Czech investment group PPF said set to exit growing energy player EPH

By bne IntelliNews December 9, 2013

Tim Gosling in Prague -

Swapping energy for telecommunications, closely-held Czech financial group PPF is set to sell its stake in M&A-hungry Energeticky a prumyslovy holding (EPH) to remaining shareholders for CZK30bn (€1.1bn), according to local media.

Netherlands-registered PFF, owned by the Czech Republic's richest man Petr Kellner, will sell its 44.44% stake to Slovak/Czech group J&T and manager Daniel Kretinsky, Motejlek.com and Lidovky.cz reported on December 8. Kellner's group entered EPH in 2009 for some CZK3bn. This means that it will raise the value of its investment ten-times, says Lidovky.cz.

While Kretinsky - who will continue to manage EPH after the deal - refused to comment, he did not deny it will happen, reports CTK. "No agreement on the transaction has been signed, so it has no sense to comment on the speculation," he said.

However, reports say an agreement has been closed. PPF will gain €1bn for its stake, with the remainder of the transaction cost to cover loans Kellner's group has granted to EPH. Motejlek.com says that the shareholders have agreed a valuation of €2.5bn for EPH.

The most probable scenario, according to the reports, is that J&T and Kretinsky will split PPF's stake roughly down the middle. That would hand the financial group a majority stake and Kretinsky a blocking minority. Ketinsky will continue to manage EPH, according to unnamed sources.

The energy group has pushed its way into a strategic position in Central Europe over the last few years via a ravenous appetite for acquisitions. That has seen it build a portfolio of more than 30 entities active in all major parts of the energy chain (eg. mining, heat and electricity generation, and commodities trading).

Along the way, it has often been accused of colluding with state-controlled CEZ to carve up the Czech power market. It is now also the third largest heat supplier in the country, and holds a similar position in the German coal mining industry.

However, in early 2013, it took a step up as it became a key player in the geopolitical playground of Russian gas sales to Europe by buying into Slovak pipeline operator SPP. The €2.6bn purchase from E.ON Ruhrgas and GDF Suez handed the company 49% and management control of the Slovak section of the pipeline that carries the bulk of Russian gas imports into the EU.

There was a mini-scandal in Bratislava in September when it was announced that the Slovak government, which holds 51% in SPP, would buy EPH out of the gas importing part of the business - which runs at a loss due to heavy regulation on domestic gas prices. The opposition noted the good relations between the ruling Smer party and J&T.

Kellner, meanwhile, has taken off in a different direction, with PPF becoming one of the Czech Republic's three major mobile operators after it purchased the Czech subsidiary of Spanish telecoms giant Telefonica for €2.47bn. In November, PPF was also reported to be eyeing the minority stake in Slovak Telekom that is currently held by the state.

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