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Czech energy companies expand eastward

Deals in Balkans, Vietnam and Russia highlight firms' growing influence abroad

By Riva Froymovich
Staff Writer, The Prague Post
June 6th, 2007 issue

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The nation’s energy companies are successfully elbowing out competitors to expand their interests across Central and Eastern Europe.
ČEZ, the country’s dominant energy utility, made history last month with the largest-ever foreign investment by a domestic company, at 1.4 billion euros (39.6 billion Kč/$1.9 billion). It beat the record set in March by Zentiva, the largest generic drug manufacturer in the Czech Republic, of 460 million euros.
The deal is a joint venture with Elektroprivreda Republika Srpska (ERS) to modernize the Gacko I power plant and construct a new coal-fired power plant, Gacko II, in Bosnia and Herzegovina. ČEZ will own a 51 percent stake in the enterprise, called Nove Elektrarne RS (NERS), which is also the largest direct foreign investment in the Serb Republic.
“The planned investment into the construction of the plant in Bosnia and Herzegovina is another step toward the fulfillment of our vision of becoming the leader in the electricity market in Central and Eastern Europe,” Martin Roman, ČEZ’s chairman and chief executive, said in a statement.
It is the company’s fifth foreign agreement. ČEZ has already acquired three distribution companies and the Varna power plant in Bulgaria, a majority stake in the distribution company Electrica Oltenia of Romania and two Polish power companies, Elcho and Skawina.
It also recently signed a memorandum of understanding with Russia’s state-owned utility, RAO UES, to reform that country’s power sector and help build new generation units at the Shchekinskaya thermal power plant.
“There is no special reason ČEZ was chosen,” said RAO UES spokesman Stas Degtyarev. “If conditions are favorable, why not?”
Also last month, Škoda Praha asked the Czech Export Bank to gather a consortium of banks to fund an energy project in Vietnam worth 3 billion euros ($4 billion/63.8 billion Kč), according to Jan Stolár, Czech Export Bank spokesman.
President Václav Klaus visited Vietnam last year and discussed Škoda’s possible construction of a 300-megawatt power plant with the Electricity of Vietnam Group.
“The Czech Republic has always been a country that focuses on the energy sector, either in terms of power generation or manufacturing components for the energy sector. This industrial tradition is very well known in the world, and in the countries of the former Soviet bloc in particular,” said Eva Nováková, spokeswoman for ČEZ.
“ČEZ also plans to invest intensively into its [national] power plant portfolio. We have already announced huge complex renewal projects in the Tušimice II power plant,” which began two weeks ago, “and Prunéřov power plant,  and also the project of a new generation unit in Ledvice power plant,” she said.
Why Czech companies have recently been on a roll is anyone’s guess, said Jon Levy, a Europe and Eurasia analyst at the Eurasia Group in New York City.
“The same reason they’d choose any of the Western firms,” he said. “There are a small number of firms that do these projects on a global basis,” he added.
“ČEZ is a pretty well-regarded firm in its space. It’s got a lot of cash on hand,” Levy said. “Same with Škoda.”

Riva Froymovich can be reached at rfroymovich@praguepost.com


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