Stake in SE might be for sale

RUMOURS have been circulating for several years that the dominant Slovak power producer, Slovenské Elektrárne (SE), is for sale, but after the new director of the Italian energy giant Enel indicated that its 66-percent stake in SE is among the assets Enel is offering for sale, they have become more realistic.

RUMOURS have been circulating for several years that the dominant Slovak power producer, Slovenské Elektrárne (SE), is for sale, but after the new director of the Italian energy giant Enel indicated that its 66-percent stake in SE is among the assets Enel is offering for sale, they have become more realistic.

Enel Chief Executive Francesco Starace, who took over from predecessor Fulvio Conti in May, has said the group’s 66 percent stake in SE could be considered for sale, Reuters reported earlier in June. Enel aims to sell €4.4 billion in assets to cut net debt to around €37 billion. According to Starace, SE had an enterprise value of around €3.8 billion, including debt of some €1 billion.

The Slovak Economy Ministry, which administers the ownership rights in SE on behalf of the Slovak National Property Fund, which holds 34 percent stake in SE, has not been officially informed about the plan, but according to Economy Minister Tomáš Malatinský, the ministry has already asked for it.
Slovakia holds a pre-emption right for the Enel’s stake in SE, but Malatinský’s bigger question is whether Slovakia is in a financial position to utilise this right.

The still incomplete third and fourth units of the nuclear power station in Mochovce remain a priority.

“Huge investments have been made into it [completion of the units] and we will agree only with such an investor who is able to guarantee that the units will be completed and that it [the investor] also can do it and that it is licensed for European conditions. This will be the basic criterion for us when we will be deciding who should enter [SE],” said Malatinský, as cited by the Sme daily on June 22, adding that his ministry will prepare a paper which will ascribe what possibilities Slovakia has to influence the sale of Enel’s stake in SE.

The completion of Mochovce is one sticking point when it comes to the relationship between SE and the Slovak government. The project to complete the two units of the Mochovce nuclear power stations is being delayed and its latest official price-tag of €3.8 billion is increasing too. The original €2.8-billion plan was to complete the third unit in 2012 and the fourth in 2013. While the Italian partner explains the delay as well as higher costs mostly by additional changes incurred by the project after the Fukushima accident, for the Slovak side this means allocating additional funds and postponed incomes from the sale of electricity generated by the new reactors.

But there is another open question related to SE over its still unresolved privatisation, Malatinský noted. Based on the privatisation agreement, the final price for Enel’s 66-percent stake should have been revised based on an independent audit of SE’s assets and changes made to them between 2003 and April 2006, the online edition of the Trend weekly wrote in February 2011. Disagreements have persisted in recent years over whether Enel still owes the state money, or the reverse.

“We have still not agreed yet whether there should be and [if yes] what an additional payment by Enel should be,” said Malatinský, adding that those able to agree with the current government over the completion of the privatisation have a much stronger position in negotiations with Enel.

Potential buyers

While Enel is already choosing an advisor for the sale, according to the Hospodárske Noviny daily, there is already a list of companies which may be interested in acquiring the majority stake in SE. These include the Czech energy company ČEZ, which actually lost against Enel when Slovakia was selling the majority stake of SE in 2006.

“We had eminent interest in SE years ago, because mutual interconnection, thanks to the common history within one state, made sense,” Barbora Půlpánová, a representative of the ČEZ group said, as cited by the Pravda daily on June 20. “The Slovak market continues to interest us, but we will not comment on concrete possibilities.”

Another potential Czech investor has been mentioned, Energetický a Průmyslový Holding (EPH), in which financiers from the J&T group now hold majority. Malatinský told the public TV broadcaster RTVS on June 20 that they have unofficially registered EPH’s interest, but that EPH has not approached the ministry yet with an official stance.

French GDF Suez, which sold its stake in the gas company SPP in 2013 to EPH, has also been mentioned in the media as a potential buyer. But its spokesperson declined to comment.

Some Russian companies, including Rosatom, may be interested in the SE stake too, while this option is being linked with concerns of Slovakia’s increasing dependence on Russia, in which the energy sector is part of foreign policy. Slovakia already imports from Russia nuclear fuel for its nuclear power stations as well as most of natural gas it consumes.

“Maybe also the Slovak government should take into consideration some security criteria when discussing the entry of Russian capital into the nuclear energy sector in Slovakia,” Peter Marčan from the Institute for Energy Security told the public broadcaster Slovak Radio.

Jiří Šimara, an analyst with Cyrrus, estimated the value of Enel’s stake at around €3 billion and expects a fight between investors.

“There will be high interest in SE,” Šimara told Hospodárske Noviny.

Recently, the Russian bank Sberbank, in cooperation with its Slovak and Czech affiliations, provided SE a loan of €870 million and according to Rastislav Murgaš, general director of Sberbank Slovensko, if the majority stake in SE is sold, they will also comment on the potential buyer, indicating that they might influence who ends up with the SE stake.

“Except for speculations and general statements, we do not have information that a change of shareholders will take place within a short period of time,” said Murgaš, as cited by Pravda on June 25. “But we would assess a possible change in a standard way as any other bank creditor. This is because part of such a credit relation usually allows the creditor to comment on a fundamental change, which a change in shareholders certainly is.”

Italian Enel acquired the 66-percent stake in SE in 2006 during the Mikuláš Dzurinda government. At that time it paid €840 million when some assets were excluded from the deal, for example, the first two units of the nuclear power station in Jaslovské Bohunice, which Slovakia promised during EU membership negotiations to close down in 2006 and 2008, respectively, as well as the hydropower station in Gabčíkovo, which was part of a Slovak-Hungarian dispute.

SE has 5,739 MWe of gross capacity in 34 hydroelectric, two nuclear, two thermoelectric and two photovoltaic plants, the company informs on its website.

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