prior to its privatisation, and argue that the move falls in line with general deregulation of the energy markets.

"This is a show from SPP that they will be approaching every customer on the same level, as they should. Why should you have an advantage just because you are a chemicals producer? It goes against normal competition rules," said Miloš Božek, analyst at J & T Finance.

Sale under threat?

The simmering dispute between SPP and the chemical firms was overshadowed April 23 by statements from Finance Minister Brigita Schmögnerová on the sale of the firm.

Speaking at an annual conference held by the European Bank for Reconstruction and Development (EBRD) in London, the minister said that she expected the profits from SPP's sale to "come only at the beginning of next year", inferring the company would be sold off by the end of 2001 at the earliest.

The news brought immediate reaction from market dealers who said they feared the comments could see crown trading hurt, with the currency weakening over the mid-term.

"Over the last few weeks we've seen signs that the whole privatisation process is slowing down and it's creating a feeling among investors that the programme is cooling down," said Braňo Matušek, dealer at ING Bank.

"The minister's comments on SPP won't help this at all."


"This is a show from SPP that they will be approaching every customer on the same level, as they should. Why should you have an advantage just because you are a chemicals producer?"

Miloš Božek, analyst at J & T Finance


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