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NATURAL GAS LIBERALIZATION PLANS STALL

Coalition locks horns over SPP

TENSIONS between two coalition partners might result in delays in unbundling Slovakia's natural gas grid operator, Slovenský plynárenský priemysel (SPP). Unbundling the state-owned monopoly is a necessary step in complying with European Union liberalization laws to open the market to outside competition.

TENSIONS between two coalition partners might result in delays in unbundling Slovakia's natural gas grid operator, Slovenský plynárenský priemysel (SPP). Unbundling the state-owned monopoly is a necessary step in complying with European Union liberalization laws to open the market to outside competition.

The Christian Democratic Movement (KDH) and the New Citizens' Alliance (ANO) parties are at odds about how to separate the natural gas transportation side from the distribution channels. After the KDH blocked the Economy Ministry's first unbundling proposal, which would have paid out €650 million in dividends to SPP's state stakeholders, the ANO accused the Christian Democrats of destabilizing several pending foreign direct investments.

The ANO considers the dividends a crucial source of funds that would allow the state to offer investment stimuli to big investors shopping around for a Central European home.

"We will only support a solution that will, in fact, lead to the payment of special dividends," Economy Minister Pavol Rusko told The Slovak Spectator. Rusko is also the ANO's chairman.

The Slovak government, which owns a majority stake in SPP, stands to gain the most from a dividend windfall. The remaining owners, Ruhrgas and Gas de France, both of which own 24.5 percent stakes, would also profit.

The KDH rejected Rusko's unbundling model because it could lead to increases in natural gas prices. "Though the state would benefit, it must keep consumers' interests in mind," KDH Minister Pavol Minárik told The Slovak Spectator last week.

However, on June 30, Minárik told the Spectator that for him the case is closed and he will make no further comments on Rusko's handling of SPP.

According to Rusko, an unbundling model that re-appreciates SPP's assets to current market value and leads to dividend pay outs would not be completed until the next parliamentary elections in 2006. Nevertheless, the ANO is prepared to hold out for this model, even if it means relying on the next government to finish the process in 2007.

"The EU deadline [for unbundling] is in 2007. We will simply support the division of SPP in two stages," Rusko added.

In the first stage, the transportation channels would be unbundled from the SPP mother company by January 1, 2006. In the second, the distribution channels would be unbundled by June 31, 2007.

The KDH is not opposed to relying on a future government to complete the unbundling process.

"I do not think anything serious would happen if a future ruling coalition decides on the transformation of the SPP. We still have time until the 2007 deadline," KDH Deputy Chairman Július Brocka told private television station JOJ in a political debate.

Brocka said the KDH would support proposals that ensure secure and consistent profits for the state.

The KDH's opposition to the Rusko's preferred unbundling model is a thorn in the economy minister's side.

"The KDH's blocking of the ministry's solution was an ill-timed move and, in fact, political revenge for the ANO's attitude towards university reform. The KDH has harmed Slovakia's citizens through this decision, especially regions with high unemployment," Rusko told the Spectator (see interview, page 3).

Rusko proposed that of the €650 million in dividends, Sk16.8 billion (€442.1 million) would be paid in 2006 to offset the cost of pension reform. By lowering the state's debt, the dividends would serve as an investment stimulus.

The EU legislation, which requires natural gas companies to unbundle their import, transit and distribution branches, aims to dismantle state-owned monopolies and thus allow customers to choose their own supplier.

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