FIVE days before the parliamentary elections in Slovakia, Interior Minister and deputy leader of the Christian Democratic Movement (KDH) Daniel Lipšic filed a motion with the Office of the General Prosecutor to cancel the 2004 privatisation of the Bratislava-based electricity generator Steam-Gas Cycle (PPC). The formerly state-owned PPC was sold to the Penta financial group in 2004 for Sk2 billion (€66 million).
Lipšic said on March 5 that he wanted the deal cancelled because “investigation confirms that the privatisation of [PPC] was done unlawfully and was significantly under-priced”, the SITA newswire reported. Penta called Lipšic’s move “a mixture of demagogy, lack of basic understanding and ignorance of the facts”.
According to Lipšic, the privatisation caused Slovakia losses of €500 million since PPC had signed an exclusive contract with another power producer, Slovenské Elektrárne (SE), which at that time was also owned by the state, to buy the power it generated for 25 years.
Lipšic alleged that the contract guaranteed PPC profits of €500 million, which were subsequently lost to the state when PPC was sold.
“The contract was overpriced by approximately 50 percent,” Lipšic said, as quoted by SITA, and went on to allege that electricity prices are currently high in Slovakia as a result.
In 2004 the government of Mikuláš Dzurinda, in which Lipšic was a minister, put PPC up for sale. Four bidders were ultimately shortlisted. The final outcome was that 90 percent of the shares were acquired by PPC Holding, a company controlled by Penta.
Lipšic said he does not understand why the privatisation committee agreed to sell the company for Sk2 billion, when the firm’s contract with SE guaranteed it profits of Sk15 billion, SITA reported.
An analysis prepared in 2004 by the Economy Ministry, led by Pavol Rusko, chairman of the now-defunct New Citizen’s Alliance (ANO), apparently stated that the sale under the agreed conditions appeared to be “significantly economically ineffective”, the Sme daily reported. However, Rusko withdrew the analysis before the cabinet session that would have discussed it.
According to Lipšic, a commission at the National Property Fund (FNM), the state privatisation agency which selected the winning tender in the privatisation, was chaired by Anna Bubeníková. Lipšic alleged that she favoured Penta’s bid, the TASR newswire wrote.
Lipšic said that during the investigation of the Gorilla file evidence was found which pointed to the disadvantageous nature of the PPC privatisation. The minister gave no further details and provided no documentary evidence to back his claims, Sme reported.
Bubeníková was sacked by the government earlier this year from her position as head of the FNM after her name appeared in the Gorilla file, a document leaked onto the internet in December that purports to contain transcripts of covertly recorded conversations between politicians, high state officials and indivdiuals from the Penta financial group.
Penta responded to Lipšic’s claim by saying that the PPC privatisation was a highly competitive tender involving seven bidders in addition to Penta. Company spokesman Martin Danko said that Penta had offered the best deal, SITA reported. The other bidders included energy giants E.ON and Dalkia and Czech and Slovak financial groups like PPF and J&T. Danko insisted that Penta was given no preferential treatment.
According to Danko, the tender was not only about submitting the highest price for PPC but also about the bidder’sability to guarantee a solution to the socalled ‘conditions precedent’, which covered a state guarantee for a loan from the European Investment Bank (EIB) and re-negotiation of contracts with gas utility SPP, SE and the Bratislava heating company BAT. Danko said that the conditions precedent had a direct, negative impact on the operation of PPC, SITA wrote.
Penta said that Lipšic’s description of “guaranteed profits” and “advantageous agreements” demonstrated his lack of understanding about the basic conditions affecting privatisations. According to Danko, the contracts in question had to be renegotiated to the disadvantage of PPC, which was one of the key conditions of the tender, along with the removal of the state guarantee originally provided to secure the EIB loan to PPC.
The day after Lipšic announced his move, Robert Fico, head of the opposition Smer party, said that the interior ministerhad publicly confirmed doubts about privatisations under the Dzurinda government, while noting that Lipšic’s KDH had been part of that government.
Fico said Lipšic was abusing the issue ahead of the parliamentary elections and asked why Lipšic had not acted in 2004.
Béla Bugár, the leader of the Most-Híd party, which like the KDH is part of the outgoing government, told Sme that he thought Lipšic was trying to score some political advantage in the run-up to the general election.