Prague will pay 1.75 billion crowns for a 49% stake in PVK, and wants to buy the rest from Veolia
The purchase of the share was approved today by Prague councilors. In the past, the French company paid seven billion crowns for controlling PVK.
Prague – The capital will pay CZK 1,754 billion for a 49% stake in Pražské vodovody a kanalizace (PV). The amount of the city will be paid through the company Pražská vodohospodářská společnost (PVS). The purchase of the share was approved today by Prague councilors.
PVK has leased water management infrastructure from PVS until 2028. Prague wants to control PVK as a whole after the expiration of the contract. PVK is actually a French company Veolia. The purchase will still be discussed by Prague representatives.
The share price was determined by two independent reviews. After the shares are acquired, PVS will receive a dividend paid each year, which it will use to repay the price paid. If part of it remains, money to repair water infrastructure. The city and Veolia also closed an option to buy the remaining 51 percent. The price of this part of the share has not yet been determined.
The agreement also includes a shareholder agreement, according to which the city will appoint a representative to the PVK board of directors and supervisory board. According to Councilor Karel Grabein Procházka (YES), the city will have two members on the Board of Directors and four representatives on the Supervisory Board. “There are also mechanisms of so-called minority blockade. The majority shareholder cannot bypass us,” he said.
PVS will purchase a total of 388,215 PVK shares. The city will repay the money in 10 annual installments of 175.4 million crowns. It will always be due on October 31 and the company’s first installment will be paid in 2019. According to Procházka, the transaction itself could take place in the coming weeks, for example, the approval of the Veolia authorities is required.
The municipality, PVS and PVK and Veolia began negotiations on the transaction last year, when they signed a memorandum of cooperation and began negotiations on how to proceed. The two parties jointly addressed, among other things, transaction documentation, purchase and option agreements, the agreement between the shareholders and also the method of dividend payment.
Water management in Prague is accompanied by complex contractual relationships, based on disadvantages for many years. PVK bought Veolia from the state in the 1990s. The water supply network is leased until 2028.
PVK earns several billion crowns a year, Prague returns about two billion for the lease and invests additional amounts in network repairs. In the past, the French company paid seven billion crowns for controlling PVK.
