Банкеръ Weekly

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THE CZECHS HAVE AMBITIONS TO ENTER BULGARIAN POWER ENGINEERING

The Czech energy company CEZ will bid in the three tenders for the privatisation of Bulgarian electricity distribution facilities, the corporate Executive Director Martin Roman said from Prague for the BANKER weekly. According to pundits, the preferences of CEZ are directly mainly to the West pool, including the power networks of Electricity Distribution Sofia, Sofia-Region and Electricity Distribution Facility Pleven. The Czechs have not only been motivated by the fact that the West region is the one with the largest number of consumers (1,884,000 as against 1,480,000 in the South region and 1,130,000 in Northeastern Bulgaria). They have been attracted by the nuclear capacities - the Kozlodoui N-plant and the projected power station near Belene. In fact, it's a secret for nobody in the branch that all five candidate buyers of the domestic electricity distribution facilities look upon the forthcoming deal as the first step to entering both Bulgaria's and the Balkans' electricity market. The next one will be the acquisition of already existing or new power generating capacities. The project for the Belene N-plant is among the great ambitions of the Czechs. The Skoda plants are among the candidates to construct it and if their offer is preferred, CEZ will probably join in the implementation. The Czech energy company is part of the corporation CEZ Group, 67% of whose stocks are state-owned, 12.7% is in the hands of foreign firms and natural persons, Czech companies hold 5.69%, Czech citizens have acquired 4.3%, and 9.67% of the shares is owned by the higher managerial team. CEZ Group is the number one performer in the utility services in Central and Eastern Europe and is the tenth biggest company on the Old Continent. It was established in April 2003 and incorporates 94 firms, operating mainly in the energy sector. It runs two nuclear power stations, 16 heating plants, 34 hydroelectric power stations, two wind and one solar electricity generating facilities, with an aggregate installed capacity of 12,295 megawatts (71% of the capacities in the Czech Republic). The corporation ensures 74% of the electricity production in the country and services 57.5% of the consumers. A huge part of its capacities (12,153 megawatts) are owned by the energy company CEZ. It holds shares in all the eight Czech electricity distribution facilities, and in five of them - the Northern Czech (SCE), the Northern Moravian (SME), the Central Czech (STE), the Eastern Czech (VCE) and the Western Czech (ZCE) - it has a majority stake - over 90 per cent. The operating profit of CEZ for 2003 was CZK8.6BN (EUR290MN), 8.6% up from the previous year. The growth was mainly due to the increased proceeds from the sale of electricity. No matter which package of the Bulgarian electricity distribution facilities the Czechs win, their major initial task will be to cut down electricity losses. Currently, the average electricity leakage along the domestic power distribution network exceeds 20%, while in the Czech Republic it is only 9 per cent. We are aware of that problem and we have planned serious investment for improvement of the network's quality, which together with our experience will result in a reduction of losses, Mr. Roman pointed out. Electricity services will also be improved and the target is to optimize electricity consumption and avoid (or at least restrict) any excess costs, CEZ Executive Director added. Households in the Czech Republic have the opportunity to choose between 12 different price tariffs, structured according to the amount of spent electricity. And price formation has been based on the principle the more you consume, the cheaper you buy the electricity. As in Bulgaria, each tariff has two components - a constant monthly fee for the power (different for the various levels of consumption) and the price of the consumed electricity. It is interesting that the energy company has the right to switch off the appliances with high electricity consumption (e.g. heaters and boilers) during peak hours without notifying its clients in advance. But they are not left without electricity as heating appliances and boilers are connected within a separate ring. Households in the Czech Republic are among the so-called protected consumers, who may not choose their supplier and pay for the electricity at fixed prices, set by the energy regulator. The current price is about CZR3.3/kWh (EUR0.11/kWh). 35.07% of that amount is earmarked for the electricity generator, 33.77% goes to the electricity distribution facility, 11.12% is paid for the transiting from the respective power station to the electricity distribution facility, 18.03% is VAT, and 2% of the worth of each kilowatt of generated electricity is set aside for the encouragement of electricity production from revivable energy sources. Under the contract signed with the electricity distribution facilities, the Czechs get their invoices each month, twice a year, or annually. Nevertheless, they pay their bills by monthly instalments, which are balanced in the end of the chosen period. CEZ has ambitions to not only step onto the Bulgarian energy market, but also gain a firm hold on it. According to a special research of the prestigious agency Economist Intelligence, ordered by the Czech company, along with Croatia, Bulgaria is among the least risky countries in the Balkans. At the same time, electricity consumption in Bulgaria is the highest in Southeastern Europe, and the growth of our energy market is quicker as compared to more developed markets. The considerable amount of installed power capacities (13,183 megawatts) and the rising export of electricity are an additional advantage. Judging by the research of Economist Intelligence, the circumstance that Bulgaria is in the centre of a region with potentially high demand for electricity (Turkey, Serbia, Montenegro, ect.) and the fact that our distribution network has reliable connections with neighbour countries, are among Bulgaria's advantages.

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