The future of gas utility SPP, and more importantly its most lucrative subsidiary Eustream, is still unknown as the foreign shareholders prepare to evacuate the country’s former monopoly gas supplier ten years after the utility was privatised. For informative purposes, here The Daily provides you with its own translation of an article on the subject published in Trend today.
Gas industry chess
Slovenský plynárenský priemysel (SPP) is trying, possibly for the last time under the baton of the German and French shareholders, to increase prices of gas for households again. Its request has landed on the table of the regulator RONI.
The foreign shareholders of the gas company, German E.ON Ruhrgas and French GDF Suez, have been working for some time on getting rid of their minority 49% share in SPP. Together with decision-making powers in the Board of Directors, this will most likely be falling to the hands of Energeticky a průmyslovy holding (EPH), which is controlled by Czech and Slovak entrepreneurs.
The state is hoping to utilise the change of shareholder rights in the company to boost its position within SPP. Even though today its controls the majority of shares, when voting in the Board of Directors it has pulled a short straw. It looks set to continue holding it as well. Prime Minister Robert Fico (Smer-SD), who is a critic of the privatisation of SPP, has a chance for the first time in ten years to adjust relations in the gas company so that the state feels more comfortable.
To sell or not to sell
The foreign shareholders are pulling out the sale of their share in SPP at a time when Slovakia has less than half a year to accommodate the requirement of Brussels and ensure the unbundling of the production and supply of gas from the transmission network. The most profitable element of the group, the transmission business, falls to the portfolio of the subsidiary Eustream. It makes money on the lucrative transit of Russian gas, which flows through Slovakia via Ukraine onwards to the west. Its outlooks for the future are not overly optimistic, though, considering the projects of new competitive gas lines North Stream and South Stream.
The government can choose which model it wants to use when separating transmission from the other activities. The tactics have started. So far it is expected that SPP will have to sell Eustream. Such a model from the laboratory of the Ministry of Economy has already gone through parliament by the first reading of the Energy Act. It did not pass without the reaction of the gas company. SPP declared that it would soon start preparing the transaction. Yet, everything could be different, if some other model appears more advantageous to the government.
The elaborated wording of the Act allows the cabinet to decide in a way that the owner of Eustream wouldn’t have to change. This is assumed by the model Independent Transmission Operator (ITO). Eustream would acquire the transmission assets, including the transit pipelines, but SPP would remain its owner.
The path that is chosen can be set out by the government until the end of October.
Both options required SPP “to transfer” transmission pipelines to Eustream. At present it leases them from the parent company.
A vision of better relations
R. Fico has long criticised the foreign shareholders of SPP. He is bothered most by their efforts to hike up gas prices for households.
He wanted to debate the prepared sale of the share in SPP with German Chancellor Angela Merkel last week. In Berlin he planned to put forward his long-term objections to the German and French owners. They practically did not deal with the theme in the end, though.
“These are economic decisions and the federal government cannot get involved in them” head of the German cabinet announced.
Slovak executive power does not want just to stand back watching the handover of the shareholder baton in SPP.
Its room for manoeuvre is limited, but it is preparing officially to debate with EPH about how relations in SPP would be set. The department of economy informed the government about these activities last week.
It wants to hire an advisor to assess the impacts of changes to the ownership structure of the gas company.
Technically, the Germans and the French are selling one hundred percent in the company Slovak Gas Holding, which holds the 49% of shares in SPP for them.
The state has first right of refusal of the share upon such a transaction. There is a lack of money at present, though, to gain control over all shares in the gas company, in these times of battling with the budget deficit.
It looks likely then that it will have to rely on getting along better with the new owners than the current ones. “The sooner they sell the shares, the better it is. A partner could appear who would behave more considerately to Slovakia and its citizens” expressed R. Fico.
The shareholders of EPH Peter Kellner, Daniel Křetínsky and J&T do not plan surrendering control over the company, however.
It could come up with a milder price policy in accommodating the state, for example.