Italy's Enel announced on 22 December that its subsidiary Enel Produzione had signed a new agreement with the Czech company Energetický a Prumyslový Holding (EPH) and EP Slovakia BV to effectively provide additional loans for the completion of units 3&4 at Slovakia’s Mochovce nuclear power plant.
It also alters the terms under which EPH can eventually buy out Enel's stake in power utility Slovenské elektrárne (SE). The new agreement modifies some of the terms and conditions of the contract signed in December 2015 (and amended in 2018) between Enel Produzione and EPH.
Construction of the Mohovce NPP began in 1982, and the first two units were commissioned in 1998 and 1999. Construction of the second phase of the plant (Mochovce 3&4) started in 1986, but was frozen in 1992 in the wake of the Soviet collapse. Work resumed in 2009 but was suspended again after the 2011 Fukushima accident for upgrading to comply with new safety requirements. In 2009, the aim was to have both units in operation by 2013, at a total cost of €2.8 billion ($3.4bn). This estimate was increased in early December to about €6.2 billion. Fuel loading at unit 3 is now expected by April 2021 and at unit 4 in 2023.
In 2006, Enel paid €840 million for its 66% stake in SE and, as part of the transaction, agreed to complete Mochovce 3&4 However, in 2014, Enel launched a programme to sell its holdings in Romania and Slovakia, including its SE stake. Divestment of these assets was part of a €6 billion asset sale begun in 2013 to reduce the group's financial debt.
The agreement reached in 2015 entailed the transfer to the newly established Slovak Power Holding (HoldCo) of the entire 66% held by Enel Produzione in SE and governed the subsequent sale in two phases to EP Slovakia BV of 100% of HoldCo for a total of €750 million ($673m) subject to adjustment on the basis of various parameters. The new agreement includes changes relating to both the financial support to SE for the completion of Mochovce 3&4 and the mechanisms that regulate the exercise of the put or call options relating to the transfer of the residual stake in HoldCo.
In particular, Enel Produzione will grant loans to HoldCo, which will in turn make them available to SE, for a maximum amount of €570 million maturing in 2032. The €570 million is in addition to €700 million already disbursed by the Enel Group on the basis of the 2018 contract amendments, the expiry of which is also expected to be extended to 2032 The new agreement also provides that EPH will grant an additional loan of €200 million to service the construction project.
With regard the mechanisms for exercising put or call options, changes were made to the trigger events which would allow Enel Produzione and EPH to exercise their respective options. In particular, the Long Stop Date was eliminated, that is the date after which Enel Produzione and EPH were entitled to exercise their respective put and call options, even without completion of Mochovce 3&4.
The new agreement also makes it possible for EPH to exercise an early call option once six months have elapsed from the signing of the updated text of the agreement and until the first of the following dates: (i) four years from the date of completion the trial run of Mochovce 4 , or (ii) December 2028.
The €750 million is subject to an adjustment mechanism that will be calculated by independent experts according to a formula defined in the contract, to which the new agreement makes some changes. These exclude part of the investments planned for the construction of Mochovce 4 and the identification of the percentage of enterprise value of that unit to be considered according to the time the option is exercised.
Should EPH exercise the early call option, a floor and a cap were introduced from a minimum of €25 million to a maximum of €750 million. These vary according to the time of exercise of the option and the concrete application of the price determination formula. Lastly, the new agreement provides that, upon exercise of these options, EPH will take over the loans. In the event of an early call option, EPH is expected to take over the loans according to an articulated scheme starting from 2026, with the last tranche expected at the latest in 2032.
