Slovakia demands €320m compensation from Enel over Gabcikovo

By bne IntelliNews March 9, 2015

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Slovakia will take over the operation of state-owned Gabcikovo hydropower plant from Slovenske Elektrarne (SE), and seek up to €320mn in compensation from the Enel-owned utility, after the Bratislava Regional Court ruled that the lease contract is invalid, Prime Minister Robert Fico said on March 9.

The government’s move to take the Gabcikovo hydropower plant away from SE and claim compensation complicates the efforts of Italy's Enel to sell its controlling stake in the utility. 

Slovakia will seek to regain the payments the plant has made to SE during the eight years it has operated the plant, Pravda daily quoted Fico as saying. The Slovak PM estimates the plant has paid €35mn-€40mn annually over the past eight years.

Slovakia moved to terminate the Gabcikovo contract on December 4, claiming grave infringement of the contract on the part of SE. Fico claims the Italian utility has blocked access to information that would allow Bratislava to assess the plant’s profit and gauge if it is fairly distributed between Enel and the Slovak state.

Moreover, the PM complains the Italian company has not presented any plans for the overhaul of the plant, which sits on the Danube River. Fico also claims Enel has not fulfilled its obligation to pay €5mn annually to the plant’s owner, state-controlled Vodohospodarska Vystavba (VVS), which manages the facility.

Fico announced at the end of last year that state-run Water Management Company (SVP) will now fully use Gabcikovo and that the state has an interest in taking ownership of the full profit generated by the plant

The hydro plant was spun off from SE ahead of the utility's 2006 privatisation to Enel, and added to the assets of water utility VVS. A lease agreement was then signed with SE, giving it the right to operate the plant for thirty years. 

Enel is trying to sell its 66% stake in SE as part of a wider European divestment plan. So far, a consortium of Hungary's MVM and MOL, as well as Czech utility CEZ have said they have submitted non-binding bids. Czech energy holding EPH has also shown interest, but has not commented on whether it made an offer. Finnish energy producer Fortum is also reportedly interested in acquiring Enel’s stake. 

However, the Slovak state - which holds the remaining 34% - has also expressed interest in acquiring a majority. That, along with huge risks connected to SE's long delayed and over-budget expansion of the Mochovce nuclear plant, has made suitors such as CEZ express concerns over the structure of any deal.

According to the Slovak economy ministry, Enel received four preliminary bids for its stake ahead of a December deadline. The Italian company is due to finish evaluating the offers by the end of April.

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