20 Jun 2019, 11:28 AM

STA, 19 June 2019 - Abanka, Slovenia's third largest bank, will be sold to NKBM bank, owned by US fund Apollo, with the value of the deal to be disclosed on Thursday as the sales agreement is to be signed.

The decision was announced by Slovenian Sovereign Holding (SSH) after the supervisory board endorsed the management board's proposal on Wednesday to sell Abanka to NKBM as the best bidder.

SSH will provide more information about the sales procedure, including the value of the transaction, after the contract is signed. The signing is scheduled for tomorrow.

A merger between Abanka and NKBM would create a bank with combined total assets of EUR 8.71 billion or a 22.5% market share. Slovenia's largest bank, NLB, has total assets of EUR 8.81 billion.

Speaking to reporters, SSH chief supervisor Karmen Dietner said that the selected bidder had not been given any guarantees for potential negative consequences of lawsuits pertaining to the 2013 bailout.

SSH management board chairman Igor Kržan said that the sales process was rather long, but also transparent and competitive. "These are two key factors, if we want a successful sales procedure."

Asked whether the proceeds from the sale would make up for the state's capital injection in the bank, at EUR 781 million, Dietner said: "If we add to the purchase money all the debts that are being sold by the Bank Assets Management Company, I hope we'll reach or exceed the state aid."

Unofficial information available to the STA indicates that NKBM as well as the Hungarian bank OTP offered between EUR 450 million and 500 million for the bank in the final stage of bidding.

The newspaper Finance cited unofficial information suggesting the purchase money was just below 90% of the share's book value or just over EUR 500 million. The purchase money includes the takeover premium.

Neither NKBM nor OTP bank would comment on SHH's decision as yet, with the NKBM management saying it would "wait for the seller's written confirmation".

Dietner would not comment on Prime Minister Marjan Šarec's tweet on 7 June that SSH should "seriously reconsider continuing the sale of Abanka. In particular to questionable funds."

However, she said: "We have thought over the decision thoroughly, we have taken a little bit of extra time, having deferred the session from Monday. The decision is well grounded."

Responding to SSH's decision today, Šarec's office issued a statement saying that with the sale of Abanka and conclusion of NLB's privatisation certain commitments to the European Commission would cease.

"This means the lifting of major restrictions on operations of the two banks, which is vital for their competitiveness and further development," the PM's office said.

Slovenia pledged to fully privatise Abanka by the end of June 2019, and to sell 75% minus one share in NLB bank by the end of 2019 in exchange for the European Commission clearing state aid to both banks in 2013.

SSH today sold the remaining 10% of NLB shares to institutional investors for EUR 109.5 million after a 65% state stake in the bank was sold for EUR 669.5m in an initial public offering last year.

Šarec's office underscored that SSH had taken the decisions on the two banks independently in accordance with its powers and based on the strategy of state asset management, passed by parliament in 2015.

A similar reaction came from the Finance Ministry, which said that 10% of the purchase money for Abanka would be earmarked for the demographic reserve fund and 90% to reduce government debt.

Abanka is the last major bank still in state ownership after NKBM was sold to Apollo (80%) and the EBRD (20%) in 2015, and following the partial privatisation of NLB last year.

To finalise the acquisition of Abanka, NKBM will need to get clearance from the competition watchdog and the European Central Bank, which needs between four and five months on average to issue its decision.

Since NKBM is owned by Apollo, which acquired the Maribor-based bank in a privatisation required as a condition for the approval of state aid to the bank, regulatory approval procedures are not expected to take long.

NKBM and Abanka have 2,300 employees and around 100 branches between them, plus 330 NKBM counters at post offices around the country.

Abanka saw its net profit decline by 27% in the first quarter of the year to EUR 18.6 million. Total assets increased by just over 2% to EUR 3.8 billion at the end of March.

NKBM posted a group net profit of EUR 72.5 million for 2018. Its total assets as of the end of 2018 amounted to close to EUR 5 billion.

19 Jun 2019, 14:19 PM

STA, 19 June 2019 - Abanka, Slovenia's third largest bank, said Wednesday it saw its net profit decline 27% in the first quarter of the year to EUR 18.6 million on plunging non-interest revenue and higher net write-downs and provisions.

Net interest revenue increased by 2% year-on-year to EUR 15.1 million, but non-interest revenue plunged over 40% in the same period to EUR 15.4 million.

Abanka says the decline of non-interest revenue is the result of the impact a sale of non-performing loans had on its balance sheet in 2018.

Net write-downs and provisions almost doubled to EUR 5.6 million. Nevertheless, the bank reduced non-performing loans by EUR 12.7 million.

