David Binar and Nicholas Watson in Prague -

CEZ made big changes to its supervisory board at its AGM on June 27, reflecting the major shift in power since billionaire and now Finance Minister Andrej Babis arrived on the political scene, as well as dissatisfaction with the way the state energy giant has been run for the past decade.

The Ministry of Finance, which manages the state's shareholdings, has effectively taken control of the board that supervises the management of this crucial state company, whose power is illustrated by the country's nickname of "CEZko" – a corruption of the word "Cesko", the colloquial name for the country.

Seven members of CEZ's 12-person supervisory board were changed, with five new members being affiliated to Babis' ANO party, which was only formed in 2011 and came second in the parliamentary elections in October 2013. Only two new members of the supervisory board are deemed close to the Social Democrats (CSSD), the leading party in the coalition. CSSD now control three members of the supervisory board, with their candidate Vaclav Paces being approved as chairman.

Analysts say Babis' effective takeover of the supervisory board is surprising, because it ignored an unwritten rule that all parties from the ruling coalition must be represented; the smallest coalition party, the Christian Democrats, are left without a representative.

"Through his five representatives on the CEZ supervisory board Babis has gained an unexpectedly strong position – he's de facto gained control over this institution... This has shaken the coalition and there will be discussions on this topic," says Zuzana Kubatova, an investigative journalist who has covered CEZ for many years.

The changes at CEZ, as well as that of supervisory board members at state oil firm Mero and state oil products pipeline firm Cepro on the same day, are in line with Babis' policy for the government to become more active in the running of state companies and overseeing their strategic direction.

Babis has earmarked CEZ, almost 70% owned by the state, as a major source of cash to pay for the new government's spending plans. In March, he suggested CEZ pay out its whole net profit from 2013 in dividends to shareholders; the power giant normally distributes around 50-60% of its group net profit. In the end, the board opted to pay out 61% of last year’s profit, which means some CZK15bn (€546m) will pour into budgetary coffers.

Transparency

The group's worrying fall in profitability is behind another key change pushed through at the AGM. According to new rules, every member of the supervisory board has the right to access any document related to CEZ activities without needing the approval of the wider board.

This is regarded as a key move to greater transparency at a company whose inner workings have long been the subject of controversy. Vlastimil Jirik, a numbers man who was a member of supervisory board until 2010 when he resigned, is known to have briefed Babis over past few months about several transactions, including the acquisition of the German coal miner Mibrag, that were trumpeted by CEZ management as big successes, but whose own investigations have found them to be hugely value destroying.

"In terms of transparency this move is quite promising," says James de Candole of the advisory firm Candole Partners, which is a trenchant critic of the company.

The AGM also confirmed in his post the current CEO Daniel Benes, though his standing with Babis remains very low, being considered primarily responsible together with former CEO Martin Roman for the ruinous expansion policy that have seen CEZ's net profits fall 32% since the record high of CZK51.9bn in 2009, and its share price drop by 44% over the past three years. CEZ has attributed the profit declines to "a major drop of the wholesale prices of electricity due to massive subsidies going into renewable energy sources, combined with a stagnating European economy and ongoing uncertainty concerning the regulatory environment in the energy sector."

On June 24, CEZ finally extricated itself from the disastrous 2009 acquisition of the major power distributor in Albania for €102m, which since then had become the embroiled in a big battle with the government there that culminated in Tirana stripping CEZ Shperndarje of its licence and putting it under administration.

On April 10, CEZ was forced to cancel the tender for the €8bn-10bn expansion of the Temelin nuclear power plant, as the whole process had degenerated into a legal and economic fiasco.

Benes is also in the firing line over his decision to award a €60m contract to build a nuclear fuel dump at the Temelin nuclear power plant to a shell company registered in Lichtenstein – a decision the Czech antitrust authority on June 11 fined CEZ over, arguing the company in question, CEEI, was not qualified to enter the tender because it had no idea how to build such a structure, and should therefore have been disqualified at the outset.

On June 30, it emerged the Prague high state attorney Lenka Bradacova, an anti-corruption crusader, has reopened an investigation into the deal, which looked suspiciously high given that the cost of an equivalent dump in neighbouring Bavaria, Germany and completed only a year earlier was around just €30m.

A CEZ spokesperson has defended to bne the use of a company whose ownership remains unknown on the grounds that to find out would contravene EU laws over procurement. Legal experts say this a fallacious argument, as EU laws stipulate only that a public company cannot discriminate against a tendering company over its ownership.