According to MF daily, domestic coal prices are being pushed higher after the entry of Mr. Tykac into two coal mining companies – Mostecka uhelna (MUS) and Sokolovska uhelna. Both mining companies are now also unwilling to sign long-term contracts. This also concerns CEZ, which has a long-term contract with MUS until 2055, nevertheless it’s a contract of a future contract. Note that c40% of CEZ's coal supplies are from MUS, the remaining 60% from CEZ owned Severoceske doly. CEZ plans to replace its power plant Pocerady (1,000 MW installed capacity) by 2012 while its fixed contract with MUS runs until 2012 and the company failed to negotiatiate a long term contact from 2012 with MUS so far. CEZ’s CEO declined to comment on possible development on the market.
Our view:
CEZ has currently all its external coal supplies contracted until 2012 and the rest secured by its own subsidiary Severoceske doly. There has been preliminary contract signed between MUS and CEZ last year about coal supplies until 2055, however there are no binding obligations from either side. We see this news as slightly negative.