Cabinet approves SPP sale

THE CABINET has finally approved the sale of a 49 per cent stake in gas utility SPP to a consortium of bidders.
The deal ended uncertainty over the transaction, which had been building following attempts by the ruling coalition Democratic Left Party (SDĽ) to first scupper and later delay the sale.
In a March 14 cabinet vote, 17 members were in favour, and only one - SDĽ leader Pavol Koncoš - was against.


SIGNED, sealed and delivered - PM Dzurinda (left) and SDĽ leader Pavol Koncoš.
photo: TASR

THE CABINET has finally approved the sale of a 49 per cent stake in gas utility SPP to a consortium of bidders.

The deal ended uncertainty over the transaction, which had been building following attempts by the ruling coalition Democratic Left Party (SDĽ) to first scupper and later delay the sale.

In a March 14 cabinet vote, 17 members were in favour, and only one - SDĽ leader Pavol Koncoš - was against.

The sale of SPP, the key link for Russian gas to western Europe, is considered a vital one for the Mikuláš Dzurinda government as funds from the $2.7 billion bid will be used to retire mounting state debt and prop up Slovakia's unsteady pension system.

Analysts also said the revenues from SPP would protect the Slovak currency from coming under attack following a record trade deficit last year.

The 49 per cent stake, which includes management control, goes to a consortium of Gaz de France, the Russian Gazprom and Germany's Ruhrgas. The bloc was the only bidder in the tender for SPP to submit an offer.

SPP moves 90 billion cubic metres of Russian gas to the West each year, or about 70 percent of Russian gas used in western Europe. The firm is the second largest gas transporter in the world, and the privatisation deal is one of the region's largest ever.

The cabinet had been widely expected to approve the bid at its regular March 13 meeting, but the ex-communist SDĽ party, which had sharply criticised the sale and claimed the bid price was too low, forced it to postpone the decision by at least a day.

The SDĽ had said it needed another week to pore over the transaction documents, but Dzurinda refused. "I don't want to push anybody anywhere, but... I will not allow any pointless delays," he said. "There has been enough time."

The single bid, submitted February 28, was at first a bit of a disappointment for observers, who had expected more interest in one of the region's largest sell-offs of state assets, particularly after heavy competition last year for SPP's Czech counterpart Transgas, which went to Germany's RWE for $3.6 billion.

Jonathan Stern, a fellow of the Royal Institute of International Affairs in London, said the price reflected the "five to ten years" it could take the Slovak government to fully liberalise gas prices: "I would have expected a higher bid given some of the equity sales that have gone on in the last few years, but if you discount the price in terms of the likely speed of economic reform it sounds about right."

The sale agreement binds the consortium to maximise gas transit through Slovakia and SPP, to expand to neighbouring states through SPP, and to allow state representatives in the supervisory board a veto over layoffs exceeding 10 per cent of SPP's workforce.

The government, in turn, has to place 20 per cent of the sale price (about Sk26 billion) in a special account to cover liabilities arising from SPP's murky past, including promissory notes issued on SPP's account by murdered former SPP director Ján Ducký.

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