Ministry moves to stop energy sale flop

The Economy Ministry has appealed to a regional court in an attempt to stop the privatisation of one of Slovakia's key energy companies being derailed.
Economy Minister Ľubomír Harach announced October 31 his ministry was appealing an earlier "scandalous" ruling by a court in the east Slovak town of Humenné to a higher regional court in Prešov.
A judge ruled October 15 that shares in state pipeline operator Transpetrol could not be traded because of an unresolved dispute over tax payments between a private firm and the Finance Ministry.

The Economy Ministry has appealed to a regional court in an attempt to stop the privatisation of one of Slovakia's key energy companies being derailed.

Economy Minister Ľubomír Harach announced October 31 his ministry was appealing an earlier "scandalous" ruling by a court in the east Slovak town of Humenné to a higher regional court in Prešov.

A judge ruled October 15 that shares in state pipeline operator Transpetrol could not be traded because of an unresolved dispute over tax payments between a private firm and the Finance Ministry.

The Economy Ministry attacked the judge's decision and warned the legal dispute could dissuade potential investors from sinking their cash into Slovakia.

The sale of the firm, expected to be completed by the end of this year, could be knocked off course if the Prešov court does not rule in the Economy Ministry's favour.

"It's a scandal that the Economy Ministry and Transpetrol have become involved in a dispute over claims between a small firm and the tax office, whatever the truth of the matter may be. I can't imagine how the court came to its decision to take this measure when it wasn't even competent to deal with tax affairs," Harach said.

He added the entire affair had sent negative signals to investors about administrative and legal proceedings in Slovakia and may have seriously damaged investor faith in the country.

But the ministry remains confident it can win its appeal. "We have appealed and we believe we will be successful. The blocking of share trading will not affect the process of privatisation, and it will go ahead as scheduled," said Peter Benčúrik, an Economy Ministry spokesman.

The dispute over the shares arises from a controversial acquisition of a 34% Transpetrol stake in 1998 by the firm CSI-CD.

In October that year Transpetrol discovered that two courts, one in Prešov and one in Vranov nad Topľou, had ordered the Finance Ministry to pay a Sk43 million ($800,000) tax claim to the company ILaS, registered in Humenné. They ruled the ministry also owed the company 17% interest as of January 1, 1997.

ILaS then sold its claim to CSI-CD, which asked bailiffs to enforce the claim. They did so through the sales of shares in state companies, among them Transpetrol. A 34% stake was transferred from the Economy Ministry's account on October 6, 1998.

The stake was taken back by the state that year and the transaction declared void by the Central Securities Registrar.

Many energy sector experts believe the current case will be decided in the Economy Ministry's favour with the higher court overturning the Humenné judge's ruling. The planned year-end privatisation should also be held to, they argue.

"This may well be a bad signal for investors but the main thing is that this sale won't be stopped or held up. The Economy Ministry is in the right in this dispute. The problems concern taxes and are between the Finance Ministry, which does not hold shares in the company, and a private firm," said one energy sector source close to the deal who asked not to be named.

"This has nothing to do with the Economy Ministry and it's stupid that the ministry, as a 100% owner of the firm, has had its shares blocked. If there is any possibility of a legal dispute, the sale contract will have a provision written into it to cover this anyway," the source said.

Six oil firms have declared their interest in Transpetrol. Preliminary offers have been submitted by all six, including Slovak refinery Slovnaft, Czech company Česká Rafinérska and American oil giant Texaco.

The Economy Minsitry confirmed the bidders had been informed of the court proceedings. Slovnaft has rejected any pullout from the sale and expects the privatisation to be concluded on schedule.

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