PPC Negotiates with BAT on a New Contract

After years of unsuccessful attempts to reach an agreement, tense business relationships between PPC, a.s. Bratislava (“PPC”) and Bratislavská teplárenská spoločnosť, a.s. (“BAT”) will probably be sorted out soon.

Representatives of both companies have sat down to a negotiating table to seek mutually advantageous model of a future cooperation, which is to result particularly in a decrease of a heat price for final customers and creation of a space for connecting new customers.

“A basis of our new negotiations is experience from the previous period and the latest financial technical analyses by external advisors,” said the vice-chairman of the board of directors of PPC Jozef Sekerka and added: “We are aimed at a long-term contract advantageous for both parties. The terms and conditions of a new contract will enable both parties to rational and economically efficient investment planning of the development of own production as well as the whole system of central heat supplying in Bratislava, whereby an inevitable precondition for a favorable price policy sustainable in the long run will be created.”

Disputes between PPC and BAT persist for several years. While a selling price for heat generated in PPC is 311 SKK/GJ, production expenses for heat generated in BAT reach 480 SKK/GJ, with fuel expenses of BAT amounting to 354 SKK/GJ. If both parties reach a mutual agreement, a positive effect will also appear in a price for a final customer. The management of PPC expects that the negotiations, which shall result in a new contract between the two companies, will complete soon.

PPC is a cogeneration power plant using a gas (combusting) turbine with a subsequent steam system. In addition to generation of electrical energy, being a core activity of the company, PPC supplies heat to the centralized heat supply system.

PPC is possessed by two shareholders – Slovenské elektrárne, a.s. possesses a 10 per cent stake and 90 per cent of company shares are held by the private equity group Penta. The latter joined PPC in 2004. Since its entry to PPC, Penta has intensively been participating in a restructuring process of PPC, which, inter alia, comprises an increase of efficiency of the generation of electrical energy and heat, optimization of the operation of the resource in respect of the provision of ancillary services, respecting valid contracts with business partners, and maximum rationalization of expenses of the company. After the successful completion of this process Penta plans to sell its stake to a strategic investor.

“Several supranational energy companies such as Endesa, Prisma Energy, ENEL, Verbund and others are regularly addressing us with an interest to purchase our stake in PPC,” said Vladimír Brodňan, investment director of Penta and added: “However, until completion of the restructuring process, we are not considering the sale of PPC.”

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