The share of non-performing loans contracted by 0.7 percentage points to 3.7% from the end of last year according to European Banking Authority methodology.

The bank's total assets rose by 2% from the end of 2018, to EUR 3.8 billion, making for a market share measured by total assets of 9.6%, the bank said on Wednesday.

Abanka released the results just hours before Slovenian Sovereign Holding is due to decide on the buyer for the state's 100% stake in the bank.

19 Jun 2019, 13:16 PM

STA, 18 June 2019 - Elektro Ljubljana, the largest of the five companies managing Slovenia's electricity distribution network, posted sales of EUR 103 million for 2018, up from roughly EUR 98 million in the year before. Net profit increased from EUR 14 million to EUR 17 million.

Profit before income tax, depreciation and amortisation (EBITDA) amounted to EUR 48m, with value added per employee, at EUR 95,000, placing Elektro Ljubljana in the top tier of Slovenia's most productive companies.

"This was the most successful business year for us," director Andrej Ribič told the press on Tuesday.

The company invested EUR 37.5 million in the distribution network, the highest amount in the last ten-year cycle, but Ribič said much higher investments were needed if Slovenia is to transition to a low-carbon economy.

The five distribution companies get EUR 123 million in network fees per year for investments. According to Ribič, at least another EUR 50 million would be needed every year.

"Some additional funding will have to be secured if we are to build what we have to build," he said.

19 Jun 2019, 11:30 AM

STA, 19 June 2019 - Slovenian Sovereign Holding (SSH) has sold 10% of NLB bank to institutional investors for EUR 109.5 million as it wrapped up the privatisation procedure, leaving the state owning a controlling stake of 25% plus one share.

SSH made the announcement Wednesday after selling shares and global depositary receipts equivalent to almost two million shares at a price of EUR 54.75 per Share and EUR 10.95 per GDR.

The price is well below market price: NLB closed at EUR 58.2 on the Ljubljana Stock Exchange yesterday, while GDRs, which are traded in London, closed at EUR 11.33.

The transaction will be settled on 21 June, which means that the state will also get the dividends incumbent on the shares, for total proceeds from the 10% stake of EUR 123.8 million.

SSH said the buyers were high-quality institutional investors who will be "ensuring [the bank's] competitiveness and its further development in the future".

Igor Kržan, chairman of SSH, said he was satisfied that "one of the largest and the most demanding privatisation process in Slovenia" had been brought to a successful close.

Since restrictions that NLB has had to operate under due to state aid will now no longer apply, it will "again be able to operate in the domestic market and in the markets of the SE Europe with all of its capacities and start to compete with its competitors on more equal footing".

"NLB remains an independent Slovenian financial institution which will continue to support the development of the Slovenian economy and will keep representing an important proportion of the portfolio of state's capital assets managed by SDH," he said.

The banks aid it would now be able to compete at home and abroad on a level playing field. It will be allowed to have a leasing business again, and invest without limitations in digitalisation and the development of new products.

"As of New Year's when the ban on mergers and acquisitions will be lifted as well, NLB, a regional specialist, will be able to more actively seek opportunities to strengthen its position as a systemic player on our markets," chairman Blaž Brodnjak was quoted as saying.

The transaction completes a long privatisation process which started in earnest in 2018 after years of fits and starts.

Slovenia nationalised the bank after spending EUR 1.55 billion bailing it out at the end of 2015. Since then the state has earned roughly EUR 1.2 billion in dividends and proceeds from the sale of the bank's equity.

18 Jun 2019, 17:28 PM

STA, 18 June 2019 - A deal was signed in Novo Mesto on Tuesday that is to pave the way for revitalisation of a hundred-year-old cross-border railway infrastructure connecting Ljubljana with Slovenian border towns and further with Croatia.

The agreement on cooperation was signed by representatives of nine Slovenian municipalities, including Ljubljana, and Croatia's Karlovac. The project will be coordinated by the Novo Mesto Development Centre.

According to the head of the centre, Franc Bratkovič, the municipalities will contribute more than EUR 100,000 for the project in the next couple of years. "We will do everything we can to have the project included in national and European documents," he said.

The goal of the initiative to revive the hundred-year-old cross border railway infrastructure connecting Ljubljana with the border towns and further with Croatia's Karlovac and later Zagreb, is to make the Slovenian railway network and the towns along the railway competitive, said Novo Mesto Mayor Gregor Macedoni.

The modernisation of the railway is to boost connectivity, international cooperation and regional development.

