The Financial Times thinks that luck is the true value driver in CEZ.


Pregnant silence: Urban Dictionary defines a pregnant silence as the "sort of silence you get when someone is fucked".

A couple of weeks ago, in a post called ‘How to spend it’, I wrote about a Financial Times (FT) interview from 2004 with Martin Roman in which the 35 year old boss of CEZ was given a clear run to present his plans to turn the Czech electricity generator into the region’s largest power utility.

Ten years on, the FT has returned to the subject, in an article entitled “Profitable state operator is keen to expand despite the risks”. Both articles were written by Robert Anderson, who recently became the news editor at BNE.

Anderson’s latest piece is more subtle. His earlier indulgence of CEZ has been replaced by a mild skepticism and a pregnant silence (pictured above).

Anderson attributes CEZ’s problems today to ‘bad luck’, by which he means exogenous factors outside the control of the firm’s management. Instances of bad luck cited in the article include the falling cost of carbon credits; a slump in wholesale electricity prices; a global financial crisis; and even an unwillingness on the part of the European Commission to approve a UK government nuclear subsidy scheme to fund the construction of Hinkley Point C.

This last piece of bad luck has just been transformed into the most remarkable good luck for CEZ, with the Commission’s decision on October 8 to approve the UK subsidy scheme, an outcome for which CEZ can take no credit whatsoever.

Anderson points out that the Commission’s earlier objections to the British scheme led CEZ to cancel its tender for Temelin 3&4. This is true. CEZ’s decision to abandon the tender days before it was due to announce a winner was caused by the fact that neither it nor its owner, the Czech state, had a clue how to pay for the services it was intent upon soliciting from Rosatom and Westinghouse, but pressed ahead anyway.

Unlike the British government, which has been laboring for years to agree a scheme that would satisfy investors, Westminster and the European Commission, the Czechs did nothing but keep their fingers crossed in the hope that a funding solution would appear from across the English Channel. For some Czechs, it now has.

Anderson acknowledges, perhaps unwittingly, the possibility that not all exogenous factors need be ‘bad luck’, even for the victim of circumstances he makes out of CEZ. The article cites the Czech economy minister saying that the crisis in Ukraine has actually strengthened the case for building new reactors in Southern Bohemia, because of the ‘energy independence’ this would deliver in an age of instability.

This Alice in Wonderland-like declaration by Jan Mladek goes unchallenged. But never mind. Anderson writes news, not commentary. It is not his role to point out that one major source of that very instability is the Kremlin, the owner of Rosatom, the front runner in the Czech Republic’s continuing efforts to build more nuclear reactors.

These efforts, if they are ever to succeed, will surely come to be seen, eventually and long after it is too late, as ruinously expensive for Czech taxpayers. And as a futile attempt to overcome the most dreadful 'bad luck' of all: the accelerating, and for the Czech nuclear industry, profoundly unwelcome proliferation of abundant, clean, and cheap renewable energy just across the border in Germany.

According to Anderson, 'power prices are expected to remain depressed in the short term'. Not according to the Czech government. As my colleague, Jan Ondrich, argues in his blog on the Heinrich Böll Stiftung Energy Transitions website, Czech energy policy is founded upon two erroneous assumptions: an expected significant increase in domestic power demand and increasing wholesale prices.

Of course, Anderson knows that bad luck is only half of this particular story. The other half of the tale, the paralyzing impact on CEZ’s management of numerous police probes (there are at least six underway today) into allegedly fraudulent transactions made by the company in recent years, is left for others to tell. The FT's role is to raise issues (hopefully, the right issues), not to ram home its own views or pillory a victim like CEZ (that is my role).

At the end of the day, CEZ gets by, in spite of its management and the dodgy deals, a great deal poorer than it needs to be perhaps, but with a bit of luck, just flush enough to acquire its Slovak counterpart SE.

And precisely because Anderson’s tale is a tale of luck, not management integrity and a firm executive hand on an EU member's most valuable corporate asset, CEZ’s CEO Daniel Benes is not mentioned in the article –at all.

This silence is pregnant. For me, it is the best part of the story that Anderson tells, for it suggests to the reader exactly what the reader needs to know about CEZ, namely that it is all just luck.