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Planned sale of shares in HEP

According to unofficial sources, the Croatian government plans to initiate proceedings to sell 25% (probably minus one) of its shares in Hrvatska elektroprivreda d.d. (the “HEP”). The intended initial public offering (the “IPO”) should occur sometimes during 2018, while the preparation for the IPO will already start this fall. This is because the HEP/Croatian government still needs to resolve certain legal issues which concern the property rights over hydroelectric power plants, building rights on public goods, etc. 

It is interesting to note that the Croatian government already voiced the idea of selling its shares in HEP in January this year when the plan was to sell 25% of its shares in HEP to raise funds for the purchase of the shares held by Hungary's energy group MOL in INA d.d., an oil and gas company. It seems that the Croatian government has now given up on this idea and plans to use the money obtained through the sale to finance new investment projects by HEP.

For the last couple of years the HEP Group has shown steady growth and in 2015 the consolidated net profit of the whole group amounted to approx. HRK 2 billion. Based on evaluations available in the media, it is expected that approx. HRK 5 billion will be gained through the sale of shares in HEP.

Liberalisation of the gas market in Croatia – increasing number of M&A transactions

The liberalisation of the gas market began in the second half of the 2000s and is still in progress, especially with regard to the liberalisation of the gas supply to households. Although liberalisation of prices was expected in April 2017, the system of regulated retail prices for household customers remained in place (a price cap mechanism for household customers has been set up by the government for the period 1 April 2017 to 31 March 2018). While this and other issues (such as a lack of legal harmonisation or the low level of technical development in distribution systems) are slowing down the liberalisation of gas market, for the last couple of years it has been noticed that the Croatian market is actually preparing for liberalisation through the privatisation of state and local government owned companies. Also, many smaller (by revenue and customers) companies which are owned by the private companies/ individuals have in the last two years initiated proceedings to sell their businesses to bigger players on the market. It is expected that, out of 36 companies currently present in the Croatian gas supply sector, only 4 to 5 companies will be able to “survive” liberalisation by being adaptable to the new “rules of the game” and, most importantly, to new prices for gas which will no longer be determined by HERA – Croatian Energy Regulatory Agency. Time will once again show that it is the strongest who survive. 


Portrait of Hrvoje Bardek
Hrvoje Bardek