VISEGRAD: Dearly departed from the Czech Republic

By bne IntelliNews December 16, 2013

Nicholas Watson in Prague -

News that the Prague City Assembly voted on December 12 in favour of buying out E.ON's stake in gas company Prazska Plynarenska has led to speculation about which energy company will brought in as a new strategic investor. However, this misses the more crucial issue: yet another dissatisfied foreign investor has turned tail from the Czech Republic.

Councillors decided to back the city council's proposal to exercise its pre-emptive rights to buy E.ON out for CZK2.1bn (€76m). In return it will take over the German utility's 49.3% stake in Prazska Plynarenska Holding (PPH), to add to its existing 50.65% stake. PPH holds a wafer thin majority of 50.2% in Prazska Plynarenska (PP), which is the major provider of gas to the capital. Prague will also buy E.ON's 49.35% direct stake in PP.

The council has made no secret of the fact that it intends to bring in a new strategic partner to run the highly profitable company, which last year made over CZK600m. There are four candidates in the running: German company Energie Baden-Württemberg Aktiengessellschaft (EnBW), Czech energy firm Energeticky a Prumyslovy Holding (EPH), the powerful local businessman Karel Komarek's KKCG and, inevitably, state utility CEZ. The council announced its intention to buy the stake on December 10, just hours after CEZ had revealed it had offered to buy E.ON out.

"Cooperation between the City of Prague and CEZ, which has extensive experience in customer care and is also the largest alternative supplier of gas, would allow improving the quality and extending the scope of services for Prague's citizens," CEZ said in a statement.

E.ON has been angling to divest the stake in Prazska Plynarenska for over a year now. It acquired the asset in 2006 from peer RWE, in a share swap that was driven by the European Commission's desire to see more competition on the Czech market. But E.ON's ambition to restructure and reform the bloated municipal utility into a lean, efficient operation producing high dividends for the shareholders was thwarted at every turn by the various parties in local government, who regard the gas firm as little more than a gravy train, say industry sources.

A look at the complicated share structure goes some way to explaining E.ON's dissatisfaction. E.ON's overall shareholding in Prazska Plynarenska amounts to more than 70%, but due to the holding structure it is in effect a minority shareholder, while the city exerts control via its slim majority in PPH. German efforts to take full control of Prazska Plynarenska over the years came to nought, as various local parties are not interested in increasing the dividends to the city, but are more concerned with using the utility as a cash cow.

It is for this reason that Prague city was so determined not to let its pre-emptive rights lapse. That would have allowed the German utility to hold an open tender for the stake - a level of transparency and openness increasingly frowned upon in this corner of the Europe.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Czech food producer Hame seen next on the menu for Chinese giant

bne IntelliNews - Following a smorgasbord of acquisitions in late summer, China Energy Company Limited (CEFC) is eyeing yet another small Czech purchase, with food ... more

INTERVIEW: Babis slams coalition partners, but Czech govt seems safe for now

Benjamin Cunningham in Prague - Even as the Czech governing coalition remains in place and broadly popular, tensions between Prime Minister Bohuslav Sobotka and Finance Minister Andrej Babis remain ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.