EDF follows the beaten track out of Slovakia

By bne IntelliNews May 22, 2013

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Electricite de France (EDF) announced on May 21 that it has entered into an exclusivity agreement with Energeticky a Prumyslovy Holding (EPH) over the sale of its 49% stake in Slovak power distributor Stredoslovenska Energetika (SSE). The state-owned utility will be the second French energy major in the last six months to quit Slovakia, with both selling out to the same ravenous Czech buyer.

EDF said it expects a €400m deal for the 49% stake in Slovakia's second-largest electricity distributor - which serves the Zilina region - to be signed in the coming days, with the sale to go through in the second half of the year after securing approval from the country's competition watchdog. EPH - which has not commented - does not own other power assets in Slovakia, but completed the acquisition of a 49% stake - including management rights - in the country's gas pipeline operator SPP from Germany's E.ON and France's GDF Suez in January.

The Czech energy holding - whose ownership includes the closely-held financial group PPF - has also built up significant assets across Central Europe, and continues to do so thanks to a huge syndicated loan it secured earlier this year. It is considered a "partner" to the rapacious CEZ in carving up the power market in its home market, while some suspect it maintains close contact with Russian gas interests. EPH will now partner Bratislava - which still says it hopes to take control of the country's gas network, which is a link in the route carrying the bulk of Russian exports to Europe - in owning both SPP and SSE.

For EDF, the sale is part of an ongoing divestment programme, similar to many major European utilities. In particular, it joins the likes of E.ON and RWE in disposing of assets in the small markets of Central Europe that offer relatively little growth prospect, both to lower debt and with an eye on larger emerging markets. To that end, it remains a key power generation player in CEE - mainly in Poland, where it is the third-largest power-generation company in terms of installed capacity.

The French group bought SSE in 2002 for €160m, and has received around €200m in dividends during the time it has held the company, an unnamed source told Bloomberg. That sort of news is hardly likely to make EPH's life any easier as it deals with Prime Minister Robert Fico - who has an instinctive dislike of privatization. In particular, he has dismissed calls from the private owners of Slovak utilities to relax tariffs. The sale price represents more than six times the company's 2012 earnings before interest, tax, depreciation and amortization.

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