Czech Coal, owner of Mostecka uhelna (MUS) – second largest coal producer in Czech Republic, held a press conference yesterday. Coal prices are increasing as other sources of energy are rising as well. Energy producers are complaining that MUS is not willing to sign long-term contracts which could make future more foreseeable, while MUS is arguing that these contract are not possible as decision on mining limits is not clear at the moment. Given that mining limits are not broken sources in CSA mine are available only till 2017. Note that CEZ plans to replace its power plant Pocerady (1,000 MW installed capacity) by 2012 relying on sources from MUS while its fixed contract with MUS runs until 2012.
Our view:
We see this news as neutral at the moment as previously in local dailies there have been talks about pressure on higher coal prices. On top of that CEZ has currently all its external coal supplies contracted until 2012 and the rest secured by its own subsidiary Severoceske doly (c60%). 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.