The Czech Republic’s government has finally announced its proposals for the privatisation of CEZ, the country’s largest power producer with stakes in six regional power distribution companies. However the proposal, which also includes the sale of the gas importer Transgas and the petrochemical group Unipetrol, has caused controversy as a result of conditions imposed by the government.

The most significant is its insistence that the company must be sold as a single entity, not broken up as some prospective bidders had expected. Another condition is that the successful bidder cannot break up the company and sell any components for a period of ten years.

Twelve companies originally bid in the CEZ tender but only four were short listed. These are the Belgian company Electrobel, Electricite de France, a joint bid involving Enel and Iberdrola and British International Power in a consortium with the US company NRG Energy.

Six other companies have been eliminated. Several are expected to ask the European Commission to examine the privatisation procedure and the conditions set by the government. In particular they are likely to be examining whether the concentration of CEZ under single ownership is likely to distort the deregulated market by creating one dominant participant.

After publication of the shortlist Tractebel, Electrabel’s main shareholder, decided to withdraw from the tender. The company said that it had decided not to continue with its bid to purchase 67.6 per cent of CEZ and the stakes in the six distribution companies because the chosen pivatisation format did not give an equal chance to all competitors. It was also reluctant to acquire a ‘controversial stake’, namely CEZ’s nuclear power plant. In addition, the government appears to be hesitating about offering a guarantee over nuclear waste. A yet further issue, surrounding the forced buyout of Czech coal, has also to be resolved.

The Czech Republic government hopes to earn around $6-7 billion from the sale. Sale of the country’s remaining energy assets could yield a further $2-3 billion.

The sale is being pushed through in order to allow the Czech Republic to meet European Union regulations governing the energy sector. The country is hoping to be admitted to the EU in 2004. In order to meet this timetable, the entire energy privatisation process should be completed by the end of 2002.