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ITALIANS' STRATEGY CONFIDENTIAL, CABINET SPEEDS UP LIQUIDATION LAW

Privatization agency gives Enel plan the go-ahead

ONE of the last large privatization deals in the country, the sale of the Slovak power utility Slovenské elektrárne to Italian company Enel, is close to completion, after Slovakia's privatization agency, the National Property Fund, approved Enel's investment plan on October 14.

ONE of the last large privatization deals in the country, the sale of the Slovak power utility Slovenské elektrárne to Italian company Enel, is close to completion, after Slovakia's privatization agency, the National Property Fund, approved Enel's investment plan on October 14.

Enel, which has gained a firm position on the European market and is one of Europe's largest energy companies, should definitely have the 66-percent share-package of Slovenské elektrárne in its pocket by the end of this year.

"The National Property Fund approved the investment plan with the comment that problems that might emerge now or in the future can be solved beyond the frame of the agreement," Tatjana Lesajová, spokeswoman for the National Property Fund (FNM), told The Slovak Spectator.

However, the strategic plan will not be made public, since it is part of Enel's business strategy, Lesajová added.

By approving the investment plan Slovakia has bridged the main reason for the delay in SE's privatization.

"We are very pleased with the decision of the Economy Ministry and the National Property Fund to give approval to the investment plan that we proposed for Slovenské elektrárne," said Fulvio Conti, Chief Executive Officer of Enel in an official memo sent to The Slovak Spectator.

"We believe this plan will contribute to the strengthening of Slovenské elektrárne as a key player in Central and Eastern Europe," Conti added.

Now Slovakia must fulfil the promises it has made to the investor.

In this regard, the Slovak cabinet announced that it does not want any further delays in the privatization process and it is ready to speed up the preparation of the law pertaining to Slovakia's Liquidation of Nuclear Facilities Fund.

The law was one of the conditions Enel set for its purchase of shares in the Slovak power utility.

The law would guarantee the Italian investor that not Slovenské elektrárne but electricity consumers will have to pay the at least Sk15 billion (€390 million) deficit in Slovakia's Liquidation of 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 (€70 million).

The Economy Ministry has been working on the law for over a year and the final touches should be made in late October.

The ministry is trying to formulate the law in a way that does not impact on public finances and its officials assume that it could be adopted by the end of the year.

The government decided to reimburse Slovenské elektrárne for the deficit in the fund in June 2004.

There are also several other time-consuming and sensitive conditions that the state has to meet.

"I cannot give concrete details, but the most complicated are the conditions that pertain to the division of the property [that was not a subject of privatization] from Slovenské elektrárne.

We are talking about the Gabčíkovo water works, which is a very complicated issue," Peter Mitka, from the privatization advisor PricewaterhouseCoopers (PWC) told The Slovak Spectator.

Gabčíkovo should come under the control of the state water-management company Vodohospodárska výstavba, while the state firm GovCo will take over the V1 nuclear power plant blocks in Jaslovské Bohunice.

There were some initial complications around the Enel deal in early August, after Enel submitted an investment plan suggesting that the state compensate the investor for revenue losses resulting from Slovenské elektrárne's long-term contracts with aluminium smelter Slovalco, Oravské Iron-Alloys and Gas-Steam Cycle.

On August 15, Slovakia and Enel ironed out the wrinkles and the Italian investor has agreed to invest close to Sk74 billion (€1.9 billion) to expand Slovenské elektrárne's power-generating capacity, of which at least Sk60 billion (€1.5 billion) should go to the completion of Mochovce nuclear power plant, dropping the claims that Slovakia found unacceptable.

The agreement was sealed in February when Enel undertook to pay €840 million for its 66-percent stake, and it has already transferred €168 million.

"The expectation of the seller was that the investment plan does not include any conditions [from the buyer] and the final version does not include any of such conditions," Mitka said.

The power utility Slovenské elektrárne is not likely to start the completion of the third and fourth blocks of the nuclear power plant in Mochovce before the end of 2007.

The Italian investor Enel wants to analyze the project once again.

"As far as the completion of Mochovce is concerned, Enel is only obliged to elaborate a feasibility study. It means that Enel has to start working on a document, which will show to what extent the completion of Mochovce would be effective, or economically justified," Mitka told the Spectator.

Enel's Marco Arcelli confirmed that the works might not start sooner than 2008.

The new study should be ready by the end of 2006.

The completion of the Mochovce nuclear plant was among the priorities of former Economy Minister Pavol Rusko from the beginning of the Slovenské elektrárne privatization deal.

"It is now certain that the third or fourth reactor blocks at Mochovce will be completed," said Rusko in early August adding that the completion of the reactor blocks should start within a year.

The SE assumes that the two new blocks at Mochovce will be needed as a replacement for the Jaslovské Bohunice's V1 plant that Slovakia will have to shut down in accordance with its EU obligations.

The news of the planned completion of Mochovce is certainly not a pleasing one for Slovakia's environmentally minded neighbour, Austria.

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