Czech Antimonopoly office started to investigate CEZ due to its dominant position and purchase power regarding to coal contracts with Sokolovska uhelna (SU). The issue relates to contracts from 2002 and 2003 valid as of 2009, when reportedly inappropriate formulas have been used in price setting mechanism.
Our view:
Mining companies are trying to push for higher coal prices as they don’t reflect significant increase of electricity prices. CEZ thus face the fact it will have to pay up several tens of million CZK for medium-term contracts if it proves antimonopoly office is correct. CEZ has coal c60% of its supplies secured from its own subsidiary Severoceske doly and then c40% from Mostecka uhelna and Sokolovska uhelna. Until the outcome of investigation process is known we see the news as neutral.