Czech energy group Energetický a Průmyslový Holding (EPH) is ready to join battle for two power plants which state-owned power giant ČEZ has indicated that it is willing to offload.
EPH has signaled that it is ready to buy ČEZ’s 800 MW Chvaletice power plant and the 1,000 MW capacity Počerady plant. The two coal-fired plants are currently on offer to mining company Czech Coal as near 70-percent state owned ČEZ seeks to seal a new long-term coal supply deal with the mining firm by the end of the year.
EPH spokesman Martin Maňák confirmed to Czech Position on Wednesday that offers for the plants had been prepared, even though the group will have difficulty finding coal supplies to operate them. Locally based investment groups PPF and J&T share an 80 percent stake in EPH with the remaining 20 percent held by group manager Daniel Křetínský.
Czech business daily Hospodářské noviny, which Wednesday reported EPH’s interest in the ČEZ plants, suggested that the main motivation for the energy group’s offer was fear that Czech Coal could get its hands on electricity production assets, which it had long been seeking to build itself up into a significant player on the electricity market. That market has over recent years increasingly looked like a tag-team double act starring ČEZ and EPH.
The problematic Chvaletice power plant, sited far from Czech coal mines in East Bohemia, was earlier offered to EPH as part of a deal under which ČEZ would acquire the Energotrans company, which supplies heat to the capital Prague from power plants sited to the north of the city near Mělník. The deal fell through because ČEZ feared whether it could scramble together the coal supplies needed for the plant without leaving itself short.
The Energotrans deal, pushed ahead under a different format, is now subject to an in-depth probe by the Czech competition office, with ČEZ managers admitting that offloading a power plant or two might ease some of the watchdog’s problems over the threatened increase in its power production portfolio if it takes over Energotrans.
ČEZ has set an end year target for trying to secure a new long-term supply deal with Czech Coal in what has been described as a poker game between the two power companies. While relations between the two groups have been soured by mutual allegations, mud-slinging and legal action — some taken to the European Commission in Brussels — the coal supplier and its major customer still have a mutual interest in an agreement.
Last week, ČEZ’s director of trading Alan Svoboda indicated that a deal with Czech Coal could be agreed within two or three months (or not come through at all). He said that ČEZ was already taking preparatory steps for the eventuality of a no deal scenario, which would probably leave some of its coal-fired power plants, which it is seeking to use at full potential this year, without the coal needed to operate them.
Prague-based brokerage Wood & Company said on Wednesday in a note to clients it was positive on the margin that ČEZ might have an option to raise cash by selling the two plants. It added that the power group has plans to decommission Chvaletice in 2015 and 2018 respectively. Swopping the plants for Czech Coal mining assets was a possibility, the brokerage said, pointing out though that it is still unclear whether the government will give permission in the near future for mining beyond current limits. That move would free up significant coal reserves for Czech Coal and, presumably, ease current worries about sourcing long-term supplies at reasonable prices.
EPH’s Křetínský also confirmed to Hospodářské noviny an earlier figure that the group has around €5.0 billion for energy sector investments aimed at making it into a player at the top table on the regional power market. Investments have been earmarked in Germany, the Czech Republic and Slovakia.
The targets include building a new 600-800 MW coal fire plant near the MIBRAG mine not far from the Czech-German border in Saxony; possible acquisition of stakes in two existing German power plants, one with full ownership; and a 49 percent stake in the dominant Slovak gas company SPP, currently held by a consortium of E.ON and GDF Suez.
EPH has also expressed interest in the Czech gas pipeline company Net4Gas, which parent company RWE confirmed again on Tuesday that it is looking to sell by the end of 2013 as part of its €7 billion divestment drive. EPH spokesman Maňák said both gas company acquisitions could go ahead without problems.
The SPP deal is on hold until the outcome of parliamentary elections in Slovakia scheduled to take place on March 10. The clear frontrunner to win is former prime minister Robert Fico of the left-leaning SMER-SD party. Fico has in the past taken a stand against the sale of state assets and the claimed abuse by SPP, where the Franco-German consortia were running the company, of its dominant position.
When in power, Fico offered to buy out the foreign stakes in the gas company, where the state still has a 51 percent share but conceded management rights when SPP was partially privatized in 2002.