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Košovan recalled by SE utility board

The Economy Ministry, which holds a 90% stake in energy utility Slovenské Elektráne (SE), used its muscle to fire Štefan Košovan as head of the SE Board of Directors during the board's general assembly meeting on March 14. The decision was taken on the basis of the ministry's four month investigation into SE's operations, an audit launched last November after questions were raised by the Slovak Democratic Coalition (SDK) and other government members about Košovan's leadership of the utility.
According to Economy Minister Ľubomír Harach, a member of the SDK, the audit showed faults in the way SE handled tenders, as well as bad financial discipline and shortcomings in budgetary management. The ministry also dismissed two other members of the board of directors and a member of the supervisory board who had been close to Košovan.


Štefan Košovan defends his record at a March 12 press conference.
photo: TASR

The Economy Ministry, which holds a 90% stake in energy utility Slovenské Elektráne (SE), used its muscle to fire Štefan Košovan as head of the SE Board of Directors during the board's general assembly meeting on March 14. The decision was taken on the basis of the ministry's four month investigation into SE's operations, an audit launched last November after questions were raised by the Slovak Democratic Coalition (SDK) and other government members about Košovan's leadership of the utility.

According to Economy Minister Ľubomír Harach, a member of the SDK, the audit showed faults in the way SE handled tenders, as well as bad financial discipline and shortcomings in budgetary management. The ministry also dismissed two other members of the board of directors and a member of the supervisory board who had been close to Košovan.

The government had been unhappy with SE's progress in getting in line with EU regulations that would eventually liberalise energy prices, paving the way for the utility's privatisation. They were also displeased by Košovan's insistence on finishing construction of the third and fourth reactor blocks of the Mochovce nuclear power plant, a project which the government felt to be too expensive.

But critics of the move to fire Košovan said that politics, rather than sound economic thinking, had been at the heart of the matter. Because Košovan is a member of the former communist Slovak Democratic Left (SDĽ) party which nominated him to the SE leadership in 1998, his ouster was seen by the SDĽ as a political move by the SDK to gain control of the company. The Economic Ministry, backed by Prime Minister Mikuláš Dzurinda and Deputy Prime Minister Ivan Mikloš, responded that the government simply wanted a competant manager to lead SE. "The Ministry of Economy refutes any political background to the process dealing with the recall of Mr. Košovan," said ministry spokesman Peter Benčúrik on March 15.

Košovan's recall had been in the air since January, when the Dzurinda government was prevented from approving its Energy Policy Programme by Košovan's insistence that Mochovce be completed. Coalition parties such as the Hungarian Coalition (SMK) and the Party of Civic Understanding (SOP) criticised Košovan and his management for being too closely connected with the utility's previous leadership, widely seen as pro-nuclear, and faulted Košovan for a plan to illegally send spent nuclear waste to Russia.

Harach at the time said Košovan's plans for the nuclear waste - exporting it to be processed in Russia, and then transported back to Slovakia in a few years - would have cost taxpayers 9.6 billion Slovak crowns ($228 million) in needless storage fees.

But Košovan said after his dismissal that he wasn't aware of any financial losses caused by his decisions, and said the decision of the general assembly meeting to recall him was invalid because it hadn't been in line with SE statutes. "All I can say is that my ouster was politically motivated," Košovan said immediately after the general assembly.

He was supported by Peter Weiss, vice-chairman of the SDĽ, who said that no concrete reasons for Košovan's recall had been given by the other government parties. "Our [SDL's] position is that we haven't yet seen on the table any serious arguments which would support this step [Košovan's recall]," Weiss said.

Even discussions held on March 14 between the SDĽ and Košovan on one side and Dzurinda and Harach on the other didn't satisfy the leftists, with SDĽ caucus leader Ladislav Orosz emerging to call the affair "a conspiracy" against his party.

Michal Benák, a partner with Bratislava-based mergers and acquisitions firm Navigator, agreed that Košovan's forced departure had been politically motivated - but said that it was high time the decision had been made. "This decision is really a positive one because it finally gives space to those who are for the quick privatisation of SE," Benák said, mentioning Deputy Minister for Economy Ján Sabol as the one who was pushing privatisation forward.

According to Benák, Economy Minister Harach had promised to take steps if the investigation found wrongdoing in SE, meaning that the results of the the inquiry and subsequent events showed that Harach was a "man of his word."

Benák explained that Košovan was the kind of person that went far beyond the limits of his position. "Košovan was pushing forward investments that SE didn't have money for, so the government had to guarantee these investments. When SE could have reached an agreement with banks, Košovan forced the board of directors to approve another investment. This cost the SE a chance at reaching an agreement with banks," Benák said.

New director?

Despite the fact that Dzurinda and Mikloš have both said they plan to hold a tender for the top job at SE, the SDĽ is widely expected to keep its grip over SE and to nominate its next boss. An unwritten agreement between the parties of the ruling coalition made in autumn 1998 reserved the SE post for the SDĽ in the same way the SDK was reputed to have been 'given' the top job at gas utility SPP while the SOP had nominated its candidate to the Slovenské Telekomunikácie telecom monopoly.

For Weiss, this current system of cross-controls between government parties included in the coalition agreement allowed the government to keep track of how state companies were run. If the current arrangement were exchanged for a tender process decided by the Economy Minister, then all state companies under the ministry that were slated for privatisation would be filled by the minister's SDK friends. "In this idea to hold a tender for the top job we see another attempt of the SDK to rule the Economy Ministry and all of the strategic monopolies which in the near future will be privatised," Weiss said.

Despite the effort that Dzurinda, Harach and Mikloš were putting into making the process of choosing top managers apolitical, Benák believed that real professionals could only become top managers when everything was liberalised. "While the state controls these companies, there is no chance that an indepenedent, professional manager with few political links can lead them," Benák said.

He was supported by Weiss, who said that because political parties had control over strategic companies, choosing top managers by tenders wouldn't work. "Once privatisation is finished and ownership is mixed, political control in the companies will no longer be necessary," Weiss said.

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