ITALIAN investors in Slovakia are most visible in the energy and financial sectors. Enel, Italy’s largest power company, dominates energy production in Slovakia and in the financial sector, Italian investors include Assicurazioni Generali, UniCredit Group and Intesa Sanpaolo, to mention just a few. Operating in both these sectors requires managing various regulatory and protective frameworks which make for complex business decision-making. On the other hand, the Slovak market is promising because of its strategic position and its development, which has encouraged Italian investors to set ambitious goals.
The Slovak Spectator spoke to Juraj Kopřiva, spokesperson of power producer Slovenské Elektrárne (SE), controlled by Enel, and Zuzana Hliváková, director of the marketing and communication department at the insurance company Generali Slovensko Poisťovňa about their business operations and their companies’ future plans.
The Slovak Spectator (TSS): What are the positive and negative experiences of your company operating in the Slovak market? Do you think that there are any barriers to doing business in Slovakia?
Juraj Kopřiva (JK): When you work in the power generation market, you look for a market like the Slovak one because it has a strategic transit route position in the middle of central and eastern Europe. Also, the assets of SE are well balanced between nuclear, thermal and hydroelectric power plants. In three years – after Enel acquired 66 percent in SE – we were able to achieve a 180 degree turnaround of the company, thus eliminating red numbers and big debt and returning to a profit and low indebtedness that allowed us to create sufficient cash flow to proceed with the completion of third and fourth units of Mochovce nuclear power station as well as a number of other projects. All together, by 2013 we will have invested more than €3 billion in Slovakia. By saying this, our experience in the local market so far is very encouraging.
With regards to the barriers, we are here to finish construction of new power investments, not only nuclear, and we are here to support improvement of a fair, competitive and transparent market place. As we are the biggest power producer in Slovakia and because we are a price-taker, not the price-maker – accepting market conditions, not creating them – there are many factors that improve the correct functionality of the power market. For instance, we may mention the balanced and satisfactory production portfolio and interconnection capacities, especially in the conditions of a small market, as the Slovak one truly is. Taking into consideration that CEE markets are newly developed power markets, with liberalisation, improvement of transparency and other processes just finished or still under realisation, then reliable, stable and transparent market conditions and existence of an organised marketplace accessible to every market participant are the most important factors.
One has to trust in the stability of regulatory system in order to deliver investments in billions of euros. We see improvements, like the abandoning of the so-called export fee in April 2009.
Zuzana Hliváková (ZH): Insurance is trading with risk, which is being carried out for money while, for example, banking is trading with money, which is being carried out also for money. Trading with risk requires special rules which in Slovakia do not always correspond with those in other parts of Europe.
With regards to the particularities of insurance, often confused or juxtaposed with other financial sectors, most often banks, there is never enough close cooperation with state institutions in Slovakia. This sometimes creates a complicated legal environment, in which it is difficult for a business to orient itself.
A current positive experience is the effort of the Slovak government to protect customers in the financial market. On the other hand, in the case of insurance, there is still a missing law on insurance policy and the need to amend the Civil Code.
TSS: What is your’ company’s vision for the future in Slovakia?
JK: After the power up-rates of units 1 and 2 of the Mochovce nuclear power plant, and with the successful execution of the modernisation programme at units 3 and 4 of the Bohunice nuclear power plant in 2008, we have to continue with the completion of the third and fourth units of Mochovce, the up-rate of the V2 nuclear power station in Jaslovské Bohunice, and a significant reconstruction and modernisation of our thermal power plants. We have pursued our renewable initiatives with the biomass combustion project in Vojany, which started to operate in late July 2009. With biomass, we are broadening our renewable portfolio, which until now was represented only by the small hydroelectric power plants with approximately 23 MW of installed capacity.
However, SE is not only growing in terms of new investments but also in terms of new business activities. In 2008, we started operations in the Czech Republic and in 2009 we will open a branch in Poland, so we will be developing the competencies and experience of Slovenské Elektrárne in the CENTREL region (Czech Republic, Poland, Hungary and Slovakia).
ZH: We perceive operation of our insurance company in a wider context since it is part of one of the biggest insurance groups in central and eastern Europe – Generali PPF Holding. Simultaneously, with regards to the long-term activities of both its predecessors (Česká Poisťovňa – Slovensko and Generali Poisťovňa), it is not a freshman on the Slovak insurance market and joins within it advantages of localness and good knowledge of the domestic market with advantages stemming from the international background of the group to which it belongs.
