The Czech government wants to equip CEZ with lucrative distribution assets in order to protect its dominant position in the liberalised Czech energy market ahead of future privatisation.

However, CEZ is set to appeal against the conditions set by UOHS. The conditions prevent CEZ from taking blocking minority shareholdings in three regional distributors, and that it could only own four out of the five distributors it was originally earmarked to control. CEZ must decide within one year which distribution company out of the five it does not want.

The precise grounds for the appeal have not been fixed. However, they will most likely focus on the fact that the competition office had previously cleared the German company RWE to own Czech monopoly gas importer Transgas as well as the eight regional gas distribution companies, while CEZ’s ownership ambitions were limited to just four distributors. CEZ will probably also claim that, in its view, the competition office wrongly decided to judge the distribution deal in the context of the Czech market rather than the wider European electricity market. CEZ is also likely to point out that in neighbouring countries, such as Austria, dominant electricity companies have been cleared by their national competition offices to take over regional distributors.

Analysts said that the competition office ruling was tougher than expected, mainly because it has been limited to control of four, not five, distribution companies. Roman Cenek, an energy market specialist with brokers Atlantik Financni Trhy, said: “The rest of the conditions were expected, this one condition makes it a lot tougher.” He also said that he did not expect CEZ to win better conditions through an appeal.

While CEZ’s appeal is under consideration, the German utility E.ON has made an offer to buy the remaining four distributors. “E.ON is ready to immediately start negotiations,” E.ON said in a statement, adding that it sees Czech non-nuclear facilities as a good investment.