One of the initiators of the project that was conceived a year ago, Grosuplje Mayor Peter Verlič, said that it was a precondition for the setting up of the European Grouping of Territorial Cooperation, which will enable the drawing of EU funds.

The modernisation of the railway, which is expected to be finalised in about ten years, will be funded from various sources.

In the initial phase, the railway track is to be modernised to allow for higher travelling speeds and heavier trains, train stations renovated and dangerous level crossings eliminated.

The next phase is to include electrification of the track and the purchase of ten modern trains.

The costs of the project have not been estimated yet, but Verlič said they would probably be similar to the costs of the modernisation of the Grosuplje-Kočevje railway.

Those costs reached almost EUR 100m.

18 Jun 2019, 13:45 PM

STA, 17 June 2019 - The builder GH Holding and a group of other Slovenian construction companies signed a deal on Monday with public utility company Bikarac from Croatia's Šibenik on the construction of a EUR 26.5 million waste management centre, the biggest regional centre in the country.

Roland Tušar of GH Holding said winning the deal in an international public call for applications was in line with the company's long-term strategy of expanding its presence in Croatia.

The EU-funded project, which is expected to take 30 months, includes the construction of a modern facility for mechanical biological treatment of waste, support facilities, a compositing plant, road, substation and the supply of vehicles to be used at the centre.

Among the companies in the consortium are also VGP Drava Ptuj and Pomgrad.

The signing of the contract was attended by Croatian Environment Minister Tomislav Ćorić.

18 Jun 2019, 10:39 AM

STA, 17 June 2019 - Prime Minister Marjan Šarec agreed with an opposition MP during questions time in parliament on Monday that Slovenia should not allow small environmental groups halt developmentally and environmentally important projects. He proposes that the Environment Ministry draw up legislation to prevent this.

"Protecting the environment is important, but stopping every project will also not get us far," the prime minister told MPs, adding that Slovenia would have to decide where it would obtain energy from.

Šarec was responding to a question by Dušan Šiško of the opposition National Party (SNS) on the latest in a series of projects that faced opposition from environmental groups.

After the government aborted plans to build hydro power stations on the river Mura in the north-east at the end of May, the latest project stopped by environmentalists is the construction of the Mokrice plant in the south-eastern part of the Sava river.

The Austrian-Canadian automotive multinational Magna Steyr also faced strong opposition from environmentalists before it could build a paint shop in Hoče, north-east.

Referring to the Mokrice case, in which a small, six-member NGO, the Society for Fish Watching, managed to halt the EUR 200 million project by launching an appeal at the Administrative Court, Šiško asked the PM how long will environmental and other groups be able to obstruct investments of national importance.

"We are letting small groups for reasons that are not clear halt developmentally and environmentally important projects under the pretence of environmental protection.

"The state has clearly made a mistake by allowing every group which has a status of a public interest group to take part in procedures and actually work against public interest," Šiško said.

Šarec noted the government had moved to protect Mura, as promised, and would protect a lot more, but "that's not enough for some". "Every day I get mail from different initiatives to stop this and that construction, close TEŠ 6 and Krško. I agree this is not the way to go about things," he said.

Šarec thinks the Environment Ministry should prepare legislation that would specify which organisations serve the public interest to introduce some restrictions as to who can act as a stakeholder.

He said common sense should be used when addressing environmental issues. "Even the fiercest environmentalists use mobile phones, cars and other modern technology. All these use electricity in a direct or indirect way," he said.

"We're always moving from one extreme to the other. We used to not care about the environment at all, and now we want to protect it so much that we are causing damage to ourselves," he said.

Wind power plants are widespread everywhere around the world, only in Slovenia "birds and butterflies apparently don't know how to fly pass them", Šarec illustrated.

17 Jun 2019, 18:06 PM

STA, 17 June 2019 - The final decision on the privatisation of Abanka, Slovenia's third largest bank, has been deferred to Wednesday after the supervisory board of Slovenian Sovereign Holding (SSH) decided not to convene Monday as planned. Nevertheless, comments by Prime Minister Šarec suggest the bank will be privatised despite initial apprehension.

Karmen Dietner, the chief supervisor of SSH, said the session was postponed so that the supervisory can "thoroughly examine the large amount of material that represents the substantive basis for the decision."

Abanka must be privatised by the end of this month according to commitments Slovenia made in exchange for a state aid clearance it received from the European Commission in 2013.

The procedure went according to plan until Prime Minister Šarec cast doubt on the plan by tweeting on 7 June that SSH should think about its decision given that police investigations into the bailout are ongoing.

But Šarec appeared to backtrack today, telling parliament during questions time that he was not putting any pressure on anyone. "The decision on the sale of Abanka will be adopted by SSH," he said.

