Czech energy group EPH close to securing €1bn loan to power acquisitions

By bne IntelliNews March 16, 2012

Tim Gosling in Prague -

Czech energy group Energeticky a Prumyslovy Holding (EPH) is closing in on a €1bn syndicated loan to power its ambitious acquisition plans for Central European gas, coal and power assets, Reuters reports unnamed sources as claiming. The deal would be the largest syndicated loan in Czech banking, the newswire adds.

EPH - 80% owned by closely-held financial groups PPF and J&T - is thought to be seeking the funds to back purchases of Slovak gas monopolist SPP and German coal mine Mibrag, amongst other assets. With the company having said it is ready to spend as much as €5bn on acquisitions, it has also expressed interest in Net4Gas, a unit of RWE that is due to come onto the market soon.

The newswire reports that two unnamed sources have confirmed the syndicated loan deal is close following reports in February that negotiations were underway. Final commitments on the six-year refinancing loan should be collected by March 23, one said.

Up to 12 banks could join the deal, the source said. UniCredit's Czech unit is reported to be leading the syndication and has committed €200m. Erste's Ceska Sporitelna, KBC's CSOB, Societe Generale's Komercni Banka, and the local unit of ING are also involved. "I personally expect slight oversubscription of the deal," the source told Reuters. "The client wanted to have it because... the local market is over-liquid. The local market can offer significantly better conditions to borrowers than international ones."

EPH spokesman Martin Manak said: "I have no specific information about any loan."

EPH has quickly assembled a portfolio of more than 20 firms in electricity, heating and coal, securing a central role in the Czech energy market second only to state-controlled giant CEZ.

EPH signaled in early March that it is ready to fight for two thermal power plants CEZ plans to sell. It's thought that the company is targeting the 800-megawatt (MW) Chvaletice power plant and the 1,000 MW capacity Poerady plant to prevent miner Czech Coal getting a foothold on the generation market.

The company now harbours ambition to step out into the region, with Daniel Kretinsky - who holds 20% - claiming it is ready to splash €5bn on acquisitions and expansion. Potential targets include a new 600-800 MW coal-fired plant near the Mibrag mine and possible acquisition of stakes in two existing German power plants.

However, it's the Slovak and Czech gas assets that have raised most eyebrows. Given the strong Russian connections of PPF owner Petr Kellner, and the clear strategic interest for Gazprom in the country's gas pipelines - which form a section of the mainline export route to Europe - speculation persists that EPH may be acting in concert with the Russian gas giant. Manak said in early March that EPH is capable of going forwards with acquisitions of both without any problems.

However, whilst a deal for Net4Gas could prove reasonably straightforward, with RWE looking to dispose of the pipeline operator as part of its €7bn divestment drive, Slovak politics looks to have delayed the purchase of 49% in SPP from a consortium of E.ON and GDF Suez.

Although the companies have confirmed they would like to sell, it remains to be seen what the new Slovak government, which was voted into power with a large majority on March 10, might say. Prime Minister-in-waiting Robert Fico moved to try to reverse privatizations during his last term that finished in 2010, and was highly critical of the E.ON and GDF's operational management of SPP.

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