Prague court rejects ČEZ lawsuit against Czech Coal

ČEZ claims former coal miner Mostecká uhelná společnost (MUS) failed to honor a long-term supply contract

Brian Kenety 13.12.2010
Skupina Czech Coal se na celkové produkci uhlí v ČR podílí téměř z jedné třetiny. | na serveru | aktuální zprávy Skupina Czech Coal se na celkové produkci uhlí v ČR podílí téměř z jedné třetiny. | foto: © ČTKČeská pozice
Skupina Czech Coal se na celkové produkci uhlí v ČR podílí téměř z jedné třetiny.

The Prague Municipal Court has rejected a Kč 10 billion suit filed by state-controlled utility ČEZ against Czech Coal, owner of the country's second largest brown-coal mining company, regarding a dispute over long-term lignite supplies, saying it does not have local jurisdiction.

ČEZ filed the lawsuit against Czech Coal to protect its rights and seek financial compensation. “After a detailed analysis of the position and conduct of the company Czech Coal, ČEZ concluded that [the concern] repeatedly breached the rules of competition in relation to ČEZ,” the company said in an Oct. 20 statement.

The lawsuit is directly connected with an agreement on future long-term cooperation that ČEZ concluded in 2005 with the former coal company Mostecká uhelná společnost (MUS), known as Czech Coal Services since 2008.

“According to ČEZ's spokesperson, the company will appeal the decision. The whole issue has been going on since 2007. We consider the news neutral,” Atlanik analysts Bohumil Trampota said in a comment Monday. 

ČEZ claims that a long-term purchase contract with the former MUS was to be concluded by mid-2007 — at the latest — for the supplies of lignite for new facilities that ČEZ planned to build, but Czech Coal failed to honor the contract.

“Meanwhile, Czech Coal increased pressure on ČEZ to relinquish the existing Počerady power plant under highly unfavorable terms and conditions,” it said in the Oct. 20 statement. “Among other things, [Czech Coal] abused its position as the monopoly fuel supplier to the Počerady power plant which is the biggest coal-fired plant in ČEZ’s portfolio.

The Czech Coal Group consists of Czech Coal a.s., a trader in energy commodities (mainly brown coal), electricity and greenhouse gas emission allowances; Vršanská uhelná (VUAS) and Litvínovská uhelná (LUAS), which both hold coal reserves and Czech Coal Services. The group also includes a number of service companies and holds equity stakes in regional heat & power plants.

ČEZ said it continues to be “seriously interested” in reaching an agreement with Czech Coal for securing the supplies of coal to the existing coal-fired power units in Počerady and their modernization or replacement with new units, but that the court case over long-term supplies must first be settled.