Czech/Slovak energy group EPH to float infrastructure unit

Czech/Slovak energy group EPH to float infrastructure unit
EPH has bought dozens of energy assets across Central Europe in recent years
By Brian Kenety in Prague April 12, 2016

Czech-based energy group EPH will sell a minority stake in EP Infrastructure (EPIF) - a unit into which it has spun off many of its Central European gas assets - in an IPO in London and Prague, the group announced on April 12.

Controlled by oligarchs from Slovak financial group J&T (JTFG), EPH says the company will receive all proceeds from the float. Most of the funds will be used to buy back its own shares from Biques, a passive financial investor in the group that is also connected to J&T. EPH announced the same day that it has completed the spin-off of its major gas assets in Slovakia into EPIF.

EPH intends to retain majority ownership in EPIF and is committed to remaining a long-term investor in the group, the group said in a statement.

“In EPIF we have created a leader in energy infrastructure in Central Europe, bringing together some of the strongest EPH assets in one integrated group”, said CEO Daniel Kretinsky. Alongside another senior figure in JTFG - Patrik Tkac - Kretinsky holds a controlling interest in EPH, which has spent recent years ravenously buying up energy assets in the region, and more recently in Western Europe.

“With its key role in gas transport for European markets and its market-leading positions in the energy sectors of the Slovak Republic and Czech Republic, EPIF’s aim is to generate strong and stable revenues in the coming years,” Kretinsky added.

EPH, which comprises over 30 enterprises operating in the coal mining, electricity and heat generation sectors, said it intends to list ordinary shares in EPIF on the Prague Stock Exchange in the second quarter of the year. The company will trade on the London Stock Exchange via global depository receipts (GDRs).

Citigroup, JPMorgan, Societe Generale and UniCredit will act as global coordinators and bookrunners of the offer. Prague-based Wood & Company will act as a joint lead manager and domestic offering coordinator.

The news marks a rare exciting start to a week for the PSE. EPH’s announcement comes a day after General Electric said it would float all of its ordinary shares in its Czech banking unit, GE Money Bank, on the Prague bourse.

Gas and coal

Ahead of the announcement of the planned listing, EPH reported it has completed the intra-group reorganisation that saw a number of its assets sold to EPIH. The infrastructure holding was previously known as CE Energy. EPIH has also drawn down €1.6bn through a loan facilities agreement in order to refinance debt.

EPIF has bought a 100% stake EPH Gas Holding, which indirectly holds a 49% stake – and management control – in SPPI group. With Bratislava holding the rest, the company runs gas transmission, distribution and storage facilities in Slovakia. The major asset is Eustream, which operates the mainline carrying Russian gas via Ukraine to the European Union. It also holds a variety of minor gas storage facilities in Slovakia and the Czech Republic.

The spun off holding will also contain all shares in JTSD Braunkohlebergbau. Among other entities, the company controls German brown-coal mining company Mibrag and a nearby power station. Reports earlier this month claim that EPH is set to win the race for Vattenfall’s German lignite coal mines and power plants.

“We operate a portfolio of modern, well-invested and long-lived infrastructure assets which are of vital importance to the European energy market”, said Tomas David, CEO of EPIF in a statement. “We are well-placed to provide an attractive dividend yield to our shareholders," he added.

EPIF made a net profit of €623mn last year on sales of €3.3bn. It now has total assets worth € 9.7bn and will pay out a €365mn dividend from 2015 profit, EPH announced. The aims to grow the payout per share by 3% percent annually until 2020, EPH said.

“As a founder of EPIF, my intention is to ensure attractive and sustainable dividend payments for all our shareholders, based on our high-quality assets and the growing economies in the region," the CEO said.