Our goal in the near future is to extend our current over 10 percent market share in Slovakia and simultaneously further develop other-than-insurance activities in the financial segment, in which we have already been involved – bank-insurance and pension services.
We will certainly further develop and improve modern technologies which contribute to better service, faster claim handling and, last but not least, also more comfortable closing of insurance policies via telephone or the internet. Generali Slovensko Poisťovňa also brings innovative products and introduces novelties into its products and services segment and plans to continue this, particularly during this period of time, so that insurance products bring Slovaks what they currently need.
TSS: In general, how do you see trends and development of the market in which you operate with respect to the global crisis?
JK: For sure, we see that the global economy is facing harder times, but in the power generation market where building a nuclear power plant takes 8 to 12 years, you are a long-distance runner and you have to be prepared to face a short-term economic slowdown.
Despite the crisis, we have announced the biggest investment of a privately-owned company in the history of Slovakia: we will invest €2.775 billion in the completion of Mochovce. Today, Slovakia is one of three countries that already have new nuclear power stations in construction – together with France and Finland. This confirms that Slovakia and Slovenské Elektrárne, a Slovak company with over 50 years of experience in nuclear generation, and their partners are at the forefront of nuclear energy. This will also help other sectors of the economy and increase employment. We will be able to gradually increase the construction workforce from the 300 people now involved to a peak of 3,500 – expected for 2011. All relevant suppliers from the Slovak power industry are involved in the project, confirming the commitment of the two shareholders to maximize the participation of Slovak companies. Also, the main foreign suppliers use local branches and hire local people and will invoice and pay taxes in Slovakia. In the aforementioned long term perspective, the project will help Slovakia to maintain its energy security and the stability of its power grid.
ZH: In general, the impact of the financial crisis on the insurance sector is lower than that on the banking sector. Insurance companies are more protected from the influence of the financial crisis than banks, for example by not being so exposed to such “liquidity shocks” as banks. Insurance companies follow strict criteria for creation of reserves and solvency.
The financial crisis has negatively rebounded into the Slovak insurance market in the segment of investment life insurance, where, after a steep increase in sales during the last few years, its drop followed as a consequence of the crisis. In the segment of traditional saving insurance products, if interest rates on financial markets decrease, we can expect a fall in the maximum technical interest rate and that will lower the attractiveness of these products from the viewpoint of the client.
On the contrary, clients are showing an increased interest in risk coverage and we expect that this interest will rise even further. The proof is that during the first three months of 2009, the number of people who came to our offices to make an inquiry increased even though the number of insurance policies has not yet increased. Insurance companies, in their effort to fulfil current needs of clients will offer innovated insurance products in the life-insurance segment. This will also increase the need to educate clients and make them knowledgeable long-term investors, transparently informed, and able to accept more and more sophisticated insurance products.
In the non-life insurance segment, more specifically property insurance, we can expect the same behaviour and way of thinking of clients as during the large economic crisis of the 1930s. Clients are aware of the risk and think more about securing their property as well as protecting their families’ housing.
TSS: When did your company begin to operate in Slovakia and why did it decide to come here? How many employees does your company have in Slovakia?
JK: Enel acquired its 66 percent share in Slovenské Elektrárne in April 2006. On December 31, 2008 Slovenské Elektrárne had 5,432 employees.
ZH: Generali Slovensko insurer entered Slovakia originally via its predecessors: Generali Poisťovňa and Česká Poisťovňa-Slovensko.
As early as 1833, there were six representations of Assicurazioni Generali established in what is now Slovakia, but their operation was temporarily terminated by the political developments in post-war Czechoslovakia in 1945. Under the name Generali Poisťovňa it returned to Slovakia in 1996. Česká Poisťovňa-Slovensko acted in Slovakia since 1993, when after the split of the then Czech-Slovak Federal Republic, it was set up as an affiliation of Česká Pojišťovna, which had already in 1827 laid down foundations to provide Czech-Slovak insurance.
Since the fusion of Česká Poisťovňa-Slovensko and Generali Poisťovňa on October 1, 2008, the company operates under the name Generali Slovensko. It is the third strongest universal insurance company in the Slovak insurance market, while its product portfolio also covers the complex range of insurance of persons as well as the segment of non-life insurance. In addition to this, Generali Slovensko offers its services in the financial sector, specifically bank-insurance and pension services. Generali Slovensko has almost 700 internal employees in Slovakia as of June 30, 2009.
3. Aug 2009 at 0:00 | Jana Liptáková