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Coal delivery behind ČEZ–EPH deal, but at what cost?

  18:37

The announcement of a three-way deal between ČEZ, EPH a Dalkia poses more questions than answers

Elektrárna ve Chvaliticích má nejvšší komín v ČR. Rovněž náklady na výrobu elektřiny zde patří k nejvyšším. foto: © ČEZČeská pozice

ČEZ announced Dec. 22 that it had agreed to sell the Chvaletice coal-fired power plant in Eastern Bohemia to Energetický a Průmyslový Holding (EPH). In exchange, ČEZ will acquire the municipal heating distribution network for Most and Litvínov in North Bohemia. The companies did not disclose details about the value of the transaction, evaluation of the assets involved, or say whether an agreement on coal deliveries from ČEZ-owned mining company Severočeské doly are part of the deal.

Since it was built in the 1970s Chvaletice has sourced brown coal from mines in North Bohemia.

It seems unlikely that now anyone would buy a coal-fired power plant without an assured supply of coal. EPH and ČEZ’s contracts for supplies from Czech Coal, which has a dominant position on the Czech brown coal market, expire in the next few years and the mining company wants to significantly increase its prices for because of lower extraction from its mines in Most and Sokolov.

There are forecasts of brown coal shortages on the Czech market within several years and it will be interesting to see what sort of contract for brown coal deliveries EPH has come away with from the deal. It’s not only the price that’s important, but also length of the contract and quantities guaranteed.

“At this stage, we don’t want to respond to questions about the details. The transaction isn’t ready and we will negotiate more,” Daniel Křetinský, the head of EPH, told Czech Position.

“But I can add that the overwhelming majority of coal burned at the Chvaletice power plant comes from the Nástup Tušimice mine which, apart from limited exceptions, does not work as a substitute for coal from Most and Sokolov, or coal from Severočeské doly’s Bílina mine because it has lower heating power and higher sulfur and ash content,” Křetinský said.

ČEZ spokesman Ladislav Kříž was even more guarded. “I don’t have anything to add to what was said in the press release,”he said.

Dim outlook for Chvaletice

The Chvaletice power plant is 20 kilometers west of Pardubice. The plant has four units with 200 megawatt capacity each. In recent years it has produced an average of about 3 terawatt hours (TWh), burning around 300 million tons of coal annually. One of the plants chimneys, at 305 meters, is the tallest free-standing structure in the Czech Republic.

Completed in 1979, production costs at the Chvaletice plant were practically the highest from ČEZ’s thermal power plants, and considerably more than those in the coal basin in North Bohemia, which are located in close proximity to brown coal deposits.

Since the beginning of the 1990s, ČEZ has sought ways to lower production costs at Chvaletice. In 1996, for example, coal shipments by boat down the Labe river were replaced with rail deliveries. Modernization and the lowering of emissions for continued operation after 2016 would not be very viable

With the contract with ČEZ, EPH could secure long-term coal deliveries for the power and heat plants operated by its subsidiary United Energy Trading. Coal delivery contracts may be valid for 10 years, while Chvaletice could be shut down within five years. ČEZ planned on continuing production at the plant until 2015.

According to Czech Position’s information, experts consider that modernization and the lowering of emissions for continued operation after 2016 would not be very viable.

It’s understandable that ČEZ wants to off-load Chvaletice. However, the state-controlled energy giant is in an unenviable position regarding coal contacts; ČEZ does not know how much it will pay for new long-term delivery contracts with Czech Coal and management will have trouble explaining why they sold a gigajoule of secured coal to EPH at a far lower price than it would pay for a gigajoule of coal from Most.          

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