EPH has cancelled plans to IPO a minority stake of spun off gas infrastructure unit EP Infrastructure (EPIF), the Czech/Slovak energy holding announced on April 27, hinting that it may have reached an agreement with a private investor instead.
The move to can the float of a 15% stake in Prague and London comes just 15 days after the closely-held group initially announced the listing. A company statement offered little hint over the reason for the move. Despite the geopolitical risk stalking EPIF, EPH claims to have had "positive feedback from the market". There is however a suggestion that the stake could be sold whole to other investors.
Ahead of setting the price range, investment banks preparing the company’s float had reportedly valued EPIF at CZK135-210bn (€5bn-7.6bn), suggesting the planned dual listing could have raised up to CZK31bn. Instead, EPH will now “consider a bilateral transaction with global infrastructure investors”, the holding said.
“We greatly appreciate the positive feedback from the market in relation to the expected initial public offering of EPIF and we want to thank investors for the interest shown in our company,” the statement reads. EPH suggested several times last year that an industry investor would be its first choice when selling the stake.
EPH is controlled by oligarchs Daniel Kretinsky and Patrick Tkac, who are connected to Slovak financial group J&T (JTFG). The key asset of EPIF, which focuses on gas, power and heat transmission and distribution, is the Slovak gas transmission system operator Eustream. It also has distribution and storage assets in the Czech Republic.
No little attention has been paid to the risk attached to the key asset. The vast majority of Eustream's €630mn revenue in 2014 was earned for the transmission of Russian gas exports to the EU via Ukraine. Moscow has pledged to bypass Kyiv's gas network by 2020. While many analysts suggest that is not realistic, it's a headline that would clearly put some doubt in the minds of investors.
For those in the region, the track record of J&T and alumni such as Kretinsky and Tkac in terms of transparency was perhaps as big a risk. A public listing, and the oversight that brings with it, never looked a natural fit for EPH. There was also concern over the appetite in Prague for a large issue.
When announcing the IPO plans, EPH had said it intended to use most of the proceeds to buy back its own shares from Biques, a passive financial investor in the group that is also reportedly connected to JTFG, although the actual beneficiaries are not known. That would still have left EPH with a huge debt burden of around €5bn, according to speculation.
The holding has maintained a voracious appetite over the past few years, snapping up assets - mostly fossil fuel power plants - in Central Europe and lately to the west. A week after the IPO plan was revealed, EPH announced it had agreed to purchase Vattenfall’s five lignite coal mines and four power plants in Germany, via a consortium with PPF Investments, the investment vehicle of Petr Kellner, the Czech Republic’s richest man.