August 24, 2015 / 9:06 AM / 5 years ago

UPDATE 2-Enel picks EPH for exclusive talks on Slovakia sale

* Enel in talks with Czech-based EPH on Slovak stake

* Sale of 66 percent stake could be done in two tranches

* Other potential bidders waiting in wings (Recasts lead, adds analysts, sources)

By Valentina Za and Stephen Jewkes

MILAN, Aug 24 (Reuters) - Italy’s biggest utility Enel is in exclusive talks with EPH about selling a stake in Slovakia’s Slovenske Elektrarne to the Czech-based company to help fund a facelift.

State-controlled Enel, which owns 66 percent of Slovenske, said on Monday it may sign a binding agreement with EPH regarding Slovakia’s biggest power generator in coming weeks.

The Slovenske sale is part of a 5 billion euro ($5.8 billion) disposal plan Enel CEO Francesco Starace has put in place to give Europe’s second largest utility by capacity a sharper focus on renewable energy, emerging markets and grid businesses.

It was not clear if the talks would lead to the sale of the whole of the Slovenske stake, which Starace said in May had a market value of about 750 million euros.

Starace, a nuclear engineer by training, has previously said the sale would take place in two stages with Enel keeping a minority stake until completion of two new reactors at the Mochovce nuclear power station, expected in 2018.

On Friday, a Slovakian business weekly reported that Enel would sell up to 33 percent of Slovenske in the first leg of the sale process.

“An anticipated complete exit could be positive news, since it could represent the end of this long-awaited disposal,” broker Kepler Cheuvreux said in a note.

Having classified the stake among assets held for sale, Enel has already been able to take Slovenske’s debt, which totalled 600 million euros at the end of 2014, off its balance sheet.

There are two other potential purchasers waiting in the wings if the talks with EPH do not lead to a deal.

Slovakia’s Economy Minister Vazil Hudak said last week that China National Nuclear Corporation was expected to place a binding bid for Enel’s stake in Slovenske by the end of August.

A consortium of Hungary’s Mol and Hungarian power grid operator MVM had also placed a bid.

The value of the Slovenske stake is hard to determine because of rising costs at the Mochovce nuclear station which have soured relations between Enel and the Slovak government that owns the remaining 34 percent.

“The whole disposal process has taken longer than expected because of the run-in with the Slovak authorities and any buyer will have to price in nuclear liabilities,” a Milan-based analyst said.

A person familiar with the matter said EPH had good relations with the Slovak government and that could help to facilitate a deal.

The company, led by Czech businessman Daniel Kretinsky, has said it is looking to diversify in Europe. Earlier this year EPH completed its first acquisition in Britain and agreed to buy thermal power capacity in Italy from Germany’s E.ON. ($1 = 0.8622 euros) (Additional reporting by Tatiana Jancarikova in Prague; Editing by Susan Fenton and Keith Weir)

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