Czech CEZ Switches $3 Billion to Gas Power from Cleaner Coal Program

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a major change in strategy the Czech power utility CEZ (Prague) will shift $3 billion in planned investments in coal-fed power plant upgrades into the construction of new natural-gas-fired plants. The move from coal to gas was spurred by the European Union's plans to start carbon dioxide emission auctions in 2013 that will put a new dynamic in the carbon credits business. Another factor in the switch was the increasingly high cost of modernizing and cleaning existing coal-fed plants.

The $45 billion company, central Europe's largest by market capitalization, had planned to invest as much as $9 billion in a coal plant upgrade program that covered the restoration of 11 blocks of brown coal-fired plants, construction on two new 660-megawatt (MW) coal-fired blocks and closing operations of 14 inefficient brown coal-fired blocks.

The company's Business Director Alan Svoboda said the move did not mean that the company would be closing down the coal plants immediately but that investments would be limited in those projects after dividing their plant categories into coal and gas. Svoboda said that the figure of $3 billion to be transferred to gas-fired projects was a realistic estimate. Of the seven projects originally on the renewal and build list, only three remain, two of which are already underway.

The Czech state has a 67% stake in CEZ, which produces almost 75% of the country's total volume of electrical power output. The company operates two nuclear power plants, 15 coal-fired plants in the Czech Republic, three coal-fired plants in other countries, 34 hydropower plants (including three pumped-storage schemes), two windfarms and one solar plant. The total installed capacity is about 14,500 MW with new plants and acquisitions imminent. CEZ is the largest purchaser of coal in the country and the largest supplier of brown coal.

The company distributes electricity to nearly 3.5 million customer supply points in the Czech Republic. When supplies to countries such as Romania and Turkey are factored, CEZ services almost 7 million customers.

CEZ is hoping to finalize a 50/50 joint venture with the Hungarian power utility MOL to build two 800 MW gas-fired plants in Slovakia and Hungary with an investment of $2.2 billion. CEZ will acquire 7% of MOL for $880 million with MOL retaining a three-year buy-back option at a set price. Two 880 MW gas-fired projects in northern Bohemia have just been confirmed, and new nuclear units are on the drawing board.

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