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CEZ seeks partners to build first Czech gas-fired power plant

CEZ AS, the Czech Republic's biggest power company, is seeking partners to build its first natural-gas-fired power plant as the country's electricity demand reaches a record high.

Czech power prices could close a 17% discount to the German electricity market by the end of this year, after which the German market will determine prices in both countries, Alan Svoboda, CEZ's executive director of sales and trading, said yesterday at a conference in London. „The price fundamentals are the same for the whole region,” Svoboda said. Previously, oversupply made Czech power cheaper than Germany's. Now, higher demand from Balkan countries that have closed aged power plants will absorb additional power-generation capacity, he said, enabling CEZ to sell power at increased prices. The Czech and German power grids are connected by cross-border cables, creating arbitrage opportunities between the two countries. Demand for capacity on the interconnector to export power to Germany has exceeded availability in recent years. That demand may diminish, or even reverse, Svoboda said. Already the price to secure capacity on the power grid to export to Germany from the Czech network has fallen, relieving the previous bottleneck at the border, Svoboda said. Flows may eventually reverse, so German power is transmitted to the Balkan region, he said.

CEZ will be well-placed to benefit, according to Svoboda, because of its presence in power-production companies in the Balkans and its plans to produce more electricity by increasing the capacity and reducing the frequency of maintenance halts at its two nuclear power plants. The Czech company also intends to produce more power from coal-fired power plants, including a plant in Bulgaria, to sell into the Balkan region, Svoboda said. CEZ has benefited from carbon trading, Svoboda said at the conference. Emissions of carbon dioxide by CEZ in 2006 were 34.3 million metric tons, compared with an allocation of permits from the country's government of 36.9 million tons, Svodoba said. CEZ sold the surplus permits before prices declined, he said. Any permits it needed for to produce power later were bought back from the wholesale market at the time of sale. The European Union's emissions-trading program sets limits on the amount of carbon dioxide that factories and power plants can emit. If they exceed their emissions cap, they can buy additional permits in the market. The first phase of the system lasts for three years, through this year. (Bloomberg)