The era of uncertainty within the European energy market continues unabated. A long-planned climate- energy summit supposed to determine European energy policies until 2030 has instead only agreed on one thing: delaying the final decision. Different viewpoints across the EU’s many nations are to blame. Meanwhile, both energy companies and consumers remain in the dark over whether the EU will seek further CO2 reductions and the planned future share of renewables within the overall energy market.
“This is bad for us,” says ČEZ CEO Daniel Beneš of the results of the summit. He claims that the semi-state-owned company he runs – as well as other energy companies – spent the entire second half of last year convincing politicians about the importance of European climate-energy policies. In Brussels, ČEZ defended the interests of the specific sectors it represents in order to secure an outcome in which the EU reduces CO2 emissions but ceases to massively subsidise renewable energy sources. “Any kind of indecision is bad for us,” adds Beneš.
Why is this bad? At least you will have more time to persuade those who don’t share your point of view...
Climate-energy policy is extremely important for Europe. It influences the lives of each citizen, the competitiveness of businesses and therefore even levels of public prosperity. Consequently, it is important to set policies in such a way that they have an internal logic instead of just having total faith in renewable energy sources.
Time alone is not yielding solutions, and it is becoming clear that each state has different views of what should be the EU’s climate policies. That is especially so in the case of Germany, whose policies are markedly different from the ideal which should be to ensure competitiveness across Europe.
„Right now, it is impossible to build a long-term strategy; instead, we are merely focusing on preserving the company’s value“
And now to explain why it is so bad: any kind of decision for a non-decision means that tackling policy is put off until the next summit. We have elections to the European Parliament coming up, which means that legislative conclusions on climate policy won’t make it into binding directives until some time at the end of 2015. The uncertainty, instability and unpredictability of European markets will continue…
For those of us forced to do business in such an unpredictable field, the prolongation of such a state of affairs by a year or 18 months is simply not good news.
What is it like to run a company in which for years it has been impossible to make decisions based on predictions of the future shape of the energy market?
It is always harder to have to guess… And, of course, policies have a fundamental impact on electricity market prices and any kind of fluctuations lead to a basic alteration of the economic circumstances of all energy companies.
Fortunately, in contrast with our competitors, ČEZ is in relatively good shape. Especially when we look at RWE, which last year faced losses of almost EUR 3bn. Nonetheless, if four months down the line the cost of electricity falls by, say six euro, then that means a loss in ČEZ income of around CZK 10bn. We are operating in an extremely uncertain market. And this state of affairs will continue – and that bothers me.
What will you do?
It is impossible to craft a longterm strategy based on non-existent, non-formulated EU energy policies. At present, the emphasis is on an overall defence of the firm’s value and the development of some kind of supply business. Right now, we have to do this in a national-economic sense and support the state.
It is possible to put a figure on the costs of this market uncertainty?
Of course it is possible to calculate. Even if you can then end up arguing with people of different viewpoints over the accuracy of such a number.
Look at the financial conditions faced by our competitors; how operating profits have fallen for them in recent years. This is in direct correlation with the falling prices of unsubsidised electricity. Indeed, it is the subsidising of renewable energies which is the fountain of all our ills. The fall in profits experienced by energy companies is in the order of tens of billions of crowns annually.
So ČEZ will continue to increase its stake in the telecommunications businesses and perhaps also end up building its own auto repairs network?
I wouldn’t exactly put it that way. Among other things, the first aim, which is the preservation of company value, is mainly about focusing on the fact that our nuclear energy plants are fully operational and are producing to their full capacities – and as effectively as possible too. Presently, we will also continue to optimise our coal plants, reducing overall costs across the group and so forth.
„Entering some unrelated field such as auto repairs makes very little sense“
At the same time, we will also focus on the development of our other businesses, which are related to our core business of energy production, as well as to our customer base and the skills which a utility company such as ČEZ possesses. For example, this means adding the provision of gas to our existing electricity portfolio; it also means entering the mobile phone provider market too.
But to enter some unrelated field such as auto repairs makes very little sense.
Will you revive your foreign expansion plans? The companies you own in the Balkans must certainly have their plates full right now...
In the Balkans we are mostly just focused on preserving the existing value of the company, which, for example in Bulgaria, is not especially easy. However, the situation we face today is far more amenable than what we faced last year, when our distribution license was at risk of being revoked.
Will you be able to preserve the value?
I am convinced we will.
And will you, despite difficult experiences, be making further foreign acquisitions?
We are primarily focused on neighbouring countries and the only promising market we have in our sights right now is Slovakia – and perhaps also Poland. Here, the only acquisition that makes sense is of Energa. The company has a large share of the distribution market, while the regulatory environment is predictable.
Your German competitors such as E.ON or RWE are facing difficult times. Have you not considered either buying them out completely or at least securing a significant stake in these companies?
I don’t know that any of these companies are up for sale. According to my information, some assets of the German company Vattenfall are up for grabs, which is certainly worthy of consideration. At the point that someone contacts us and asks “Are you interested in buying?” then we will give the matter due diligence. It is all about what exactly is on offer.
Will ČEZ go into foreign acquisitions alone or join up with another partner?
Nothing concrete is on the table, but both of these scenarios are possibilities.
How much is ČEZ capable of investing in acquisitions?
I won’t reveal a figure as that would not be prudent.
Acquisitions require capital. But Finance Minister Andrej Babiš has announced that he wants ČEZ to pay out its entire profits for last year in dividends...
It would be premature to comment on this right now. The dividend issue will be determined at the company’s June General Meeting.
|Daniel Beneš (44)|
|Studied at the Engineering Faculty of VŠB-Technical University of Ostrava and later at Brno Business School/Nottingham Trent University. From 1993-1997, Beneš worked as head of sales at Bohemiacoal, and subsequently became head of Hedviga Group. From 2000-2004, he served as manager of Tchas, a chief importer and trader of fuels in the Czech Republic. In 2004, he became head of acquisitions at ČEZ. In 2006, he became head of the company’s administration division. As of May 2006, he was also Vice Chairman of the Board. Since September 2011, Beneš has served as Chairman of the Board. He represents ČEZ in the management bodies of its acquired subsidiary companies.|