February 19, 2013
Czech energy holding CEZ admitted on February 18 that it is under investigation by anti-corruption police over four transactions, although it stressed no charges have been brought.
Czech police have demanded information on the sale of a 50% stake in German coal miner Mibrag to EPH, transactions made by subsidiary Skoda Praha Invest for possible violations of public procurement laws; CEZ's investments in Albania; and its contracts for temporary storage of spent nuclear fuel at its Temelin nuclear power plant, reports Dow Jones.
Spokesman Ladislav Kriz said that within the past six weeks police had requested information the transactions. He added that the anti-corruption unit had made several similar requests for information last year, that the company has fully complied with all requests, and that he is not aware of any criminal charges. A spokesman for the police anti-corruption and financial crime unit declined to comment.
The state-controlled company is under increasing pressure over its foreign assets that were acquired during a push to transform itself into a CEE giant. It is currently being pulled into the centre of huge protests in Bulgaria against the cost of electricity, which has seen the government threaten to revoke its licence alongside the two other foreign owners of the country's distribution grids.
Things are further down the line at its Albanian unit, where its licence was withdrawn last year following a long fight with Tirana, and has initiated arbitration proceedings. CEZ spokeswoman Barbora Pulpanova claimed on February 17 that of the CZK72bn in foreign investment it has conducted since 2005, only the Albanian business is expected to make a loss for the holding.
However, there are issues at home also. The ongoing tender for expansion of the Temelin nuclear plant is highly charged. Currently defending a challenge form French group Areva over its expulsion from the competition, the Czech power company is now set to choose between offers from the US and Russia, developing the issue into a geo-political debate that is taking in opinion from the president down. The company is also reported to be struggling to make the investment work without significant state support, for which it is lobbying intensely.
CEZ is also defending itself against accusations of anti-competitive behaviour from the EU, and is hoping to escape the charges by offloading one or more of its aging thermal power plants in the country. The closely held EPH is seen as a front-runner for the key purchase, a scenario which some analysts suggest will hardly open the Czech power market to greater competition given the fact that the two companies are seen to have largely carved up the market between themselves.
Beset by both the investigation at home and events in Bulgaria, CEZ shares opened down 0.2% on the day at CZK618 in an overall higher market in Prague. The overwhelmingly largest stock on the PX index, the company's shares have dropped 9.4% in 2013, compared with a 3.4% index decline, according to data compiled by Bloomberg.