EPH picked as preferred bidder for Slovenske Elektrarne

By bne IntelliNews August 24, 2015

bne IntelliNews -


Enel has launched exclusive negotiations with Energeticky a Prumyslovy Holding (EPH) as part of the divestment programme of the 66% stake in Slovak power producer Slovenske Elektrarne (SE), the Italian utility announced on August 24. The talks likely set up a deal that will see the Czech-based energy holding join as a minority partner, with the state to take control. 

Enel has been looking to sell up in Slovakia for over a year. However, it has met tough opposition from the state, and is now looking to sell just some of the stake for the meantime. The Italian utility said in a statement that it could sign a binding agreement with EPH, which is well used to working with Bratislava, in the coming weeks. 

Following months of pressure from the government, Enel announced this summer it will divest its Slovak assets in at least two tranches. As dictated by Prime Minister Robert Fico, the company now suggests it will remain a minority shareholder until completion of the long-delayed and over-budget nuclear project at Mochovce. The state has also made it clear it wants to boost its current holding of 34% in the country's dominant power producer. 

That push has seen the likes of CEZ – seen as the leading suitor when Enel first announced it wanted to sell in July 2014 – drop out of the race. The head of the Czech utility said last year that any investor buying into SE without the blessing of Bratislava would be "crazy". 

The equity value of the stake is thought to be around €900mn, according to Reuters. SE held €600mn in debt at the end of last year. 

Front of the line 

It also appeared to push EPH to the front of the line. The owners – from Slovak financial group J&T – are reportedly on good terms with Slovak Prime Minister Robert Fico. 

The Czech-based holding was previously involved in a similar transaction. EPH bought EDF Suez and E.ON out of their 49% stake in Slovak gas utility and pipeline operator SPP in 2013. During that sale, Fico's government put off bidders as it tried to regain management control from the minority shareholder. 

However, the government did not have the cash at the time to pull that deal off. EPH, however, appears to have found a route to working in harmony with Fico, who has regularly blasted foreign investors that bought into Slovak firms via privatisation deals under previous rightwing governments. Last summer, Bratislava bought EPH out of SPP's loss-making gas sales unit, leaving the energy holding with the lucrative distribution and transmission parts of the business. 

This time around Slovakia has the cash, after selling a 49% stake in Slovak Telecom in May. The government now looks to be guiding the sales process for SE from behind the scenes. 

Economy Minister Vazil Hudak recently said the government will press forward with its bid to raise its interest in SE after Enel selects a preferred strategic investor. The official noted in mid-August that the state is struggling in its hunt for an advisor to help it decide on the terms it should offer the Italian company to buy shares in SE, but that is unlikely to derail its push to buy a minimum of 17% from Enel. 

Some other suitors for Enel's stake have ploughed onwards regardless. A Hungarian consortium made up of MVM and MOL placed a binding bid by the May 9 deadline. And China National Nuclear Corporation(CNNC) has recently emerged as a contender, and is reported to be set to submit an offer by the end of August, despite having missed the deadline. 

However, their enthusiasm to accept a minority stake and work with Fico's administration has never been clear. On the other hand, while there are questions over EPH's ability to afford the purchase, with the closely-held group having made several major acquisitions that have loaded it up with debt in the past couple of years, it has road tested relations with the Smer government. 

On top of that, some suggest it could get SE without laying down very much cash. One Slovak banker told bne IntelliNews in July that SE is essentially worthless without the problems at Mochovce solved. The unfinished extension of the nuclear plant has been a major obstacle claimed by Enel's suitors. "SE is not worth much even if [the problematic] Mochovce is hived off, so EPH could afford it," the banking source noted. 


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