CEZ Probably Won't Buy All Enel Slovak Assets If It Bids

CEZ AS, the largest Czech power maker, will probably not buy Enel SpA’s entire 66 percent stake in the Slovak utility Slovenske Elektrarne AS if it makes a bid for the assets, Chief Executive Officer Daniel Benes said.

The Czech company is conducting negotiations with the Slovak government, which holds the remaining 34 percent of Slovenske Elektrarne, to determine how to share potential risks stemming from the construction of the Mochovce nuclear power station, Benes said in an interview in Prague today.

Enel, Italy’s largest utility, said in July it will seek to sell assets in Slovakia and Romania to reduce its debt by 4.4 billion euros ($5.6 billion). In their talks, CEZ managers are discussing the potential future ownership structure with the Slovak government as the Mochovce project has been beset by delays and budget overruns.

“I don’t think it would be prudent for CEZ to buy Enel’s entire stake in Slovenske Elektrarne,” Benes said. “I don’t see this as a quite likely scenario.”

Enel said today the deadline for Mochovce will be extended by about two years, with the first of the two new reactors starting commercial operation in the third quarter of 2016 and the second in 2017, Slovak newswire SITA reported. The budget was raised to 3.8 billion euro from 2.4 billion euro envisaged in 2007.

Benes said he “can’t imagine” that Enel would be able to sell the Slovak unit before the end of this year. CEZ won’t consider making an offer for Slovenske Elektrarne unless its experts are allowed to conduct due diligence of Mochovce and determine the real state of the project, he said.

“It’s not clear how much has been built, in what quality, and whether the current timetable is realistic,” said Benes.

Any sale may be further complicated by Slovak government’s demand that Enel pay it an additional 200 million euros for the original deal. Enel bought the stake in Slovenske Elektrarne for 839 million euros in 2005, pledging to invest another 1.9 billion euros in the company during 10 years. As part of the deal, the Italian company committed to finishing the construction of the two Soviet-designed reactors.

Given the technology of the reactors, it would make sense “from the business point of view” for Russian state nuclear company Rosatom Corp. to participate in the Mochovce project as it would be best positioned to asses the risks, Benes said. It remains an “open question” whether Russian participation is “politically feasible” given the deteriorating relations between Russia and the European Union and the U.S., he said.

“Materially, the Russians would have the biggest added value for Mochovce,” Benes said. “But both Slovak and Czech politicians would have to agree, and the geopolitical situation is rapidly changing.”

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