The Czech energy company has ended up at the centre of a dispute worth millions with the Albanian government and also risks in Bulgaria. Once again the decision on the biggest project in recent years has been postponed. We will have to wait until 2014 for a decision on the expansion of Temelín
What a mess with the Balkans. A thick molasses, actually too thick, in which Čez, the Czech energy company, has both feet stuck. What was once the top company in Central and Eastern Europe for market capitalization, has lost its throne and above all seems likely to risk being in even deeper water due to the electricity market crisis, for international arbitration against Albania, for the price cuts of energy in Bulgaria, and finally due to the uncertainties regarding the planned expansion of the Temelín nuclear power plant. The prospects are rather bleak and even the budget forecasts are anything but rosy, with earning estimates continuing to fall in 2013.
The fish for Čez to fry are many, but first things first. What is worrying the leaders in Prague, is undoubtedly the Albanian dispute, a black hole in which the company could get stuck, and lose a lot of money. In fact in January, the government in Tirana withdrew the license of the company for having violated the contract with which in 2009, they won a monopoly on the distribution of electricity and water in the country. The Albanian government has accused the Czech company of being responsible for the blackout that has occurred in the country, the lack of investment and the omission of a presentation of financial statements. Nevertheless, the Czech company has responded to the allegations by initiating a process of international arbitration in which they have asked Tirana for compensation amounting to 200 million euros. In fact, for Čez, “the Albanian state has not protected the investment made to buy 76% of the local distribution company (102 million euro, Ed.). This is the reason why we are asking for a compensation for the damage that we have suffered from these situations, according to the rules of international law”, said Barbora Půlpánová, a spokesperson for the Czech energy giants. According to Čez, besides the lack of protection of the investment, the Albanian government is believed to have also prevented the increase in energy tariffs, against an increase of purchase prices of electricity, and to collect outstanding debts. For the Czech company, half of Albanian users do not pay the bills with accumulated losses of 190 million euro in early 2012. As a final provocation Čez have also announced plans to sell its 76% in Shpërndarje. An apparently simple way out of the Albanian puzzle, but one which does not have a certain time frame, and that could cause a net loss in the transactions of purchase and sale of the distribution company. In addition to the unsuccessful investment, Čez may have to pay a fine of 108 million euro for pre-emptively breaking the contract with Dia, the authority responsible for debt collection in Albania, with whom they signed an agreement in 2010 for the credits of Albanian consumers. “None of what is happening in Albania, including the lawsuits and arbitrage will affect Čez, and have no longer concerned the company since the moment, in January, when the Albanian state revoked the license and is therefore directly responsible for the company and their obligations”, declared Půlpánová.
A certainty as strong as granite, which has also been displayed on other the battlefield of the difficult Balkan game of Risk, the Bulgarian one. From the first of August, electricity prices will be reduced by about 5% for all Bulgarian consumers, a choice that will have a “limited impact” on Čez, according to the company who hope to be able to maintain the distribution license on which the threat of revocation of Sofia hung. Čez, in fact, has been at the centre of the controversy that eventually led to the fall of the Bulgarian government due to the increase in electricity bills. The Czech utility found themselves at the storm centre, and in an elettoral-populist outburst, the former Bulgarian Prime Minister Bojko Borisov promised an 8% cut in electricity bills and announced the revocation of the license for the distribution of energy to Čez, in an attempt to curb protests against rising prices of light that brought tens of thousands of people into the streets throughout Bulgaria. Prague had reiterated it had complied with its obligations, and had accused the government of wanting to politicize the story before next elections.
However, what also worried the higher levels of the company, were the problems in their homeland. In addition to losses on the stock market, where until a few weeks ago, it was the wealthiest utility in all of Eastern Europe (it was surpassed by the Polish Pko) in terms of market capitalization, it is the uncertainty about the fate of the expansion project of the Temelín nuclear power plant, which carries weight, a plan worth 8-12 billion euro. The Centre-right government, which collapsed after the scandals concerning the former Prime Minister Petr Nečas, had played for time by postponing the decision on the autumn consortium to choose. Choices included the US-based Westinghouse and the Mir-1200 consortium, consisting of the Russian Atomstroiexport and Gidropress and the Czech Škoda JS.
The technical government, in a rather “pilate-like” manner, have passed the ball on to others claiming that it is a decision which is “too politically relevant” to make. If the current polls are to be believed, there will be a Centre-left government, who will have to discuss the plan. However, this will not be until 2014.
By Daniela Mogavero