State increases pressure on SE

THE TENSIONS between the state and the dominant power producer Slovenské Elektrárne (SE) are escalating with a police search on December 16 at SE headquarters in Bratislava and a new criminal complaint for an alleged fraud in running Gabčíkovo hydroelectric power plant.

THE TENSIONS between the state and the dominant power producer Slovenské Elektrárne (SE) are escalating with a police search on December 16 at SE headquarters in Bratislava and a new criminal complaint for an alleged fraud in running Gabčíkovo hydroelectric power plant.

These developments came in the wake of lengthy negotiations that saw the state agree to an increased budget for completion of the second two blocks of the Mochovce nuclear power station to €4.6 billion on November 21 and the unilateral termination of SE’s lease contract Gabčíkovo on December 4. All these events could complicate attempts by the Italian energy group Enel to sell its majority stake of 66 percent in SE.

“Only after the completion of the third and fourth block the Slovak government will be ready to talk with Enel about where and how it wants to sell its 66 percent of stock,” Prime Minister Robert Fico said on December 17. “Until then, however, we won’t cooperate in the sale.”

The state-owned company Vodohospodárska Výstavba (VV) claimed that SE is not properly observing the contract on operating the hydropower plant Gabčíkovo and filed on December 16 a criminal complaint against an unknown offender acting as the statutory body of electricity utility SE for an alleged fraud in running the plant.

“The reason for this step was a contract on the operation of the hydropower plant Gabčíkovo with SE,” VV spokeswoman Diana Migaľová Baschierová said, as cited by the SITA newswire. “The state-owned enterprise sees in the action of certain individuals characteristics of attempted criminal offense of fraud.”

VV claims that SE is not properly fulfilling the contract also because SE does not pay the agreed-upon €5 million in maintenance costs per year. SE allegedly began having problems with these payments only since September 2013, around the time when information on Enel’s plan to sell the stake emerged for the first time.

VV asserts that it pays annually to Slovenský Vodohospodársky Podnik (SVP) €15 million on average for maintenance of the of the hydropower plant Gabčíkovo and thus SE pays only one third of maintenance costs.

“Also on the basis of these facts, the state-owned enterprise decided to act and filed a criminal complaint against an unknown perpetrator in the position of the statutory body of SE, so as to protect the property of the Slovak Republic,” Migaľová Baschierová said.

SE sees the complaint as ill-founded, SE spokeswoman Jana Burdová told the TASR newswire. According to Burdová, SE has always observed the contract and has paid all its obligations related to the contract on time but questions legitimacy of payments to SVP. If this claim is not confirmed, SE will require money back.

“We believe that it’s an unjustified move that should divert attention from the essence of the problem that has emerged by termination of the contract on operating the hydropower plant Gabčíkovo [by the state] without any reason,” said Burdová, as cited by TASR.


Police search


On December 16, police conducted a raid on Enel’s headquarters in Bratislava while the police operation was allegedly related to the events around Gabčíkovo dam, according to reports by private broadcaster TV JOJ. According to Police President Tibor Gašpar, police were only collecting documentary evidence, while nobody was detained. The police also came to the power plant in Gabčíkovo and the nuclear facility in Jaslovské Bohunice. This was already the second search of SE, with one occurring earlier this summer.

“Since this morning, police have been performing additional seizure operations in accordance with the Criminal Procedure in cases that were publicised some time ago and relate to Slovenské Elektrárne,” Gašpar confirmed for TV JOJ. “The current investigation led to the conclusion that it is necessary to provide further evidence.”

The search was a follow-up to a similar summer police raid.

“Investigators continued to secure documents and data which they started this summer,” Burdová told SITA. “Slovenské Elektrárne offers its full cooperation with investigators and their experts.”

Economy Ministry spokeswoman Miriam Žiaková said that police have been interested in documents connected to the privatisation of SE. Enel thinks that the July raid was not connected with their activities within SE.


Terminated contract


Slovakia terminated the contract on the rental of the hydropower station Gabčíkovo to SE, accusing SE of violation of the contract. SE denies the accusations and indicates that it may take legal steps.

“After eight years of operating the Gabčíkovo hydropower plant by the Italian company Enel, we have decided, based on flagrant violations of the contract on operation of the Gabčíkovo hydropower plant, to terminate the contract as of today,” Fico said at a December 4 press conference.

Fico listed three reasons for termination of the contract. The first alleged that SE refused to provide the state with data and information that would allow it to determine to what extent the distribution of profits from the hydropower plant was fair. The second, he said, was that SE under the Italian management has not prepared any plans for refurbishment and general overhauls of Gabčíkovo. The third reason is that Enel has not fulfilled its duty to pay €5 million annually to its owner, the state-controlled Vodohospodárska Výstavba which manages the facility.

SE denies all Fico’s allegations. SE receives 35 percent of revenues annually from the sale of electricity generated by Gabčíkovo, but it simultaneously pays all the fixed operating and maintenance costs, the company wrote in a press release.

In its response to the termination of the contract SE writes on its website that the opportunity to withdraw from the contract is anchored directly in its text, as is also the obligation to indemnify SE, while the company intends to apply the claim. It may climb to millions of euros but it is expected that only an international arbitration would decide this.

SE maintains that it has always followed agreements, met the given obligations and paid the contractually stipulated payments to the owner of the power plant to the full extent.

“However, we have questioned the right of Vodohospodárska Výstavba for our payments for Slovenský Vodohospodársky Podnik structures in Gabčíkovo in the total amount of €43 million for the years when there was no contract between SVP and VV,” the company said in its statement.

The hydropower station in Gabčíkovo with an installed capacity of 720 MW, which is part of a Slovak-Hungarian dispute, was excluded from the SE privatisation deal. Italian Enel acquired the 66-percent stake in SE in 2006 during the government of Mikuláš Dzurinda, paying €840 million for the package.

SE and Vodohospodárska Výstavba signed the rental contract on Gabčíkovo in March 2006, before the completion of the privatisation process, SITA wrote. Based on this, they obtained the right to operate Gabčíkovo for 30 years.

But Fico’s first government was already opposed to the deal. In 2007, the government challenged the contract in court, with the aim to cancel it. In total there are 12 open lawsuits on the matter.


Sale attempt


Earlier this year Enel offered its 66 percent stake in SE, along with other assets for sale, as part of a plan to cut debt. The estimated value of the stake in SE ranks from billions of euros to negative value because of the outstanding Mochovce issues. According to the latest plans, SE should complete the third unit at Mochovce in 2016 and the fourth one in 2017.

Several companies have showed interest in the stake including Slovak refinery Slovnaft together with the company MVM Group. Czech electricity companies ČEZ and Energetický a Průmyslový Holding (EPH) have officially confirmed interest in SE, too, while other interested investors mentioned by media may be Finland’s Fortum and the China National Nuclear Corporation (CNNC).

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