Analysts: two out of three "not bad" for energy privatisation

18-12-2001

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The decade-long privatisation process culminated on Monday, as the government agreed to sell off its natural gas system Transgas and its petrochemical conglomerate Unipetrol. The industry sale of the century, however, fell slightly short of expectations: disappointingly low bids forced the cabinet to postpone the scheduled sell-off of its profitable electric power utility, CEZ - owners and operators of the controversial Temelin nuclear power plant. A new deadline for bids has been set for January.

It's twelve years since the collapse of the Communist system, but after years of right-wing governments only the present Social Democrat cabinet has actually begun the privatisation process in earnest. Jan Sykora is the director of the leading equity firm Wood and Company:

"Well I think, sadly, what we saw was that some of the previous governments were right-wing more in their rhetoric, but also they were in a difficult position because all the conservative governments had a Social Democratic opposition, and in the mid-1990s, the Social Democrats were actually quite aggressively blocking any privatisation of industry such as banking, energy etc. And today what we see is that, paradoxically, the Social Democrat government is carrying through all this privatisation and there are two main reasons, I think. One is that finally, all politicians are realising that the government or the state is not a very good shareholder, and second, the state coffers are empty and they need to be filled in and the tax revenues are not enough so therefore you need some privatisation proceeds."

There were three big deals on the agenda at Monday's cabinet session - but while the sale of natural gas giant Transgas to Germany's RWE Gas went smoothly, there were cries of foul play after the cabinet decided to sell petrochemical conglomerate Unipetrol to the Czech-Swiss company Agrofert. Britain's Rotch Energy offered more for Unipetrol, and say the sale to Agrofert lacked transparency. The Czech government has defended the deal, saying Agrofert would be a strategic partner.

But the big disappointment was of course the failure to sell the country's huge electricity utility CEZ. The company operates two nuclear plants, as well as numerous coal-fired power stations. CEZ was to be sold in a package with the national grid and six regional electric distributors, but the bids fell short of the 5.5 billion dollars demanded by the government. The Prime Minister Milos Zeman ordered another auction on January 7, and has asked Italy's Enel and France's Electricite de France to participate. But despite the CEZ disappointment, Jan Sykora from Wood and Co. says two out of three is not bad going.

"I think, if all three went very smoothly, it would be an idealistic world, so I think the outcome is actually very positive in the sense that we have two serious bidders who went to the second round and I certainly hope that in the second round you will see that the government might modify some of the conditions which, I certainly hope, would lead to some price appreciation."

So billions of crowns will be pumped into the state budget, and six months before the general election too. The Social Democrats will be keen to extract the maximum political capital ahead of the poll, but Jan Sykora says what's important is that the country's power and gas monoliths will no longer be in state hands.

"Of course, the Social Democrats will definitely try to extract maximum political value out of it, but at the same time, the opposition will claim that the privatisation was not done in the best way and that they would have done a better job, but that's the nature of politicians. What I appreciate, being a taxpayer and a citizen in this country is that the government is no longer a shareholder and the companies will be run as private companies. That's when both the shareholders and the economy benefit the most."

18-12-2001