VISEGRAD: All change at CEZ helm but full steam ahead for nuke tender

By bne IntelliNews September 19, 2011

Nicholas Watson in Prague -

The future for CEZ's recently departed boss looks uncertain given his mounting legal problems, but the main question for the power industry and investors is whether it will be business as usual at the Czech utility, particularly with regards to the multi-billion nuclear tender.

Judging from comments from officials and industry players, it's full steam ahead for CEZ's tender to build two new nuclear reactors at its 2-gigawatt Temelin nuclear power plant with an option for up to three more reactors at other sites around Europe, in what could amount to an investment of about €20bn.

Indeed, Czech Prime Minister Petr Necas said in comments published by the Mlada Fronta Dnes newspaper on September 16 that the reason for Martin Roman's departure as CEO and chairman of the 70% state-owned power company two days before was so his successor could seamlessly oversee the tender, the parameters for which are scheduled to be issued in late October. "Martin Roman would finish as director at CEZ next year in January anyway," Necas was quoted as saying by the newspaper, without elaborating on why his contract would not be renewed in the new year. "This ends one era of CEZ's development, associated mainly with acquisitions abroad, and starts another, the main theme of which will be the expansion of the Temelin nuclear power station."

Nuclear industry sources say Necas' decision to end Roman's seven-year reign as head of CEZ and move him to the supervisory board could have been influenced by an August meeting with executives of the three bidders in the tender - France's Areva, the Toshiba subsidiary Westinghouse Electric and a Russo-Czech consortium led by Atomstroyexport - at which Roman indicated he favoured an approach that would involve spending as little money as possible in the initial stages of the project before a final investment decision would be made further down the line.

This go-slow approach, which sources say extends the period during which the project can be scrapped, angered the prime minister who wants to see the tender proceed as smoothly as possible, with the winning bidder chosen in 2013 and the new reactors up and running by 2025. Since the tender was first initiated in 2009, the whole project has been put into question by criticism that its financial and economic assumptions are flawed, with some experts arguing state guarantees will be needed to finance it.

The government has also been angered by the cack-handed way management has embroiled the state firm in a high-profile investigation into anti-competitive practices by the European Commission. On July 15, the Commission chose not to open formal investigations into suspicions CEZ had manipulated prices on the Czech electricity market, engaged in cartel activities and limited the trade in brown coal, but it has opened a formal probe into suspicions the utility illegally hampered rivals from entering the domestic wholesale electricity market.

Sources also say the government increasingly felt that Roman had become too much of a public and controversial figure to head such an strategic and politically delicate project as the nuclear tender. His replacement, Daniel Benes, previously Roman's deputy and a long-time friend, is regarded as a less polarising figure and more of an industry player, having worked at Bohemiacoal and other firms involved in the energy sector.

Roman probe

Necas told Mlada Fronta Dnes the sudden departure of Roman is unrelated to the newspaper's revelation that a few days previously it had challenged Roman to respond to documents it was in possession of which purportedly show he benefited from payments via offshore trusts from his former employer, the power plant equipment maker Skoda Plzen, even though CEZ was a big customer of that company.

Roman has repeatedly denied over the years assertions that he maintained financial ties with the engineering group he headed prior to joining CEZ in 2004, though Mlada Fronta Dnes said the documents reveal Roman to be the founder of a Cayman Islands trust, The California Trust, which in turn owned the British Virgin Islands-based Artwick Investments Limited. Roman was listed as a "beneficiary" and manager of both offshore trusts, the paper said, along with three other former Skoda Plzen managers from a Dutch subsidiary of Skoda Plzen's former owner, Appian Group.

The murky Appian Group has been the subject of ongoing investigations into money laundering by the Swiss and Czech authorities in connection with its purchase of the Czech mining company Mostecká uhelná společnost in 1998.

In 2009, the South Korean Doosan Heavy Industries & Construction acquired Skoda Power in a deal worth more than $600m.

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