ČEZ claims victory over EU competition verdict

ČEZ has claimed vindication in its Brussels battle against accusations it distorted competition, but EU watchdogs are still probing one claim

ČEZ is claiming a win, but the battle is not over. CEO Martin Roman (pictured) reportedly lobbied EU Commissioner Štefan Füle to influence the outcome. | na serveru Lidovky.cz | aktuální zprávy ČEZ is claiming a win, but the battle is not over. CEO Martin Roman (pictured) reportedly lobbied EU Commissioner Štefan Füle to influence the outcome. | foto: © ČTKČeská pozice
ČEZ is claiming a win, but the battle is not over. CEO Martin Roman (pictured) reportedly lobbied EU Commissioner Štefan Füle to influence the outcome.

Czech state-controlled power giant ČEZ claimed Friday that European competition watchdogs had largely cleared it of distorting competition on its home market.

“Today’s decision of the European Commission fully clears ČEZ of several serious accusations,” the 70-percent state held company said. “Clear evidence has been discovered that ČEZ has not and could not have manipulated electricity prices, has not engaged in a cartel with anyone, nor has it been involved in limiting the trade with coal…” it added.

‘Clear evidence has been discovered that ČEZ has not and could not have manipulated electricity prices, has not engaged in a cartel with anyone, nor was it involved in limiting trade with brown coal.’

ČEZ said that the initial complaints, which sparked a raid by EU officials on its Prague offices in November 2009, were filed by its local energy rival, mining company Czech Coal. It accused Czech Coal of trying to escalate and broaden a bilateral row over coal supplies by bringing in Brussels officials.

ČEZ has, however, not been cleared on all counts by EU competition officials. The EU directorate announced that it had opened a formal anti-trust probe into the company for alleged abuse of its dominant position.

That investigation will center on “hoarding capacity on the transmission market [which] may have resulted in preventing the entry of competitors into the Czech wholesale electricity market.”

Specifically, Brussels will be asking more questions over suspicions that ČEZ is hogging capacity on power lines to the northern Bohemian area of Počerady, where the company is proceeding with construction of a large gas-fired power plant.

It is also the site where Czech Coal, as Czech Position reported first in February, wants to build a massive coal-fired power plant of up to 1300 MW capacity costing up to Kč 30 billion but has been told by high voltage network operator ČEPS that it is unlikely to be given the power line capacity needed because it has already been reserved.

“ČEZ is convinced that further investigations will show that even in this area it did not do anything,” the company said.

Frustrated

Czech Coal is desperate to get into electricity production instead of just selling the brown coal it produces in the north-west of the country. It has repeatedly accused ČEZ of foiling its ambitions by means both fair and foul.

In particular, Czech Coal says that ČEZ and holding company J&T (which later transferred its energy assets to newly-created company Energetický a Průmyslový Holding (EPH) conspired to stop it having a chance of making a bid for the power assets of British company International Power, especially the large Opatovice power plant, when they were put up for sale.

ČEZ and EPH accuse Czech Coal of hoarding coal to artificially inflate prices with the heat and power companies that heat many Czech cities saying they are in danger of running out of supplies or will have to charge uneconomical prices for heat if a solution is not found.

Czech Coal is owned by local businessman Pavel Tykač. In November 2010 he bought out the stakes of his co-shareholders Petr Pudil and Vsil  Bobela to bring his 50 percent stake up to full contol.

ČEZ and Czech Coal are involved in a bitter legal battle, with the state-controlled giant accusing the mining company of failing to honor contracts to supply coal. It says that it has had to put projects to build power plants on hold as a result of the uncertain power supplies.

The ČEZ probe has been closely, if not always accurately, followed in the Czech press, with some papers reporting that Czech European Commissioner Štefan Füle was lobbied at the last minute in Brussels by ČEZ boss Martin Roman.

Füle’s office denied there was any such meeting. In any case, Friday’s Commission decision was taken by officials from the Competition Directorate and did not go to the full college of Commissioners, where Füle would have an opportunity to have a say.

Kč 20 billion fine?

The time for ČEZ lobbying will be towards the end of the announced formal Commission probe if the Czech company has a case to answer. The European Commission can fine companies 10 percent of their total annual turnover if it finds them seriously guilty of breaking its competition rules. In the case of ČEZ, the group had turnover of just short of Kč 200 billion in 2010.