CEZ says it will not bid for Slovenske Elektrarne

By bne IntelliNews May 7, 2015

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Czech energy group CEZ said it will not submit a bid to buy Enel’s 66% stake in Slovak power producer Slovenske Elektrarne (SE) after Bratislava declared it wanted to raise its own 34% stake and threatened to block any sale before the Italian company finishes the two new reactors it is building at Mochovce.

“Negotiations between Enel and the Slovak government have resulted in the Slovak government’s interest in increasing its stake in Slovenske Elektrarne as well as its interest in Enel giving priority to the completion of the construction of Units 3 and 4 at the Mochovce power plant, which brings a number of new inputs into the situation,” CEZ said in a statement on its website on May 7, ahead of the May 9 deadline Enel has set for binding bids. 

CEZ added the company remains ready to discuss ways how it "can support the development of the Slovak energy sector with both the Slovak government and Enel".

At the same time, Czech-Slovak power group EPH, which is seen as a potential ally of the Slovak government, announced through its spokesman Daniel Castvaj that it has already submitted a binding bid for Enel’s stake in SE, TASR news agency reported.

The two announcements come as little surprise. EPH has already stated it is not giving up its interest in the Slovak company. "EPH seeks to verify if it is possible to find a solution that would be in the interests of Slovakia and Enel and in which EPH could play a meaningful role," the company said in April.

CEZ chief executive Daniel Benes suggested recently that any investor would be unwise to go ahead with a bid for SE without Bratislava's blessing. Meanwhile, not many foreign suitors are likely to be interested in becoming a minority partner with a government that makes its opposition to privatisation so clear.

EPH, controlled by closely-held Slovak financial group J&T, has already done a very similar deal. In 2013 it bought EDF Suez and E.ON out of their 49% stake in Slovak gas utility and pipeline operator SPP. In that sale the Slovak government also put bidders off as it pushed - but failed - to remove the privatisation stipulation handing management control to the minority owner. Last summer, Bratislava bought EPH out of the loss-making gas sales unit, leaving the Czech company with the lucrative distribution and transmission parts of the business. 

Apart from CEZ - which had long has been seen as the leading suitor for the stake - EPH and the Slovak state, other contenders include a consortium between Hungary's MVM and MOL and Finish energy producer Fortum.

Ever since Enel announced in the summer its intention to sell the SE stake, it has been under pressure from Bratislava to stay on until it completes the construction of the new units at SE’s Mochovce nuclear power plant. Slovak Prime Minister Robert Fico has also made it more and more clear recently that he wants to boost the state's position in the company. 

Enel now looks close to giving in to the pressure and abandoning the sale process. Following a recent meeting with Fico, Enel CEO Francesco Starace raised for the first time the possibility of selling the 66% stake in tranches, with the Slovak state buying enough shares to regain a majority, and Enel remaining a minority shareholder until the new units at Mochovce are completed.

Speaking about the potential solutions, Starace said that one of them is Bratislava to get 51% and someone else buying the rest. A model where there would be three shareholders - Enel, the state and someone else, could also be a possible solution, he added.

Enel says it is now running two parallel processes: the auction process and the discussions with the government. As he came out of the meeting, Fico said Bratislava will now start separate negotiations with Enel, reiterating that the government would try to block any attempt by Enel to divest the stake before Mochovce is completed. Fico is expected to go to Rome in June to discuss any potential deal.

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