Slovakia raises pressure on Enel

By bne IntelliNews July 29, 2014

Tim Gosling in Prague -


Slovak faces even greater delays and cost over-runs on the expansion of the Mochovce nuclear plant, the country's economy minister claimed on July 28, stepping up the pressure on utility Slovenske Elektrarne - which was put up for sale by Italy's Enel on July 10.

Speaking as he left a cabinet meeting, Economy Minister Pavol Pavlis told reporters that SE faces "a certain shift" in its efforts to add two units at Mochovce, over and above an already extended deadline for the end of the year, reports SME. The budget on the project is also set for "some increase," according to new analysis from SE, the official said.
The expansion of the plant was originally set to cost €2.4bn when first planned in 2007. However, the Slovak government agreed to expand the budget to €3.8bn earlier this year. The deadline has also shifted significantly. Under the last agreement, a third block should be in operation by the end of the year, with a fourth to be added in 2015.

"We will now analyze the material we received," Pavlis said. The official added that the government will discuss the issue with Enel and SE before evaluating the length of the delay and extra costs.


The very public announcement of additional problems - ahead of any analysis - comes just under three weeks after Enel announced it's looking to sell its 66% stake in SE, and five days after police raided the Slovak company for documents pertaining to the privatisation agreement. It suggests Bratislava is looking to up the pressure on the Italian company to agree quickly to sell. 

The Slovakian government, which retains 34%, and Prime Minister Robert Fico in particular, have harshly criticized Enel for the delays and budget increases at Mochovce over the years. The PM has previously said missing the 2014 deadline would be "intolerable."

The pressure has helped persuade the Italians to cut their losses. After months of speculation, Enel announced on July 10 that it will seek to sell its Slovak assets - as well as several Romanian units - as part of a debt reduction drive. The Slovak state has the right to approve any buyer of the Enel stake.

Police raided SE offices and facilities - including Mochovce - on July 23, hunting for documents related to its 2006 privatisation. The Italian company pledged to add two new blocks at the nuclear plant as part of the deal, which saw it pip Czech power giant CEZ with an €840m bid.

Birds of a feather

The approach in Bratislava is starting to look somewhat similar to that being followed just over the border to the south. In Hungary, the (nominally) right-wing Fidez government is pursuing an ongoing policy of re-nationalization. Pressure by the authorities on the energy and banking sectors has resulted in the sales by international companies of several utilities in particular. The widespread wisdom is that the regulatory pressure is planned to help valuations drop ahead of purchase.

While Slovak Prime Minister Robert Fico is theoretically from the opposite side of the political spectrum to Hungary's Viktor Orban, the two administrations share remarkable similarities. Both earned landslide political victories in the face of collapsed opposition by pushing populist platforms, and their parties stand as the only viable governing force currently. Both are amongst the least willing EU states to criticize Russia throughout the crisis in Ukraine, although Fico is less confrontational towards Brussels than his rambunctious next-door neighbour.

The shared vision extends to the economy. They are both unwavering critics of international investors - particularly in core sectors such as energy. Both have this year taken control of the main gas importer for their respective countries.

In terms of the power sectors, both are looking to break through the hoodoo that has hung over Central European nuclear power projects in recent years. Hungary surprised in January when it pulled an international tender for expansion of Paks, it's only nuclear facility, to hand the contract to Russian state nuclear agency Rosatom.

In return, Moscow will lend Budapest €10bn. The government commissioner in charge of the project warned on July 28 that developments in the EU could affect the project if broad-based sanctions against Russia are applied.

However, the Slovak government's coffers are empty and unlike Budapest, it has little fiscal wriggle room. Fico has instead overseen deals that have seen western giants sell to CEE-based investors, often with ties to Bratislava.

E.ON and GDF Suez sold gas utility SPP last year to Czech-based EPH, which is now controlled by Slovak financial group J&T. A deal was then sealed this year that saw the state handed full ownership of the gas importing part of the business.

The ravenous EPH is joined by Czech state-controlled utility CEZ on the list of potential suitors for Enel's stake in SE. France's GDF Suez is another name doing the rounds, while press speculation also suggests China's Shanghai Electric Group is eyeing the asset.

However, speculation in local media is also rife that Rosatom is keen, despite the obvious obstacles to selling an EU nuclear plant to Moscow right now. Rosatom is the ultimate supplier of technology and fuel for Mochovce, and the company offered to buy into CEZ's Temelin last year as part of its bid in a now abandoned tender to expand the Czech nuclear plant.

An €870m loan from Russia's state-controlled Sberbank to SE in June sparked that talk. Analysts have noted it's around the volume of cash needed to finish Mochovce, and also that such a sizable credit line is rare in Central Europe without syndication. It has also been suggested that the Russians must have been granted a deep look into SE's accounting and other paperwork to agree the deal.


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