ČEZ strategist has his plate full

There can be few people in the Czech Republic with as much on their plate as Pavel Cyrani, the chief strategy officer for ČEZ.

The utility has made the news in 2012 on multiple fronts, ranging from controversy over the tender to expand the Temelín nuclear power plant to the company's difficulties in Albania and a European Commission probe over alleged anti-competitive behavior in the Czech power generation sector.

Yet despite the turbulence, ČEZ, as well as being one of Europe's largest energy firms, is the Czech Republic's most profitable company, a situation Cyrani, still in his mid-30s, is no doubt keen to see continue.

Cyrani answered questions from The Prague Post about some of ČEZ's key developments this year and what the company hopes to achieve in 2013.

The Prague Post: ČEZ has had a difficult year in Albania in 2012. Why do you feel the situation deteriorated there?

Pavel Cyrani: It is clear the Albanian energy sector, as well as the whole economy, is under financial pressure caused by a shortage of water for the hydro power plants operated by the state-owned [power-generation] company, KESH. This missing energy can be replaced only by very expensive imports. However, the Albanian response to this situation was to put the whole burden on ČEZ Shpërndarje, which was not allowed to reflect higher energy costs in the prices for Albanian consumers. Moreover, ČEZ was banned from effectively collecting even the low payments for supplied electricity when police forced it to reconnect state-owned waterworks that have long failed to pay their electricity bills. Such a situation is not at all sustainable for us. Our team has been and still is working very intensively to solve the situation in Albania, but the behavior of the Albanian side is very unpredictable. That's why we've decided to initiate the process of selling the distribution company. Besides, we've already taken the first steps to claim the World Bank's guarantee in order to shield our investment.

TPP: Have ČEZ's experiences in Albania changed the company's position regarding investments abroad?

PC: It is important to mention that the overall performance of foreign acquisitions is excellent. ČEZ has already recouped 71 percent of its investment. For example, ČEZ's efforts in optimizing operating costs and reducing grid losses in Bulgaria and Romania were successful. But it is true, that in terms of its foreign assets, the ČEZ Group wants to focus in particular on investing in renewable energy sources, which is consistent with its long-term strategy. Since October, ČEZ has been operating the largest continental wind park in Europe in Romania and is developing the Ecowind wind-park projects in Poland.

TPP: How hopeful are you that a successful bidder for the Temelín expansion will be chosen on time next year, and that the project will continue on schedule?

PC: The project to prepare a new nuclear source in Temelín is our No. 1 priority. The disqualification of Areva from the tender has not influenced the final milestones of the tender which has been conducted correctly according to the Public Procurement Act. The winner of the tender should still be known by September 2013, and a contract is expected to be signed at the end of 2013.

TPP: What is your response to suggestions from analysts that demand for electricity is not sufficient to justify the building of two new reactors at Temelín?

PC: The fact we have enough electricity at the moment doesn't mean we will have enough of it in the next 50 years. Local electricity consumption per capita today is well below many west European countries and will grow together with the country's economy and wealth, despite efficiency savings. Moreover, Czech lignite deposits are decreasing with no major source of domestic fuel available to replace them. Nuclear fuel is a suitable, well-established, high-tech source of energy. We also believe that nuclear energy will help in achieving the EU targets in de-carbonization.

TPP: How do you respond to the view sometimes expressed that ČEZ has become too powerful and is able to exert too much influence over the Czech government?

PC: We try to be a partner to the government on the topics of energy policy, providing our expert view and practical experience. We are also helping to support the Czech Republic's interests in the European Union. However, I strongly insist that it is transparent, and it does not differ from the position of large banks or telecommunication companies providing views on the topics relevant to their respective sectors.

TPP: Are you confident the issues with the European Commission over anti-trust matters will be resolved by the sell-off of one of your coal-fired power plants?

PC: Yes, we are quite confident about this. We are currently receiving and evaluating bids on the power plants marketed for divestiture, and we plan to decide about the sale together with the commission's final approval of our settlement proposal.

TPP: What challenges do you see ahead in the new year, and what are your key aims for 2013?

PC: As I already mentioned, our No. 1 priority is to successfully complete the tender process for construction of two new nuclear units in Temelín. We want to finalize the settlement with the European Commission and secure sufficient lignite supply contracts for our portfolio of power plants for the upcoming years. Fully resolving the situation in Albania is another key priority for 2013. We need to pursue all cost-efficiency initiatives, mainly building Shared Service Centers in order to at least somewhat compensate for decreasing prices of electricity.

On the development side, we will continue building our positions in wind power generation and regional heating generation, although the pace will be adjusted to the overall worsening economic situation in the sector. It is clear we have quite a full plate and will need to put all of our energy into it.

Daniel Bardsley can be reached at
business@praguepost.com