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ITALIAN INVESTOR AGREES WITH WORDING OF PRIVATIZATION CONTRACT

Enel's pen poised

AFTER initial hurdles, the privatization of Slovakia's major power utility seems on track. Italian company Enel has agreed to the wording of the contract that will give it a 66-percent stake in Slovenské elektrárne.
Once Enel signs the transaction documents, the first stage of the privatization process will be wrapped up.

AFTER initial hurdles, the privatization of Slovakia's major power utility seems on track. Italian company Enel has agreed to the wording of the contract that will give it a 66-percent stake in Slovenské elektrárne.

Once Enel signs the transaction documents, the first stage of the privatization process will be wrapped up.

The country's privatization authority, the National Property Fund (FNM), must still approve the documents. The Slovak government and Enel will sign the final version after the cabinet gives its okay.

Enel's press officer Gerardo Orsini confirmed Enel's approval of the privatization contract for The Slovak Spectator.

Orsini said that Enel hopes the cabinet will endorse the contract by the end of January.

Economy Minister Pavol Rusko considers the end of January a realistic date, saying the final documents would likely be signed by then.

After signing the documents, the investor will transfer 30 percent of the purchase price, or €252 million, to the Slovak state's coffers. Altogether, Enel will pay €840 million (Sk32.8 billion) for the stake in Slovenské elektrárne.

The Slovak government expects Enel to submit an investment plan by the end of June that would include a sum that the power company intends to invest in Slovakia in the upcoming years.

The plan should also include an analysis on the completion of the third and fourth blocks of the nuclear power plant in Mochovce, and the modernization of thermo plants in Nováky and Vojany.

Minister Rusko originally had the idea that Slovenské elektrárne would be sold to an investor that would complete the two unfinished blocks of Mochovce - an idea that evoked debate in business, environmental, and diplomatic circles.

Some experts even doubted Enel's experience in running nuclear power plants.

"We have a long history in running nuclear plants. Until 1987 we owned and managed several nuclear power plants in Italy," Enel's Orsini told The Slovak Spectator.

Once the transaction documents are signed, the second stage of the privatization process starts. During this phase, the 16 conditions set by the Slovak government will be addressed. Among the conditions is the exclusion of the A1 and V1 nuclear power plants in Jaslovské Bohunice and the Gabčíkovo waterworks from the privatization process.

If the Slovak government does not like Enel's plans to address the conditions, it has the right to withdraw from the deal. The investor does not have the same luxury.

Minister Rusko thinks that the second phase of the privatization process could last until the end of 2005.

In late October 2004, Rusko was still concerned that selling a 66-percent stake of Slovenské elektrárne to the Italian buyer would not take place since Enel appeared inflexible in initial talks.

Media speculated that the impasse might have been over one or all of the following: the way in which the Slovak state would manage its 34-percent minority share; the return of Gabčíkovo waterworks to state administration; or a long-term rental agreement with the Slovak power producer.

The SME daily claimed to have inside information that the deadlock concerned a guarantee over a "backdoor" fuel cycle.

Slovakia reportedly demanded a guarantee from Enel that the Italian company would not make the Slovak state responsible for the eventual deficit of Slovakia's Liquidation for Nuclear Facilities Fund.

The state liquidation fund is the only resource for covering costs associated with liquidating nuclear power devices, including spent fuel.

Currently, Slovenské elektrárne covers part of the liquidation costs in addition to paying the fund an annual fee of Sk2.6 billion (€947 million).

On December 8, 2004, the Slovak cabinet agreed to protect contracts between Slovak smelter Slovalco and Slovenské elektrárne, which was believed to be one of the thorns in Enel's side.

The contract, signed in 1994 by Slovenské elektrárne, ensured advantageous energy prices to Slovalco through 2013.

Official ministry sources denied, however, that Slovalco played any decisive role in the negotiations with Enel. The ruling coalition has promised to address the Slovalco contract, which interferes with Slovakia's commitment to the EU to liberalise its electricity market by 2006.

The Italian investor pledged that it would not alter these contracts and that it would respect them until they expire.

Finance Minister Ivan Mikloš told news wire SITA that if Enel changes these contracts, extra revenues reaped from the amended contracts would go into the state coffers and Enel would have to bear the consequences determined by an arbitration court.

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