CEZ Pulls Out Of Romanian and Polish Power Projects

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The Czech Republic's largest utility, CEZ AS (PRG:BAACEZ) (Prague, Czech Republic), has announced that it is cancelling its involvement in two key power projects in Romania and Poland.

The company has confirmed that it is withdrawing from the 4 billion-euro ($5.56 billion) project to expand Romania's Cernavoda nuclear power plant and has cancelled a public tender to build a 430-megawatt (MW), gas-fired power plant in Skawina, Poland.

The moves are part of the company's recently stated goals to refocus on domestic projects, reduce foreign investments, and concentrate on lower-risk energy projects that will provide a faster return on investment. Until recently, CEZ has been actively expanding in central and eastern Europe through investment in new energy projects, buying existing plants and electricity distribution companies.

This is the second major Romanian power project that CEZ has withdrawn from in recent months. In July, the company announced that it was giving up on plans to build a 400-MW, gas-fired power plant with Romania's Termoelectrica S.A. (Bucharest) at Galati. After two years of pre-feasibility studies, CEZ said that reports showed numerous technical issues, much higher construction costs than originally planned, and the need to demolish existing assets on site.

The two existing units at the Cernavoda nuclear power plant are rated at 706-MW each and currently provide approximately 18% of Romania's electricity. The new additions, units 3 and 4, will double the capacity of the plant by 1,400 MW. CEZ said that it has signed an agreement with the other investors to sell its 9.15% stake in the venture.

"The decision to retire [from Cernavoda] has already been approved by the CEZ board," Adrian Borotea, corporate affairs manager with CEZ, told the press.

Romania's state-owned Nuclearelectrica (Bucharest) created a joint venture, EnergoNuclear, in 2008 to oversee the project, and it controls a 51% stake. The other partners include ArcelorMittal (NYSE:MT) (Luxembourg), Enel SpA (BIT:ENEL) (Rome Italy), RWE AG (OTC:RWEOY) (Essen, Germany), Electrabel S.A. (Brussels, Belgium), Iberdrola S.A. (MCE:IBE) (Bilbao, Spain) and GDF Suez S.A. (EPA:GSZ) (Paris, France). Last month, EnergoNuclear put the contracts for the engineering, design and construction of the new Cernavoda units out to tender, in what is the largest project to be awarded in Romania for the past 20 years.

"The project's development will entail a multi-million-euro investment and the creation of several thousand jobs, both during building works and after the two reactors become operational," the company said in a statement.

In Poland, CEZ has cancelled plans to build a 430-MW, gas-fired plant at Skawina, near Krakow, claiming that the Polish energy sector is still too restrictive and must become more competitive. A spokesperson for the company said CEZ is aware of the need for new generation capacity in Poland and that it does not intend to abandon the project. The current coal-fired plant at Skawina has a generating capacity of 492 MW.

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