State still wants influence in SE

THE SLOVAK government still looks interested in gaining a bigger ownership stake in Slovenské Elektrárne (SE), the country’s largest power producer.

(Source: Sme)

The state has not submitted any binding bid for purchasing more of SE thus far and meanwhile the Italian energy group Enel, which holds 66 percent of SE, has launched exclusive talks with the Czech firm Energetický a Průmyslový Holding (EPH) about the sale of a minority stake in SE.

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“At this moment I completely do not care about what the Italians want or do not want,” Prime Minister Robert Fico said on August 26, as quoted by the SITA newswire, when commenting on the start of the talks. “We care about completion of the third and fourth blocks of the nuclear power station Mochovce. I do not care that Italians need to de-consolidate accounting books; this is their internal problem.”

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Fico said the plan for Enel to sell its 66 percent stake in SE while the remaining 34 percent is in Slovakia’s hands falls in line with his plans to grow the state’s influence.

“We will do our utmost in order that also now when the Italians have decided to sell their stake in SE to somebody else we will strengthen the position of the state in SE,” said Fico. “I still do not exclude the interest of the cabinet to obtain 17 percent of the shares being sold in the future.”

Increasing Slovakia’s current stake by 17 percent would mean the state would hold a majority 51 percent stake.

“If it shows that this would be beneficial for the state, we will do this,” said Fico. “This possibility remains open.”

Slovak Economy Minister Vazil Hudák supports strengthening the state’s position in SE but he also sees other possibilities, for example via shareholders’ agreements.

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Enel informed on August 24 that it has initiated exclusive negotiations with EPH for the sale of SE. EPH is one of two companies that submitted a binding bid for purchase of an SE stake.

“As part of the divestment programme of the 66 percent shareholding that Enel holds in Slovenské Elektrárne, Enel informs the market that it has initiated exclusive negotiations for the sale of the stake with the Czech-headquartered EPH,” Enel stated in its press release. “On the basis of the outcome of such discussions, Enel and EPH may sign a binding share purchase agreement in the coming weeks.”

Fico recalled that a two-phase sale of the 66 percent stake was planned when first Enel would sell 33 percent of SE and after completion of Mochovce the remaining 33 percent stake.

“We confirm that we launched exclusive talks on the stock’s sale with Enel,” EPH spokesman Daniel Častvaj told the Sme daily. “We, however, will not publish any further details.”

Exclusive talks

EPH already holds a strong position on Slovakia’s energy market as it controls transit and distribution of natural gas in Slovakia and distribution of electricity in central Slovakia. Thus, acquisition of a stake in SE would mean further strengthening of its position.

Czech and Slovak entrepreneurs Daniel Křetínský, who holds the managerial control, and Patrik Tkáč own two thirds of EPH while the last third is in the hands of private investors administered by the J&T financial group.

Energy market analysts see especially EPH’s ability to communicate and reach an agreement with the Fico cabinet as its advantage. While Slovakia does not hold any pre-emptive rights for acquisition of SE shares, as some parts of the Slovak energy market are still regulated, the state still holds major influence. Fico has reiterated that completion of Mochovce is the top priority and that Slovakia would not allow Enel to withdraw from SE until completion of the project is secured.

Recently EPH acquired Slovakia’s gas utility SPP. Later it sold the state the loss-making household sales portion and kept control over profitable transit of gas via Slovakia abroad and distribution of gas to end clients within Slovakia. EPH has also withdrawn arbitration against the state related to gas prices.

“Certainly its [EPH’s] advantage is that they have managed to carry out an acquisition in SPP, large in size in Slovakia, and have managed to reach an agreement with the state,” said energy sector analyst Jozef Badida as cited by TASR, noting also EPH’s lack of experience with operation of nuclear power stations.

Ľuboš Vančo, partner of the consultancy company KPMG, agrees.

“During that transaction [related to SPP] they have shown that they are able to find a common tongue,” Vančo told the Denník N daily. “Without cooperation with the cabinet the sale of a stake in SE is impossible.”

Analysts do not exclude repeating of the SPP scenario.

“Either taxpayers will subsidise nuclear power stations via a subsidy model or the state will pull out nuclear assets from SE,” Michal Šnobr, energy analyst cooperating with J&T bank, told Sme. “The state will acquire what is loss-making, similarly as it was in the case of SPP.”

Křetínský has already labelled the project of completion of Mochovce disadvantageous given the current low energy prices, according to the Pravda daily.

Other bidders

Aside from EPH, a bid has been submitted by a consortium consisting of Slovak oil refinery Slovnaft and Hungarian energy company MVM. The consortium announced in July that it had upped its offer for purchasing the stake in SE.

Czech energy company ČEZ also originally showed interest in the shares but it eventually decided not to submit an offer.

Slovak Economy Minister Vazil Hudák also indicated that the China National Nuclear Corporation (CNNC) was interested in buying Enel’s stake and that it was carrying out due diligence at SE. But the firm has not submitted any binding bid thus far.

The Slovak cabinet has been looking for an advisor that would advise it in terms of the sale of the stake in SE but it has failed to find such an advisor thus far.

Italy’s Enel announced the sale of its stake in SE and other assets in 2014 as part of efforts to cut its debt load. It acquired the 66 percent share, which included also renting of the Gabčíkovo hydropower plant for €840 million in 2006, while the privatisation had not been completed yet. Earlier in 2015, in response to demands of Slovakia, SE returned Gabčíkovo back to the state, a transaction resulting in both sides demanding hundreds of millions of euros in compensation from the other.

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