Slovenske Elektrarne shareholders increase Mochovce budget to €4.6bn

By bne IntelliNews November 24, 2014

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The Slovak government and Italy’s Enel - which together own power utility Slovenske Elektrarne (SE) - agreed on November 21 on yet another budget increase for the expansion of the Mochovce nuclear plant. That only adds to the potential bill for potential bidders for Enel's stake in SE.

The delays and budget overruns on the project to build two new reactors at Mochovce have been the source of vicious fighting between Bratislava and Enel. However, the Italian company has now got the nod on a further €830mn in costs, which will raise the total to €4.63bn, economy minister Pavol Pavlis stated, according to TASR. The project was originally set to cost €2.8bn.

Apart from the rise in the budget, the two shareholders in SE - Enel holds 66%, with the Slovak state owing the remaining 34% - confirmed that the first of the two units will start commercial operation in November 2016, with the second to follow a year later. The installation of the extra 880MW is already more than two years behind schedule, partly because of increased security demands in the wake of the March 2011 Fukushima disaster. SE's general director Luca D'Agnese explained that one of the reactors is 80% complete, the second 60%.

SE has said it plans to cover the additional €830mn in funding via a loan. Russia's state-controlled Sberbank announced in June that it would provide SE with a €870mn credit over the next seven and a half years. This was an unusually large loan without syndication, and triggered much speculation in the summer that a bid from Moscow for SE was on the way.

On top of the November 21 agreement on expanded funding, Enel and Bratislava have also selected Czech-based - but Russian owned - Skoda JS to work as an independent assessor of project development. The company, which works closely with Russia's state nuclear agency Rosatom in the region, will work to optimise expenditure and better supervise the project, the SE shareholders said. 

A direct Russian buyout of Enel's stake in SE, which was put up for sale in the summer, is unlikely in the current political climate. Meanwhile, the budget increase on Mochovce will only present more difficulties for the Italian seller.


Mochovce is the main obstacle claimed by known suitors because of the project’s long delays and budget increases, as well as the government's anger over the issue. So far, Enel has received non-binding bids from Czech power group CEZ and Hungary's MVM and MOL, which submitted a joint offer

While CEZ officially expressed its interest, it also again stressed its concerns over Mochovce. Meanwhile, the Hungarian offer has reportedly raised suspicion in Brussels. MVM's interest in SE sparked a claim from news portal that the European Commission suspects it of fronting for Russia.

Fitch Ratings offered CEZ back-up on its uncertainty over the nuclear project. A report on November 21 suggested an acquisition could have a negative impact on the Czech company’s rating. The agency warned that the Slovak utility has a weaker credit profile, while CEZ's leverage would likely increase.

“The acquisition would potentially expose CEZ to construction risk of unfinished nuclear units in Mochovce," the Fitch report said. "The units, once completed (expected in 2016-2017) are likely to operate on a merchant basis without a support mechanism for cash flows, exposing the company to weak profitability if wholesale power prices remain at current low levels. Therefore, any mechanism reducing the risks of the Mochovce nuclear project in terms of construction and future cash flows could mitigate the negative rating impact of the acquisition."

The ratings agency added that it expects to place CEZ's ratings on Rating Watch Negative if the Czech company has a bid accepted. It adds though that that would depend on the price and details of the deal, including potential government support for Mochovce and CEZ's financial strategy after the acquisition.

In addition to CEZ and the Hungarian companies, both the Slovak state and Czech-based energy holding Energeticky a Prumyslovy Holding (EPH) - controlled by Slovak financial group J&T, and a reputed ally of Prime Minister Robert Fico - have also shown interest in buying out Enel. According to Pravda, which quoted an Enel spokesperson, the Italian company will accept bids for SE until early next year.

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