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Demand for payment, audit pressure SE

THE STATE has intensified pressure on the country’s largest power producer, Slovenské Elektrárne (SE), in which it holds a minority share, and whose majority stake is for sale. Officials are asking for an additional payment of €200 million from SE’s majority owner, the Italian energy group Enel, to close a still disputed privatisation deal, and have sent the Supreme Audit Office (NKÚ) to SE to check the management and accounting to find out why the completion of the second two units of the nuclear power station in Mochovce has seen delays and cost overruns.

THE STATE has intensified pressure on the country’s largest power producer, Slovenské Elektrárne (SE), in which it holds a minority share, and whose majority stake is for sale. Officials are asking for an additional payment of €200 million from SE’s majority owner, the Italian energy group Enel, to close a still disputed privatisation deal, and have sent the Supreme Audit Office (NKÚ) to SE to check the management and accounting to find out why the completion of the second two units of the nuclear power station in Mochovce has seen delays and cost overruns.

Slovakia sold its 66 percent majority stake in SE to Enel in 2008 for €840 million, but after eight years the privatisation deal has not been finalised as yet.

“Before the sale itself takes place, we will want to complete the privatisation [process],” said Miriam Žiaková, a spokeswoman for the Economy Ministry. “We will rely on the analysis, which mentioned the additional payment of about €200 million.”

Enel refuses to comment on the issue, claiming that negotiations are ongoing.

“Because the negotiations are still not over, we will not comment on this topic,” the energy website vEnergetike.sk quoted an Enel spokesperson as saying.

When selling the 66-percent stake in SE in 2006, the state agreed with Enel that after the Italian investor enters SE, they would look more closely into whether the price of €840 million was adequate. In question was the rental of the Gabčíkovo hydropower station, for example. In late 2009, Ľubomír Jahnátek, the then economy minister of Prime Minister Robert Fico’s first government, proposed the so-called zero variant, based on which none of the involved parties would be obliged to pay anything to the second party.

However, the Slovak National Party, which along with the Movement for a Democratic Slovakia (HZDS) formed the coalition government with Fico’s Smer, did not agree with such a proposal, requiring additional payments from Enel for its stake. Because of the approaching parliamentary elections scheduled for 2010, the issue remained unsettled.

The next government led by Iveta Radičová tried to complete the deal too, but this time the state required an additional payment from Enel. However, the government collapsed and the matter was still not resolved. In 2012, Fico and his Smer party returned to power. The Economy Ministry led by Tomáš Malatinský commented on the issue in late 2012, saying that the ministry is still analysing whether Enel should pay additional money or the state should return a portion of the paid sum. Finally, on September 23, the Economy Ministry, now led by Pavol Pavlis, demanded the additional payment.

NKÚ audit

Back in 2008 when launching the completion of two units of the Mochovce nuclear power station, SE proudly called it the largest private investment in the history of Slovakia. The construction was planned to be finished at the end of 2012 and 2013 respectively, with a price tag of €2.8 billion. The deadline has since been postponed and the price has increased. SE explains the delay and higher costs as necessary after changes were made to the project in the wake of the Fukushima accident in Japan, among others. The latest plan agreed upon by both shareholders mentioned a budget of €3.8 billion and deadlines extended to 2014 and 2015, respectively.

Earlier in 2014, SE requested additional time and money. As the project is financed from SE’s dividends, this means that the state would be not able to use its portion of the dividends elsewhere in the state budget. To find out why the price of Mochovce keeps rising, the state is sending the NKÚ to SE.

“It is important for us, based on what arguments or what calculations SE requires a change in the budget and the change in the [terms] of completion,” Žiaková told the public broadcaster Slovak Radio.

Parliament agreed to send the NKÚ to audit SE on September 24. Its assignment, initiated by the Economy Ministry, is to look into how SE handles its finances, while the ministry claims that the planned inspection is not linked with the planned sale of the majority stake in SE.

Jana Burdová, a spokeswoman for SE, said in response to the planned audit that SE is prepared to cooperate further if the NKÚ decides to carry out an internal audit, as cited by the SITA newswire.
Independent MP Jozef Kollár welcomed the audit, yet he proposed to enlarge its scope, claiming that there is a grave suspicion that huge amounts of money has been “siphoned off” from SE to its Italian parent company Enel before the upcoming sale of SE.

“The suspicion doesn’t stand on a clay leg ... it has a firm leg to stand on,” said Kollár on September 24, as cited by the TASR newswire. “So let’s have the NKÚ check it.”

SE and Enel denied the accusations one day later, saying that all significant transactions are being approved by both shareholders, according to TASR.

Parliament and the related parliamentary committees turned down proposals to expand the audit of the feasibility study of the completion of Mochovce or steps during negotiations about completing the SE privatisation deal.

SE is already under investigation for reasons pertaining to its privatisation. On July 23, Slovak police came to the company’s headquarters and other facilities seeking documents related to the privatisation of the company back in 2006.

The sale

Low market electricity prices mean the incomplete units at Mochovce are often cited as a problematic element of Enel’s efforts to sell its 66 percent stake in SE. Thus, there has emerged speculation that the state would take the project over or that it would guarantee prices of the electricity generated, the Pravda daily wrote. Or that those interested would offer a low price or that Enel will not sell the stake.

Luca D’Agnese, CEO of SE, confirmed for Goodwill magazine that shares [of SE] are included in the portfolio, which is offered for sale, “but if no attractive offers arrive, Enel is not forced to sell its stake.”

Earlier this year, Enel announced it would attempt to sell its stake in SE. The sale of its power generating assets in Slovakia and its distribution and sales assets in Romania are part of a broader €6-billion programme of asset sales begun in 2013 and aimed at reducing the Enel Group’s debt.

As for potential buyers, the Czech companies ČEZ and Energetický a Průmyslový Holding (EPH), as well as Russian Rosatom, have been mentioned, while the latter option is being linked with concerns about Slovakia’s increasing dependence on Russia.

ČEZ has confirmed that the unfinished reactors are a problem.

“I cannot imagine that ČEZ would decide at this moment to acquire the whole package of shares, including the unfinished nuclear power station,” Václav Pačes, chairman of the ČEZ supervisory board, told the Czech news channel ČT24.

The state, as the minority owner, insists that the completion of Mochovce is one of its conditions for the sale.

The state is also interested in the stake. While Pavlis indicates that the state may acquire the stake via an energy holding that manages shares in state-owned energy firms, Prime Minister Robert Fico hinted that the state may buy just 17 percent.

“Thus, we would obtain the majority and control over SE,” said Fico, as cited by TASR, adding that to do this, the government needs to find a partner interested in the remaining 49 percent.

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