The Slovenia Times

Slovenia proposing several solutions for NLB


Minister Mateja Vraničar Erman is meeting European Competition Commissioner Margrethe Vestager on Thursday after the government halted a two-phase privatisation plan in early June over dissatisfaction with the sale price and concerns over potential liabilities to Croatian savers.

Under positions taken by the government last week, Slovenia wants to implement remaining compensation measures set down by the EU commission in 2013 in approving state aid for NLB in a way that would not harm Slovenian taxpayers and would at the same time be compliant with EU state aid rules.

The government's goal is to preserve NLB as a strong regional banking group, which means it wants to negotiate a solution so that the bank would not have to sell the profitable subsidiaries in the countries of the former Yugoslavia.

In exchange for Brussels endorsing the state bailout of the bank in 2013, Slovenia committed to sell 75% of NLB by the end of 2017, but then secured approval earlier this year to sell 50% of NLB by the end of the year and the remaining 25% minus one share by the end of 2018.

In the state aid approval of 2013, the sanction envisaged for the country's failure to meet its commitment is selling NLB's Balkan subsidiaries. In this case the government should appoint a trustee, one endorsed by the Commission, to independently implement the sale process.

To avoid the scenario, which would reduce the value of NLB, the finance minister will offer several alternative proposals tomorrow.

In one proposal, which has been agreed within the ruling coalition, Slovenia would secure a three-year deferral of the bank's privatisation in exchange for several compensatory measures.

Unofficially, these involve corporate governance measures to secure additional guarantees for the independence of the bank's supervisors and an extension and stifling of restrictions on takeovers and NLB Group's expansion.

These measures are unofficially agreed with the bank's management, which finds them acceptable, but Brussels is said not to be enthusiastic about the proposal.

As a second proposal the minister will unofficially propose diplomatic measures to increase pressure on Croatia to respect the 2001 succession agreement and a later bilateral memorandum on the issue of the Yugoslav-era savings deposits.

Unofficial information suggests an appointment of an independent expert to interpret the succession agreement.

Unofficial sources say that the European Commission has lately shown more understanding about the issue in Croatia and agreed to enhanced communication with Zagreb.

While Slovenia may count on the Commission's more active engagement on the issue, Brussels is said to be of the opinion that the issue does not warrant a deferral of NLB sale and that the efforts may run parallel.

Meanwhile, the Commission has also come up with some proposals in technical talks with Slovenia in recent weeks, which the Slovenian side says have brought little progress.

One such is the "earn out" model, a system whereby the seller agrees to a price that it deems too low in exchange for a share of the revenue or profits of the sold company for several years after the sale.

Slovenia is unofficially not in favour of such a proposal because it believes the pressure on the sale price in this case would be excessive, while there is no guarantee for an off-set later on through profit sharing. The uncertainty element is not the bank's operations but the Croatia savings issue.

Unofficially, the Commission also proposes for Slovenia to sell a smaller stake in the bank by the end of the year, between 40% and 45%. Slovenia is said to be welcoming such flexibility but would want the stake to be lower.

In that respect Slovenia would unofficially propose making a step forward to a new sales procedure through an initial public offering of shares by selling a minor stake to a known buyer by the year's end.

Unofficial sources say that Slovenia has another proposal; to avoid the sale of Balkan subsidiaries the country would propose, if need be, that the expected purchase money equalling the book value of 75% of NLB shares or around EUR 360m be paid as NLB's fine to the state, settled over a longer period of time.

By paying the fine, Slovenia is said to believe the commitments resulting from the approval of state aid for NLB would cease.

The latter two Slovenian proposals have unofficially not been fully agreed within the coalition.

The Commission's expectations over Slovenia's commitments in the case of NLB were also discussed today by the coalition.

Speaking after the meeting, Simona Kustec Lipicer of the Modern Centre Party (SMC) said that the coalition's instruction to the government was to "negotiate in such a way as to not to allow any additional damage for the Slovenian taxpayer".


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