The statement appears to settle who will have the final say: after the original tweet, SSH said only the government, representing the state as SSH's sole shareholder, had the power to change the course of the privatisation.

"I believe [SSH supervisors] are capable of taking this decision themselves without making anyone else responsible," Šarec said.

Šarec suggested his original tweet had simply been a comment on new facts revealed at the time - the release of the criminal complaint against the 2013 board of the central bank.

"I'm not pressuring anyone... This is simply a major story and the criminal complaint was a new fact for me," he told MPs.

Commenting on the issue before the postponement decision was made, Infrastructure Minister Alenka Bratušek, who was prime minister at the time of the 2013 bank bailout, said that there were actually no new facts lately which could affect the sale.

"It is irresponsible to change political decisions based on one documentary show," the head of the coalition Alenka Bratušek Party (SAB) said in reference to RTV Slovenija's documentary about the bailout.

The film raised questions about the role of the European Commission in ordering that junior creditors of three banks be wiped out, prompting Šarec to publish the tweet in question.

Bratušek said that the coalition partners had immediately agreed that they would contact the European Commission last September to present the arguments for postponing the sale. This should have been done in September, not a week before the deadline, she added.

"When [SSH] is able to tell what will be the consequences of sale or non-sale, then we will be able to make the right decision. I hope that those who started this non-sale are aware of the possible consequences."

Coalition Pensioners' Party (DeSUS) head Karl Erjavec noted that the party had been against selling banks all the time, but added he did not believe anyone could stop the Abanka sale.

Asked about his potential vote in the government, the foreign minister said he would see what arguments SSH would give for leaving it to the government to decide.

Igor Zorčič, the head of the deputy group of the coalition Modern Centre Party (SMC), said that the "prime minister said he was reserved about this, and we are reserved even more."

"If SSH returns the issue to the government, it will probably need to decide in line with what its representatives have been saying," he added.

Luka Mesec of the opposition Left said that given Šarec's tweet, "we expect from the supervisory board to reject the sale of Abanka or leave it to the government to reject the sale and launch appropriate proceedings before the European Commission".

On the other hand, Jernej Vrtovec of the opposition New Slovenia said that Abanka needed to be sold, "not because of the commitments, but because I believe it would perform better in private ownership".

"I've had enough of these co-financing and recapitalisations of the banking system we had witnessed in the past," he said, adding that the pressure not to sale Abanka now, including from politicians, was inadmissible.

SSH is selling 100% of Abanka, with three binding bids reportedly in the EUR 400-500 million range, about a fifth below book value but, together with recent dividend payments, the proceeds would still be higher than what the state invested in Abanka as part of the bailout.

The SSH supervisors can either complete the sale directly or ask the government as the sole shareholder to have the final say, which is exactly what happened last year, when marker leader NLB was privatised.

17 Jun 2019, 15:16 PM

STA, 17 June 2019 - The rating agency Standard & Poor's (S&P) upgraded on Friday its rating for Slovenia from A+ with a positive outlook to AA- with a stable outlook due to strong economic growth and employment growth, the Finance Ministry said in a press release on Monday.

S&P said Slovenia "continues to post strong GDP and employment growth, alongside fiscal and external surpluses".

Based on the last nine years of private sector deleveraging and a decline of government debt to GDP since 2015, the agency thinks Slovenia has substantial buffers in the event of an external shock.

It projects Slovenia's net general government debt will decline further to about 40% of GDP over 2019-2022.

"The stable outlook takes into account the upside potential from faster income convergence toward the eurozone average, but also possible higher-than-expected external risks to economic growth, public finances, and financial stability, and the potential for buildup of macroeconomic imbalances."

After Moody's upgraded Slovenia's outlook to stable from positive in April, the upgrade by S&P is an "additional and significant confirmation that Slovenia is on the right track to get the AA rating it had in May 2006," the Finance Ministry said.

S&P raised its long- and short-term foreign and local currency sovereign credit ratings on Slovenia to 'AA-/A-1+' from 'A+/A-1'. The outlook is stable.

"The stable outlook on Slovenia balances the prospects for further income convergence with wealthier eurozone member states via balanced economic growth against the potential for a significant weakening in the external environment and the resulting adverse impact on the Slovenian economy and its budgetary position," the agency says in the report.

S&P expects the Slovenian economy will expand by 3.4% in real terms this year. "Growth will moderate to an average of slightly below 3% over 2020-2022, compared with brisk expansion over the past two years when growth reached almost 5% on average."

Domestic demand is expected to be the key driver of growth in the coming years.

