Government to decide on privatisation of heating companies

The privatisation of six large heating companies that is being prepared by the government will invoke a hike in heating prices. This will apply to residents of Bratislava, Trnava, Žilina, Martin, Zvolen and Košíce.

For political reasons, the state-owned heating companies have been keeping prices well below those of private producers. At an average price of heat in Slovakia, a family in a 3-room flat will pay around EUR 1,000 for heat this year, while households connected to state heating companies will pay an average of just EUR 700 or so according to calculations of daily Pravda.

State-owned heating companies are cheaper thanks to the combined production of electricity and heat, but pressure of voters has also played a part. “The energy business in state heating companies is not just about physics. If a politician says, however, that they will not increase the price of heat, then someone has to pay for it because there is no getting away from production costs” says executive director of  Teplárenské združenie na Slovensku, Pavel Michalec. State-owned heating companies subsidised prices to date to the detriment of profits, which privatising companies will not do.

The National Property Fund (FNM) is proposing selling the whole of the heating companies without it dealing in more detail with the impacts on future prices in its analyses. The analysis of the fund is being reviewed today by the Coalition Council. The fund argues that in 2002 to 2009 the heating companies produced some EUR 14 million in dividends from the sale of heat and that the state would gain around EUR 200 million if it were to sell the companies.

Cities are pointing out, though, that this will be at the price of paying higher heating prices. Representatives of the Union of Towns and Cities of Slovakia (UMS) want to speak to the Prime Minister today before the Coalition Council meeting goes ahead so that she would consider transferring heating companies to the municipalities for the sake of not increasing heating prices.

Marián Minarovič from UMS warns that due to the potential impacts of privatisation on the price of heat they had the promise of having part of the shares of heating companies transferred to the municipalities already during the second government of Mikuláš Dzurinda.

If the shares of the heating companies are acquired by investors, there is justified concern says Minarovič that prices will go up. In any case, Minarovič feels the heating companies should not function on the same principle as municipal transport, the prices of which are subsidised by the municipalities. The UMS representative could imagine a situation, though, where the town would keep the prices of heat down thanks to heating using cheaper biomass or the awareness so people do not disconnect from the central distribution.

The National Property Fund claims that privatisation will not produce higher prices. “The price is regulated and will continue to be based on the rules set out by the independent authority, URSO” emphasised the analysis of the fund. Finance minister Ivan Miklos (SDKÚ) indicated that the price of heat could even drop after privatisation, thanks to greater efficiency within the companies.

Privatisation of the heating companies is supported also by the SaS party. On the other hand, the KDH party was first to express its doubts over the sale of the companies at a time when the crisis is waning out, and its was followed last week by the Most-Hid party, which demanded a discussion in the Coalition Council on the issue of privatisation.

The FNM also pointed to the uneconomical operation of the heating companies. For example, Bratislava heating company Bratislavská teplárenská invested EUR 16.7 million in 2008 and 2009 in activities that did not relate to the generation of heat.  In that year the company did not increase the prices of heat following a political decision, even though other private heating companies adjusted their price lists after the cost of gas went up. Even the loss making economics of Martinska teplárenska is put down by the fund to the fact that the company did not reflect projected costs to the prices of heat for 2010.

There would definitely be no lack of interested prospects for the privatisation of heating companies. In 2006 as many as 64 companies were interested in the sale of a 51-percent stake in heating companies. The privatisation was halted by Fico’s government, though.

Source: Pravda

Author: Martin Kovacik

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