Czech billionaire Pavel Tykač, the owner of leading lignite miner Czech Coal, said in an interview for the daily Mladá fronta Dnes published Thursday that no other party — including rival Energetický a Průmyslový Holding (EPH) — will outbid him for state-c0ntrolled utility ČEZ’s coal-fired Počerady and Chvaletice plants.
The Chvaletice power station (total installed output of 800 MW) has already been spun off into an independent joint stock company in view of its potential sale, and ČEZ is moving to spin off the Počerady power station (1,000 MW). The utility announced on May 31 it was preparing to sell off the two plants, neither of which has been modernized and the operation of which would require an investment into reducing emissions to meet the emission limits applicable from 2016.
ČEZ and Czech Coal (formerly Mostecké uhelné společnost, or MUS), have been at loggerheads over a long-term supply agreement to the Počerady plant for around six years. “The main reason behind the considered sale of both power stations is the uncertainty of coal supplies after 2013 due to as yet inconclusive negotiations with the fuel supplier, Czech Coal,” ČEZ spokesman Ladislav Kříž said last month.
ČEZ has said their cooperation agreement in 2005, which was by mid-2007 to have been followed up by a deal to supply coal for up through 2055, was never hammered out. Their existing contact runs out by the end of the year.
According to Pavel Tykač, ČEZ wanted a supply contract lasting only for the life of the Počerady plant, so it has finally agreed to sell the two plants to Czech Coal.
According to Tykač, the Prague-listed utility wants a supply contract of only 5–7 years — the remaining life of the Počerady plant while Czech Coal wanted a long-term supply contract of perhaps 40 years. With neither side interested in a joint venture, he said ČEZ has finally agreed to sell both plants to Czech Coal.
Tykač told Mladá fronta Dnes that although ČEZ is soliciting offers from other bidders — chief among them EPH — he cannot imagine his offer will be beat. The situation would become clear in a matter of weeks, he said.
Czech Coal announced on June 7 it had terminated its supply agreement to EPH’s Elektrárny Opatovice power station due to “recurring gross breach of contractual terms and conditions, consisting in its failure to pay the purchase price for the coal accepted.” EPH, owned by the PPF Group controlled by Czech billionaire Petr Kellner and J&T (40 percent each) and company chief Daniel Křetínský (20 percent), flatly denies the claim.
Meanwhile, EPH is now considering using coal from its Mibrag mine in Germany to keep the Elektrárny Opatovice station running, the daily E15 reported on Monday. However, sector analysts said it was doubtful that EPH would do so because the Mibrag coal has different properties and would be expensive to transport; furthermore, there is no contract in place between the respective companies for its delivery.
Negotiating via the media
Prague-based brokerage and investment bank Wood & Company analyst Bram Buring said in a note to clients Thursday that Tykač might have given the interview “because he is looking for PR, but we believe that it is more likely that he feels that he will make gains by negotiating with ČEZ — and indirectly with rival EPH — through the media.”
“His goal is to win the bids for the Počerady and Chvaletice power plants and, if he is willing to pay up for the assets, we believe that this is positive news for ČEZ’s shares in the near term,” Burning said.
ČEZ, listed in Prague and Warsaw, had intended to transfer Chvaletice — distant from the brown coal fields that fuel ČEZ’s plants — to EPH as part of larger deal focused on the Energotrans heating plant north of the Czech capital but reportedly pulled out due to worries whether it could guarantee coal supplies to the 800 MW plant.
This week, the Czech antimonopoly office ÚOHS approved the power utility ČEZ’s planned acquisition of Energotrans from EPH (part of a larger asset agreement between them by which ČEZ completed the sale of its half stake in Mibrag to EPH). Energotrans owns an aging 325 MW coal-fired power plant around 35 kilometers north of Prague and land on which ČEZ wants to build a new gas-fired power plant (suitable for delivering heat to the capital). The acquisition of Energotrans (owned by EPH’s Pražská teplárenská) comes with a 20-year contract with the Prague administration to supply heat to households and public buildings.
As for the Počerady and Chvaletice plants, Wood & Company have estimated that a buyer would probably not want to pay more than Kč 17.8 billion (€715 million) for them, assuming a lignite price of approximately Kč 31/GJ, and not more than Kč 9.2 billion (€ 370 million) at a lignite price of Kč 40/GJ.
“Tykač commented that the price for the assets (including the CO2 rights, worth approximately Kč 5 billion) could be around Kč 20 billion. The upper end of our fair price range represents Kč 33 per ČEZ share, which, in our opinion, it would most likely invest in building up its renewable portfolio (later around 2016-2017, these assets could be sold to fund the Temelín [nuclear power plant expansion] project, assuming it goes ahead),” Buring added.
Tykač told Mladá fronta Dnes he is selling lignite to heating plants at Kč 49-51/GJ. The prices for power plants are lower, but he would not comment on the level (according to EPH, Czech Coal wants to double the price for energetic from around Kč 30/GJ to Kč.60/GJ).
Furthermore, the Czech Coal owner said the relationship with ČEZ has improved since the departure of former CEO Martin Roman, who has been replaced by Daniel Beneš (EPH’s Křetínský had established close relations with ČEZ when he was the manager of J&T Banka).
