Czech privately held company Energetický a Průmyslový Holding (EPH) has become the favourite to become the biggest player in Slovakia’s electricity market after Italian energy giant ENEL said it had been selected for exclusive talks over the purchase of its majority stake in Slovenské Elektrárne. The talks could result within weeks in a deal to buy up the shares.
ENEL’s announcement favouring EPH surprised few analysts. EPH was when the announcement was made in a two horse race with a Hungarian dominated joint venture composed of local electricity company MVM and Slovak refinery Slovnaft, majority owned by Hungary’s MOL. China’s China National Nuclear Corporation could be a late entrant in the bidding as it is now carrying out due diligence on Slovakia’s dominant electricity producer. And there is certainly no doubt now that ENEL wants to draw a line under its ill-fortuned Slovak investment through will only be able to make a two-stage exit, selling part of its 66 percent stake by the end of the year and the rest when the Mochovce 3 and 4 nuclear reactors are completed. That should be in around two years’ time.
One of the main issues to be settled is the relationship between the incoming owner of ENEL’s shares and the Slovak government, the 34 percent minority shareholder in Slovenské Elektrárne. Here, EPH has the advantage on its rivals in that it has already proved that it can come to a deal with the Slovak state over management of the country’s gas industry after buying out the Franco-German holding company that previously had such a prickly relationship with the company.
A similar deal could probably be hammered out again over the electricity producer although the Slovak government is still officially in the running to buy out some of ENEL’s shares to boost its influence over the company generating around 75 percent of Slovakia’s electricity. The government’s early plans to recruit consultants to advice on the approach to ENEL has been replaced with the idea to tap the expertise and know-how at state-dominated gas company SPP.
For Czech EPH, there are clear benefits to purchasing the Slovak power company. It already has a minority stake and management control over Slovakia’s second biggest regional electricity company, which buys most of its power supplies off Slovenské Elektrárne. EPH’s current power production portfolio is mostly centred on coal and cogeneration heat plants. Slovenské Elektrárne will be nuclear dominated when the new Mochovce units eventually come on line with hydro power as a significant additional asset.
Significant EPH roles in both the gas and electricity market might look problematic in one country, but the Slovak government could probably live with that and smooth approval of a final sale if it is able to shape the deal to its liking.
The biggest Czech power company, ČEZ, played a crucial role in helping EPH get to where it is today. The next step though would put it almost on an energy production par with the state dominated former partner and with plenty of excess electricity and a flexible production portfolio to play around with.
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