Czech power utility CEZ is reportedly targeting a local coal mine worth $18.6 billion for acquisition.
Czech power group CEZ is in talks to acquire the largest Czech brown coal mines Mostecka Uhelna (MUS) in a transaction valued at $18.6 billion and which would end disputes over long-term coal contracts between the two sides, giving the power producer better access to the coal supplies it is seeking for expanding its power capacities.
Daily Mlada Fronta Dnes reported, citing unnamed sources close to the negotiations, that a deal could be completed by the end of the year, sending CEZ shares higher in morning trade. However, analysts said the deal may raise anti-trust concerns and the paper said the owner of a 49% minority stake in MUS may also be unwilling to sell. „We are in discussions with MUS,” CEZ spokesman Ladislav Kriz said, declining to give any details on what the discussions concerned and declining to comment further. CEZ and MUS have been in a dispute since June when CEZ filed a court complaint against the coal miner, saying MUS refused to respect a preliminary commitment on long-term coal deliveries until 2055 for the power group, thwarting CEZ’s initial plans to expand its plant in Pocerady, near MUS in the north of the Czech Republic.
Analysts earlier this year estimated the power generated by the new plant would amount to 9% of CEZ’s current capacity and would provide 5% of its forecast EBITDA in 2012, when the current contract for coal deliveries expires. CEZ has been searching for ways of expanding its coal production in both the Czech Republic and Poland as prices of the fossil fuel soared on the back of rising world commodity prices. Bram Buring, an analyst with Wood & Co, said that if plans for Pocerady don’t work out, CEZ has backup plans to build gas-fired capacity. „It’s not under pressure to over-pay (for MUS),” Buring said.
Analysts questioned whether an MUS buy would pass antitrust checks. “They would have a near monopoly in coal production,” said analyst Petr Novak of brokerage Atlantik FT. „Mlada Fronta also reported that it wasn’t clear if 49% owner Indoverse Czech Coal, owned by Czech financier Pavel Tykac, was willing to sell its stake, which it bought last year for $6.5 billion. (idnes)