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State agrees to changes in gas firm

THE STATE is one step closer to increasing its say in the management of the country’s major gas utility as part of changes to the ownership structure of Slovenský Plynárenský Priemysel (SPP) and its subsidiaries. Ministers on December 12 unblocked the sale of a 49-percent minority share package currently owned jointly by foreign shareholders E.ON Ruhrgas and GDF Suez, thereby giving up its pre-emptive right to purchase the shares. The intended buyer of Slovak Gas Holding, the vehicle for the stake, is the Czech firm Energetický a Průmyslový Holding (EPH), the SITA newswire reported.

THE STATE is one step closer to increasing its say in the management of the country’s major gas utility as part of changes to the ownership structure of Slovenský Plynárenský Priemysel (SPP) and its subsidiaries. Ministers on December 12 unblocked the sale of a 49-percent minority share package currently owned jointly by foreign shareholders E.ON Ruhrgas and GDF Suez, thereby giving up its pre-emptive right to purchase the shares. The intended buyer of Slovak Gas Holding, the vehicle for the stake, is the Czech firm Energetický a Průmyslový Holding (EPH), the SITA newswire reported.

In the process, the government announced that it had acquired – via a separate deal with EPH – the opportunity to acquire complete control of SPP, the parent company which sets prices for the gas its subsidiaries distribute and supply to customers. Economy Minister Tomáš Malatinský assessed the bill for acquiring the 49 percent of SPP that it does not currently own at €58.8 million. If the state’s tentative plan works out, EPH would retain 49-percent stakes in SPP-distribution and Eustream, the profitable subsidiaries of the gas utility, while the state would buy 100 percent of the SPP parent company, the Sme daily reported. One of the opposition parties suggested that the deal puts Slovakia’s energy security at risk.

“We have roughly a quarter [year to say] whether we would really go to 100-percent in SPP,” said Malatinský, as quoted by SITA, explaining that in the first three months of 2013 the state intends to conduct an audit into SPP to see whether the deal would be advantageous for the state. “Of course, if we find it disadvantageous then we would not use this [option].”

If the state chooses not to exercise its right to purchase the remaining 49-percent stake in the SPP parent company, EPH would have the right to sell this stake under the same conditions as it acquired it, the minister said.

Peter Marčan, an analyst with the Energy Security Institute, a think tank, commented that the state should not have a say in SPP’s pricing policy, as the current law defines this as being entirely within the remit of the regulatory authority, the Office for Regulation of Network Industries (ÚRSO).

“Prices artificially pushed down across the board lack solidarity [i.e. are not redistributive], because they are also beneficial for households which aren’t socially challenged [i.e. poor],” he told the TASR newswire, adding that the state should use different ways to make energy more affordable for less well-off families.

As for where the state would find the cash to make the purchase, Malatinský suggested that it could use its SPP dividends to pay for the deal.

“The entry of the new owner will guarantee a dividend share of €400 million in the following three years,” said Malatinský, as quoted by TASR. “This means that €300 million will certainly go into state coffers and €100 million would be [used] to cover any potential losses.”

The cabinet’s approval of the sale comes after an ongoing and very public wrangle between the existing minority shareholders and Prime Minister Robert Fico over gas pricing. Fico had vowed to block the sale of the share package until he was given assurances that the minority stakeholder would refrain from pursuing higher gas prices for households in 2013.

EPH is controlled by Czech tycoons Daniel Křetínský and Petr Kellner, as well as Slovak investment group J&T. As part of the deal, the draft of which was agreed on December 12, after EPH buys into the gas utility the minority stakeholder will abandon legal claims regarding alleged losses it claims it has suffered due to regulation of prices in the household supply sector between 2008 and 2013, SITA wrote.

The ruling Smer party only pretends that it intends to reduce gas prices, but actually would “rob Slovakia of millions of euros” and shift the gas company into “the hands of wheeler-dealers”, said Ivan Štefanec, a deputy with the opposition Slovak Democratic and Christian Union (SDKÚ), as quoted by TASR.

Štefanec argued that until now SPP has been run by reputable companies, referring to the German and French stakeholders, but that the sale might endanger future gas supplies.

Štefan Hudacký of the opposition Christian Democratic Movement (KDH) called the process “non-transparent”, suggesting that the state wants to control prices for end-consumers through the firm’s general shareholders’ assembly, which is already possible now, SITA wrote. The mother company will not have any active property, since all SPP’s property is actually owned by its daughter companies, he added.

The deal

According to Malatinský, the ownership reshuffle should boost the state’s managerial powers in the company. At present, as part of the terms of the deal by which E.ON Ruhrgas and GDF Suez bought their 49-percent stake around ten years ago, the state does not have management control despite owning a 51-percent stake.

“The right of the Slovak partner to information will widen significantly,” the Ministry of Economy stated.

The deal would also bring a stronger position to the state in SPP’s subsidiaries, while the definition of the main SPP group will widen to incorporate Nafta and SPP CZ a company currently operating as an SPP subsidiary in the Czech market, SITA wrote.

The ministry also boasted of achieving a better position in terms of dividend policies, and suggested that EHP, through its representatives, will ensure that the board of directors submits to the general shareholders’ assembly proposals on the distribution of profits in such a way that annual dividends amount to a minimum of €600 million, and that Slovakia will until June 30, 2013 have the option to request payment of a special dividend, SITA reported.

Earlier this year Prime Minister Robert Fico lashed out at SPP’s minority stakeholders after they refused to withdraw requests to increase prices by between 18 and 25 percent, as he had previously demanded.

“They are submitting amoral proposals, which have nothing to do with reality,” said Fico on October 17.

The minority shareholders of SPP approved the request for gas price hikes for 2013, ranging from 18.56 percent to 25.43 percent, on September 29 at a meeting of the board of directors, where they hold four of the seven seats. The general assembly, where the state holds a majority, had the opportunity to block the rises and did so on October 29. ÚRSO has the final word over any price rises that affect regulated markets.

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