CEZ head at odds with Czech officials in excitement over UK nuclear deal

By bne IntelliNews October 1, 2014

bne -


EU approval of UK public support for a new nuclear power station has "cleared the way" for resurrecting a plan to expand the Czech Republic's Temelin plant, the CEO of Czech utility CEZ said in comments published on September 30. The claim appears at odds with earlier statements from the state, the company's controlling shareholder, with a minister saying the same day that there will be no decisions made on the project this year.

Prague, which has made it clear that it hopes to resurrect the tender process for the €10bn expansion of Temelin in the near future, got a boost on September 22 when London agreed terms with Brussels for public funding for its first new nuclear plant for a generation. The European Commission's challenge to the funding of Hinkley Point C was seen as a key element in the Czech government's announcement that it would not offer state-owned CEZ pricing guarantees on the power produced at Temelin.

CEZ, having struggled throughout a long winded process to win pledges of public support for the project, promptly dropped the tender, which had been fraught with controversy over the exclusion of France's Areva. Analysts welcomed the news, having complained for years that the project was economically unviable and would stretch CEZ's finances unreasonably. 

However, the very same figures that helped kill the previous competition - President Milos Zeman, powerful Finance Minister Andrej Babis, who has since effectively taken control of the CEZ board, and Minister of Industry and Trade Jan Mladek - were back within six months calling for the scheme to be resurrected. 

Daniel Benes, CEO of CEZ, told Czech business daily Hospodarske Noviny that the September 22 statement from a European Commission official that regulators would accept a compromise offer from London on its contract-for-difference funding model offers a European precedent that will help the company relaunch the Temelin expansion. "One argument was that it would never go through because it is public support," he said, according to Reuters. "Now, though, Brussels approved it for the British. It is always good when some one big clears the way for you."

However, the CEO may be jumping the gun, with his bosses busy trying to dampen expectations of a swift resumption as they look to raise competition amongst potential bidders from China and South Korea as well as Europe and the US. They may also be hoping a delay could allow them to open the competition back up to the Russians. State nuclear agency Rosatom offered generous funding options in the first tender, but Czech officials have since suggested the Ukraine crisis means a bid from Moscow would not be welcome.

Asked by bne on September 22 if the UK's deal was encouraging for resurrecting the Temelin expansion, a finance ministry spokeswoman retorted that the question was "premature". Helena Petrikova said at the time: "Even if the UK receives an affirmative opinion … for the construction of the Hinkley Point C nuclear power station, it is necessary that such possible affirmative opinion is confirmed by the EC as a whole. A decision … cannot be anticipated at this point."

Government officials remained keen to play down the issue on September 30. Industry and Trade Minister Jan Mladek told Russian news agency Prime that no decisions will come before 2015. "Now our ministry, together with experts in nuclear power, is preparing a document for the government, which will be ready only by the end of this year. It will include recommendations on how exactly should Czech Republic develop its nuclear power sector. So, this year there will be no decisions [on Temelin]," Mladek said.

Benes' excitement over the Hinkley Point deal therefore appears at odds with the view of his bosses. The ire of the majority shareholders may only be made worse by the CEZ head's suggestion that the politicians are not smart enough to understand the issue.

"I have tried to explain the contract-for-difference scheme ... to probably three governments and it was always difficult," he told Hospodarske Noviny. Following comments like that he may have some more explaining to do.

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