The Czech tycoon taking over Royal Mail in a controversial debt-fuelled deal has suffered a £3 billion blow after profits plunged at his energy empire.
Daniel Kretinsky will this month become the first overseas owner of the postal service in its 500-year history. He is also the main shareholder of Prague-based EPH, which owns energy infrastructure across Europe.
Concerns are mounting over the state of his finances after EPH, the largest energy group in Central Europe, reported a pre-tax profit last year of £1.4 billion – down sharply from the £4.5 billion it generated in 2023.
The firm blamed the slump on ‘declining electricity prices and high market volatility’. It had previously cashed in on soaring power costs as the Russian invasion of Ukraine disrupted global supply chains and sparked a surge in household energy bills.
The sharp drop in profit at EPH comes as fresh doubts emerge about Kretinsky’s looming takeover of Royal Mail’s parent company International Distribution Services (IDS), which is due to be completed this month. The deal will be funded with a combination of equity and debt, with loans of £3 billion on top of IDS’s existing £2 billion of debt.
Former Conservative party leader Sir Iain Duncan Smith told The Mail on Sunday that the Government ‘must take another look’ at the deal, noting that ‘concerns about Kretinsky’ remain.
Worrying: Concerns are mounting over the state of Daniel Kretinsky’s finances
EPH’s assets include Ballylumford, Northern Ireland’s largest gas-fired power station, and the Lynemouth biomass plant in Northumberland.
EPH’s dividend payout for the year was slashed to £1.4 billion from £2.9 billion. It means Kretinsky, who controls just over 50 per cent of EPH, saw his dividend haul drop to about £700 million from £1.5 billion in 2023.
The tycoon, who has an estimated fortune of £7.3 billion and is nicknamed the ‘Czech Sphinx’ for his inscrutable approach to investing, steadily built up a stake in Royal Mail, becoming its largest shareholder ahead of a £3.6 billion swoop on the business last year. Aside from his interests in energy plants and the postal service, Kretinsky has big stakes in Sainsbury’s and West Ham United football club.
Despite the Government waving through his takeover of Royal Mail last year, there have been persistent calls to review the deal due to growing fears it could put the UK’s national security at risk. The tycoon has come under scrutiny in recent months due to links between some of his business interests and Russia.
EPH’s assets include part-ownership of Eustream, a major gas pipeline in Slovakia that funnels gas between Russia and Europe.
There were suggestions the Royal Mail deal could be held up due to a political crisis in Romania, where EP Group also operates. However, Kretinsky’s firm said this month that all regulatory approvals had been secured.
The takeover comes with a number of conditions from the UK Government, including that it will retain a ‘golden share’ in IDS.
This means any changes to Royal Mail’s ownership, tax residency or headquarters will need ministers’ approval. The UK owns golden shares in companies that are regarded as crucial to its security, including the weapons manufacturers BAE Systems and Rolls-Royce.
The brand will also be protected for as long as EP Group, the Kretinsky vehicle buying Royal Mail, owns the company.
EP Group has also agreed to retain the Universal Service Obligation, which guarantees a first-class postal service to anywhere in the UK for a fixed price six days a week. IDS has suggested second-class post could be reduced to every other weekday.
The company also warned last week it may not be able to deliver first-class post within three days without increasing prices for customers, despite the communications watchdog proposing a watering down of Royal Mail’s delivery targets for both first and second-class mail.
Ofcom has proposed lowering the target for first-class mail to arrive the next working day from 93 to 90 per cent of deliveries. The target for second-class mail to arrive in three days would go from 98.5 to 95 per cent.
But Ofcom’s plans also include ‘tail of mail’ targets requiring 99.5 per cent of first and second-class mail to arrive in three and five days respectively.
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