European Commission competition office swoop turns up heat on ČEZ

European and Czech competition watchdogs have carried out raids on Czech energy companies. The unprecedented action has been sparked by suspicions that local electricity giant ČEZ has been using sharp practices to corner the local market and increase prices.

ČEZ is at the centre of an investigation by European competition watchdogs over suspicions that it tried to nobble rivals and force up power prices.

Around a dozen European officials accompanied by their Czech counterparts swooped on the offices of the biggest energy company in Central Europe on Tuesday in what journalists like to describe as a dawn raid. They quizzed top managers and seized computers and papers.

Photo: CTKPhoto: CTK Jonathan Todd is the competition spokesman at the European Commission in Brussels.

“The Commission has reason to believe that ČEZ, the energy company, on its own or perhaps with other companies may have taken anti-competitive action to enhance ČEZ ’s dominant position on the Czech wholesale electricity market and in particular we suspect that it may have taken action to exclude competitors and to artificially raise prices on the Czech wholesale market. And if proven, these would be serious breaches of the treaty rules on restrictive business practices and abuses of monopoly power.”

Jonathan Todd, photo: European CommissionJonathan Todd, photo: European Commission The raids also took place in the offices of ČEZ–controlled brown coal mining company Severočeské doly and that of its ally in recent acquisitions, an energy joint venture dominated by Czech-Slovak financial group J&T and the financial group PPF. PPF is piloted by the richest Czech, Petr Kellner.

All in all, it amounts to the biggest swoop of its kind launched by European authorities in the Czech Republic.

According to state-owned ČEZ, the investigation is looking at whether it took part in a conspiracy to block rivals’ power plant projects and curb trading in brown coal used for electricity production.

While protesting its innocence on all counts, ČEZ has said this sort of attention from the European Commission is par for the course for a company such as itself whose fast recent growth has put it among the top 10 European electricity companies. It could be regarded as recognition from Brussels.

But the cause of the raids should be sought elsewhere than ČEZ’s recent rocketing growth. The fingerprints of Czech Coal, the second biggest brown coal mining company in the country, are all over this one. Its attempts to build or buy power plants so that it could rival ČEZ have been frustrated over the last decade.

Photo: CTKPhoto: CTK Czech Coal lodged complaints with the local Czech competition office and European authorities in August after failing to acquire the Czech portfolio of assets owned by British-based International Power. J&T landed those assets for 22 billion crowns, around 1.3 billion US dollars, with a side deal to dispose of some of them to ČEZ.

Czech Coal and ČEZ are also involved in a long-running legal battle over alleged breach of contract covering coal deliveries.

A kiss and make up between the two rivals was rumoured last month but no final deal has been declared. Brussels’ interest probably signals that such a deal is not on the cards for now.