The finance minister has good reasons for not insisting upon an independent audit of relations between ČEZ and its business partner CEEI.

Last week, Daniel Beneš of ČEZ was asked at a press conference to comment on the most recent Appian-related revelation in the Czech press. MFDnes cited documents from Swiss investigators which apparently show that in 2006/7 an Appian company transferred CZK 12 million to UBIE, the then owner of CEEI, the firm commissioned by Beneš a few months after the money transfer took place to build the spent fuel facility at NPP Temelín.

Beneš replied that ČEZ’s internal audit of its business relations with Appian was conclusive and the matter closed. The internal audit to which he refers was an audit of all ČEZ transactions with Škoda Power before that company was sold by its owner Appian in 2009. It was not an audit of Appian’s relationship with CEEI, a relationship that until last week was not public knowledge. In short, Beneš was saying that Appian's relationship to CEEI is irrelevant because ČEZ's relationship with Appian was always at arm's length. In other words, if Appian owned CEEI, so what?

I see his point. You could argue that Appian may reasonably own CEEI and that ČEZ may reasonably procure services from an Appian-owned CEEI. And you would be right if, as Beneš insists, ČEZ and Appian are indeed unrelated. But so far we only have his word for it. Why is the majority shareholder of ČEZ not willing to order an external audit of relations between ČEZ and Appian, and end all speculation thereby? After all, the finance minister already knows the answer so there is nothing to be lost and plenty to be gained, for example in the boost to public trust in his ability to protect the value of the state's shareholding in ČEZ.

Actually, there are very good reasons for not holding an independent audit of relations between ČEZ and suppliers such as CEEI. The first is the CZK1.5 billion fee paid to CEEI for the spent fuel facility at NPP Temelín. An earlier project prepared by the Czech Nuclear Research Institute, part-owned by ČEZ, priced the facility at one third of CEEI’s bid price. The cost of an equivalent facility at NPP Isar in neighbouring Bavaria completed a year earlier was Kč 810 million according to its owner E.ON. The cost deltas between the facilities at NPP Isar and NPP Temelín, and between CEEI’s winning bid price and ČEZ’s own price estimate prepared by the Czech Nuclear Research Institute are so great that we must assume either that the Temelín facility is not comparable to the Isar facility or indeed to the facility that ČEZ itself had planned. Or that the contracted price was much higher than it needed to be.

The second reason for not digging deeper into relations between CEEI and ČEZ is the fact that CEEI’s owners remain hidden to this day behind a raft of Cypriot-based nominee shareholders and trustees. CEEI is now owned by Panweco Ltd. Panweco Ltd is owned by Conpran Ltd. Conpran Ltd is owned by Vimatex Ltd and Medwell Holdings. Vimatex Ltd is owned by Stateco Nominees and Stateco Trustees, as is Medwell Holdings. All are based in Cyprus. All are shell companies the single purpose of which is to hide the identity of the owners.

The third reason for not holding an external audit of relations between the two firms is the fact that CEEI is managed and directed by politicians associated with the governing ODS. The managing director of CEEI is Jiří Kovář, an ODS member, a former deputy chairman of ODS and head of the Cabinet Office under Václav Klaus' prime ministership in the early 1990s. Rostislav Senjuk, the leader of an ODS proxy party called Soukromnici, which is co-chaired by Bedřich Danda, the current deputy trade & industry minister, is listed on the Cypriot public records as a director of Panweco Ltd and Conpran Ltd. Senjuk claims not to know who the owners of CEEI are but insists all the same that whoever they are, they have no connection whatsoever to Martin Roman. In the same breath, he claims knowledge of matters about which he claims to know nothing.

And the fourth reason is the financial link between Appian and CEEI uncovered by Swiss investigators and mentioned in MFDnes last week.