Slovak Prime Minister Robert Fico said he will ask Slovnaft AS, the country's sole refiner, to reduce the price of fuel, the newspaper Sme reported yesterday. Talks with representatives of Slovnaft, which is controlled by the Hungarian energy company
MOL Rt., will start this week, the newspaper said. The government may also cut excise taxes on fuel to ensure consumer prices fall, Fico said, according to Sme.
Our view: We believe, increasing political pressure on the margins of Slovnaft is a new risk factor for
MOL. Although fuel market is fully liberalized in Slovakia, government seemingly plans to reduce the relatively high (some US$ 2-3/bbl in FY06) inland premium Slovnaft enjoys due to the remoteness of other refineries and the lack of cheap import routes. Since this is some one quarter of usual refining profits, a lowered premium might have substantial negative impact on Slovnaft, which provided some 15% of
MOL group’s total
EBIT last year.