The right of NKU to audit state firms failed to make it into the coalition's anti-corruption measures. Does it matter?



CEZ's answer to Germany's Energiewende.

In that part of the coalition agreement entitled ‘Reconstruction of the state’, it is proposed to extend the oversight of the supreme audit office (NKU), but not as far as private companies in which the state owns a majority.

Apparently firms like CEZ have been funnelling public money into private pockets including those of political parties for years according to BIS. This is a criminal offence. But even so, I wonder how much difference an audit by NKU would make to CEZ's profitability.

Let me explain. Andrej Babis will soon take control of the finance ministry, either as the minister himself or as his political patron. The finance minister, as the representative of the majority shareholder in CEZ, has powers enough to ensure the company is well managed: the problem has been that he chooses not to exercise these powers.

An NKU audit of CEZ would not hinder the efforts of a finance minister committed to maximising the value of the state’s shareholding in CEZ. But neither would it be an adequate substitute for those efforts. It would help to eliminate petty fraud and, by making its findings public, NKU would certainly make it harder for the management of state firms to give shareholders the so-called 'mushroom treatment' - keep them in the dark and feed them shit.

In the end, however, the management failures of CEZ are caused not by the lack of an NKU audit but by the unwillingness of its majority shareholder to hold the firm's management properly accountable.

The challenge for the new finance minister is to ensure that the mistakes of the past are not repeated (and if these mistakes are thought to be criminal, to provide evidence to the appropriate authorities). This is easily done. A competent supervisory board must be appointed and the current management board purged. And then the ministry’s financial analytical unit, not the local branch of a private audit firm with an interest in maintaining good relations with CEZ, should be parked in CEZ's Prague 4 headquarters for a few months.

Martin Roman might well have fallen on his sword. But his sidekicks, Daniel Benes and Vladimir Johanes, have not. All three were appointed by CSSD in 2004. For ten years, they have led CEZ, surviving the fall of half a dozen finance ministers. Yesterday, the latest of these ministers reappointed Daniel Benes as chairman. Jan Fischer's successor should overturn this appointment. He should leave the investigation of suspicious transactions under Roman, Benes and Johanes to the state prosecutors, and instead focus on installing managers in CEZ that understand how energy market fundamentals have been revolutionised by what is happening in Germany.

An NKU audit of CEZ would be welcome. But it would not alter the fact that CEZ's problems are much more serious than anything an audit can turn up. If the company is to ensure its future - as an energy utility, not as an operator of virtual mobile telephone networks - it requires a management that can see beyond nuclear. And that requires a forward-looking majority shareholder.

Instead, CEZ has the coalition government, which declares its support for Temelin 3&4 if the economics are sound. The fact that Sobotka, Babis and Belobradek appear not to understand the economics of the energy sector is a measure of what a mess CEZ is really in.