Utilities for sale in November

SLOVAKIA's six major heating companies should soon be in private hands. In a privatization deal worth an estimated Sk4 to 5 billion (€104 to 130 million), investors will bid for heating utilities in Bratislava, Košice, Žilina, Zvolen, Martin and Trnava.

SLOVAKIA's six major heating companies should soon be in private hands. In a privatization deal worth an estimated Sk4 to 5 billion (€104 to 130 million), investors will bid for heating utilities in Bratislava, Košice, Žilina, Zvolen, Martin and Trnava.

The Slovak cabinet has already approved the form of the sale; strategic investors will get a chance to purchase 51-percent stakes in each of the six companies.

According to a statement made on September 7, Finance Minister Ivan Mikloš said that for the time being, the remaining 49-percent stakes in the companies would remain in the hands of Slovakia's privatization agency, the National Property Fund (FNM).

The FNM will start selling the majority stakes in November 2005. The agency said on October 4 that it expects to complete the privatization by the end of the first half of 2006 at the latest.

Though the official investor criteria have not yet been published, privatization experts assume that bidders offering the highest price will be shortlisted.

"The privatization advisor [CA IB Financial Advisors] is still working on the criteria. However, in general, the FNM considers purchase price and promptness of payment important," FNM spokeswoman Tatjana Lesajová told The Slovak Spectator.

Lesajová was not comfortable guessing the amount that bidders might offer. However, she says the agency will only consider offers that meet a minimum price. "In other words, the FNM is aware of the value of these utilities, and that value will be the guiding point when evaluating bids," she said.

Though the 49-percent packages will remain in the FNM's hands, the cabinet will have to decide on transferring part of these remaining shares to the various municipalities.

Two alternative plans have been discussed. The state will either transfer 100 percent of the remaining share package to towns and villages for free, or it will transfer most of it to towns and villages for free, reserving a portion of the shares, probably 15 percent, to sell to strategic investors or liquidate on the stock market.

"The FNM prefers the second alternative, which means putting a larger portion of shares up for sale and transferring a smaller portion to the municipalities free of charge. However, the FNM will accept the cabinet's decision," Lesajová told the Spectator.

The FNM originally proposed selling 67 percent of each of the six heating companies to a strategic investor.

Finance Minister Mikloš told the press on September 7 that the decision about what to do with the remaining 49 percent of the shares is a subject for the future. However, according to him, local municipalities are expected to receive at least 34 percent of the heating plants' shares for free.

The Slovak Association of Towns and Villages (ZMOS) supports the idea that municipalities become beneficiaries in the privatization of the heating companies because they are interconnected with municipal networks.

"However, it is not within the ZMOS' authority to decide on concrete conditions or the compromises that towns should make regarding the privatization deal. It is the same situation in the case of the privatization of spas when towns received shares. The conditions were negotiated directly by the towns," Pavol Ifčič of ZMOS told The Slovak Spectator.

Another organization, the Union of Towns and Villages, has been lobbying for a full 49-percent share in the heating companies, arguing that in other utility-related privatization deals, municipalities gained majority shares. The union fears that if towns fail to keep share control over the utilities, it might result in the increase of heating prices. Outgoing Labour Minister Ľudovít Kaník supports selling a portion of the shares on the Slovak capital market to revive trading. Within the pension reform, pension savings companies are obliged to invest 30 percent of their assets in Slovakia. Without a lively stock exchange, such investment might be increasingly difficult.

Mikloš already has an idea on how to use potential revenues from the eventual sale of the heating companies: lower the state debt and support the pension reform.

However, privatizing at least one of the heating companies may be difficult. In 2004, Deputy Prime Minister Pál Csáky warned that privatizing the Žilina heating plant before 2009 could result in the loss of €9 million in European ISPA funds. The money is earmarked for modernizing the plant.

Discussions on the Žilina plant and the ISPA funds have not yet been wrapped up, however, and the FNM does not consider the situation unsolvable.

According to the FNM, so far 17 potential investors have shown an interest in the utilities. However, the final number of bidders will be known only after the tenders are announced. The media has so far publicized the names of the following potential bidders: the Slovak gas utility SPP, Dalkia (France), VNG (Germany), and two Slovak financial groups, Penta and Slavia Capital.

Share capital
in thousands of Sk
Number of shares
Bratislavská teplárenská, a.s.
1 038 270 1 038 270
Martinská teplárenská, a.s.
1 043 619.309 1 246 857
Tepláreň Košice, a.s.
1 151 088 3 237
Trnavská teplárenská, a.s.
530 587 530 587
Zvolenská teplárenská, a.s.
787 625 787 625
Žilinská teplárenská, a.s.
689 601 689 601
Total 5 240 790.309 4 296 177

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