Slovakia: Fight over electricity

The Slovak market for electricity is in turmoil. At the center of attention is the planned change of control of the largest Slovak producer of electricity - Slovenske Elektrarne a.s. (joint stock company). Currently, ENEL PRODUZIONE S.P.A. holds shares, issued by Slovenske Elektrarne a.s., representing approx. 66% of the share capital of the company, and the Ministry of Economy of the Slovak Republic holds the remaining shares. However, due to the share deal which Enel has entered into with EP Slovakia B.V., EP Slovakia B.V. is fully on track to reach its ambition of acquiring control over Slovenske Elektrarne a.s.

Despite the fact that the aforementioned share purchase agreement was already signed, the transaction itself cannot be fully completed unless the final and enforceable authorization is granted for permanent operation of units 3&4 of Mochovce Nuclear Power Plant, or upon the occurrence of certain events. Due to the slow construction progress of the units, it is neither possible to determine whether nor when the authorization for permanent operation will be issued.

Nevertheless, it is already more than clear that this deal will have an impact on the market itself, since 49% of shares in the main electricity distribution company for central Slovakia is held by a EP Holding subsidiary company (EP Slovakia B.V. is a part of its structures). Their alleged involvement in the major price increase for high-voltage circuit-breakers led to some energy-regulatory issues, which drew the attention of the media, public and politicians.

On the other side, in the interest of the Slovak Republic, the reigning government intends to amend the Law on strategic enterprises to secure a better position in strategic companies. Furthermore, the governing coalition clearly proclaimed that their main interest is to increase the shares held by the Slovak Republic in strategic companies, if it means strengthening the position of the state in the energy sector. This would not only concern companies producing electricity, but also other strategic companies, such as Slovak gas and coal producers. The details of the intended changes were not yet specified, nor the methods of financing of an eventual state buy-in.

The given problematic situation may be of interest due to possible changes in the M&A market, energy-regulatory issues and antimonopoly issues.