The agency expects private consumption to pick up in 2019, and project investments expand at 7% in 2019-2022 in real terms, albeit slightly down from over 10% in 2017-2018.

It forecasts net general government debt will decrease to just over 40% of GDP by 2022, from 52% in 2018 due to robust GDP growth and sound fiscal results.

"In 2019, the debt reduction trend could be further supported by privatization proceeds from the sale of an additional 10% stake in the country's largest lender, NLB, and from the sale of the third-largest bank, Abanka."

Despite a slowdown in exports, S&P expects a "resilient performance of Slovenia's export-oriented manufacturing sector, and robust services exports, resulting in a slight reduction of the current account surplus to 5% of GDP by 2022 from 7% in 2018".

S&P also called for structural reforms in education, the taxation of labour, public administration, and state-owned companies.

It expects the structural reform agenda to be piecemeal, especially in health care, pensions, and long-term care of the elderly, and that the reduction of the state's role in the economy will progress only slowly.

15 Jun 2019, 10:16 AM

STA, 14 June 2019 - Ascent Resources, the UK developer of the Petišovci gas field in eastern Slovenia, plans to take multi-pronged legal action against Slovenia after it was ordered to get a separate permit for hydraulic fracturing.

Ascent will submit a "robust response to this manifestly wrong decision contrary to EU law," the company said in a permitting update posted on the website on Friday.

The statement comes after the Environment Ministry upheld a decision of the Environment Agency on the controversial gas extraction project in Petišovci.

The ministry agreed that an environmental impact assessment and a separate environmental permit were necessary because the location of the gas wells was close to water sources and because underground waters and agricultural land in the area do not have very good ability to regenerate.

The decision mistakenly concluded that the project fell within a conservation area and misapplied EU case law in relation to mitigation measures, Ascent said.

Aside from challenging the decision at the Administrative Court, Ascent plans to submit a claim for damages against the state for breach of EU law including for the unreasonably long time it took for the decision to be reached.

The company will seek damages for loss of future income from the project "which would have been expected to have been a multiple of the historic investment of some EUR 50 million."

It also plans to lodge an investment treaty arbitration claim under the Energy Charter Treaty.

"It was the strong desire of the board to avoid such litigation and obtain the permits necessary to develop the field which it was legally entitled to. As it has now become apparent that the possibility of achieving these goals has significantly diminished, the company will move ahead with filing this claim," the statement reads.

As a result of these developments, the company's focus in Slovenia now "inevitably shifts away from the development of the Petišovci Project towards obtaining legal redress for the damages inflicted on shareholders by the actions of the government."

All our stories about this project are here

13 Jun 2019, 03:54 AM

STA, 12 June 2019 - The Ministry of Environment and Spatial Planning has confirmed the decision of the Environment Agency on the controversial gas extraction project in Petišovci (NE), thus rejecting an appeal by UK investor Ascent Resources. In line with the decision, a separate permit procedure will be needed for hydraulic fracturing.

The agency granted the investor the permit for a planned gas processing plant but demanded a separate environmental impact assessment to determine whether the UK company can step up extraction via hydraulic fracturing, which is crucial for the refinery that would be allowed to process 280,000 cubic metres of natural gas and a tonne of oil per day.

The March decision of the Environment Agency came after the original permit for the refinery, issued in 2015, had been successfully challenged by environmentalists.

The Ministry agrees with the agency that an environmental impact assessment and a separate environmental permit were necessary because the location was close to water sources and because underground waters and agricultural land in the area do not have very good ability to regenerate.

Operating in a joint venture with Geoenergo, which is co-owned by the Slovenian state-controlled energy companies Petrol and Nafta Lendava, the UK company wants to extract gas on a large scale in Petišovci.

The separate permit procedure could further delay the implementation of the project in which more than EUR 50 million has allegedly been invested so far.

The UK company holds 75% interest in the project, Geoenergo's concession for the Petišovce gas however expires in 2022.

Hydrocarbon extraction in Petišovci started in 1943 and boomed in the 1980s. But after the oil refinery there was closed, the activity slowly died down.

Last December, Ascent Resources stepped up pressure on Slovenia to issue the environmental permit for its project by threatening to sue the government for damages.

This was after the then Environment Minister Jure Leben ordered an internal inquiry at the Environment Agency to see "whether inappropriate pressure has been exerted on employees" in relation to two Petišovci-related procedures.

The inquiry showed that there had been pressure and threats in both procedures and that the autonomy and independence of the decision-making authority had been violated. The findings prompted Joško Knez to resign as the agency's director.

All our stories on this project are here

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