Czech energy group bucks green trend with bet on coal

Jan MARCHAL
Czech group EPH has been bucking the green energy trend by buying up coal-fired plants in Europe

Bucking a trend set by its European peers to divest from coal, the Czech energy group EPH is buying coal-fired power plants across the continent to the dismay of environmentalists lobbying for a phase-out of fossil fuels.

Its annual production of more than 100 million megawatt-hours in its plants in Britain, the Czech Republic, Germany, Hungary, Italy and Slovakia -- enough to power around 30 million homes -- makes EPH the seventh largest power producer in Europe.

Set up in 2009, EPH (Energeticky a Prumyslovy Holding) relies on coal for more than half of its production capacity.

It's owner, Czech billionaire Daniel Kretinsky, is undeterred by global efforts under the 2015 Paris Agreement to curb global warming by switching from carbon-intensive fossil fuels like coal and oil to clean energy, especially solar and wind.

"From the practical and moral point of view, we believe it's wrong to reject using resources that are necessary to meet the fundamental needs of European citizens," EPH spokesman Daniel Castvaj told AFP of the company's lack of qualms about coal.

The EPH controls about fifty companies with 25,000 employees. Dirty-burning brown coal, also known as lignite, accounts for 30.5 percent of EPH's capacity, while cleaner burning black coal makes up 21.7 percent.

Kretinsky, the sixth wealthiest Czech according to the Forbes magazine, controls 94 percent of EPH. It earned 1.64 billion euros ($1.73 billion) in gross profit in 2015 after taking in 4.57 billion euros in consolidated revenue.

Kretinsky also owns the Czech branch of German-Swiss publishing group Ringier Axel Springer Media AG and the top-flight football club Sparta Prague.

- Alternative strategy -

EPH has been on a shopping spree, snapping up coal-fired electricity plants from European energy giants like E.ON, Enel or RWE, which they are happy to sell.

Given the global push to decarbonise "there's a great deal of uncertainty about the future of coal, gas and nuclear power," according to Marek Hatlapatka, an analyst with the Prague-based brokerage and investment firm Cyrrus.

"The energy sector is currently divided into two completely different streams with capital intensive 'old energy' on the one hand and 'new energy' on the other, that is more modern, less capital intensive and with a lot of room for renewables," he told AFP.

"This division is putting huge pressure on companies and regulators," Hatlapatka said, adding that it is forcing giants like E.ON or RWE to sell off their fossil fuel-based assets at "relatively low prices reflecting the risk."

But there are investors, like EPH, who see opportunities afforded by the low prices of these assets and have been snapping them up, regardless of the uncertainty.

Last year the Czech holding acquired German lignite assets from Sweden's Vattenfall.

It also bought three coal-fired plants and five mines in eastern Germany and a 50-percent stake in the Lippendorf power station near the German city of Leipzig, accounting for 8,000 megawatts of power in all.

EPH's Castvaj insisted that EPH only buys coal-fired plants in markets where they are "indispensable to cover the needs of the population and industry.

"Germany's withdrawal from nuclear energy necessarily implies a temporary use of coal," he added, but declined to confirm how much money EPH has poured into its recent acquisitions.

- Environmentalists cry foul -

According to Petr Kalas, head of the Czech government committee for renewable energy, EPH has "an alternative strategy which is not exactly in line with the Paris Agreement on climate, but is still an option for the market."

"It's an investment opportunity for two or three decades," said Kalas, who served as the environment minister in 2006-2007.

"Coal will lose its importance, but at present it can still be useful to some extent," he added.

EPH's takeover of Vattenfall assets in Germany sparked an outcry among Czech environmentalists.

"Along with the mines and power stations, EPH also bought some massive resistance from the public," said Jan Rovensky, spokesman for Greenpeace's Czech branch.

However EPH's Castvaj insisted the company "is interested not only in existing capacities but also in helping build new facilities designed to replace them some day."

He pointed to EPH switching from burning coal to biomass at a plant in Lynemouth, northern England.

But Castvaj declined to disclose how long EPH plans to continue using coal-fired plants.

Castvaj said EPH recognises "the temporary character" of technologies based on black and brown coal, adding only that the company expected coal-fired plants to remain in operation longer in Germany than in Britain.