CZECH REPUBLIC
In the Heart of Europe


Introduction - Hot spot in Central Europe - Energy sector: looking for partners - Manufacturing industry - High Tech and IT: quietly growing powerhouse - Tourism: time to come back - Upcoming business opportunities - Conclusion


Energy sector: looking for partners

The energy sector is one of the most attractive investment areas in any country of the world. The energy sector in the Czech Republic consists of CEZ, the dominant energy producer, and eight regional distributors with each of them having a monopolistic position in their regions (until deregulation, that should happen in the beginning of 2006). While the first try to privatize CEZ was not successful (Electricité de France was one of the hottest participants but failed to comply with the Czech government's requirements) in 2002, CEZ underwent a major restructuring, buying the state's stakes in the eight regional distributors. A similar model was first used with the gas sector where the state sold Transgas and the regional distributors in a single package to German RWE.
While, according to the deal and rules set by the Antimonopoly Office, CEZ will have to sell eventually its minority stakes in the three regional distributors and its majority stake in one of the five distributors where it holds majority, it will still have a significant stake in the Czech energy sector from production to household delivery in over half of the country. "The government will prepare new long-term energy policy and then proceed with privatization again," says Mr. Jiri Rusnok, Ex-Minister of Industry and Trade suggesting it will take some time before CEZ is again put on the auction block.

Despite the planned takeover of the regional distributors by CEZ, the companies must also prepare for the starting liberalization of the energy market that gradually, starting with the biggest customers, allows to buy energy from any of the suppliers. Besides improving their sales and marketing skills, the regional distributors also support construction projects, operate public lighting, provide energy audits and some even branch out into other fields.
"We are also focusing on telecommunications and we have recently started a new IT-related business," says Mr. František Šucha, CEO of Zapadoceska Energetika (ZCE),

Mr. František Šucha, CEO of Zapadoceska Energetika (ZCE)

the regional distributor of Western Bohemia that profits from the relationship with the neighboring Germany. ZCE is often considered as a pioneer among the regional distributors, illustrated by the fact that it is the first distributor offering green energy in the Czech Republic.

However, the main challenge does not lie in deregulation or diversification. "The most important change is the way of thinking of our employees: we have to change from a monopoly to a company that should serve its clients and should take them as its most fundamental asset," explains Mr. Petr Zeman, Chairman of Board of Directors and General Manager of Vychodoceska Energetika.

Mr. Petr Zeman, Chairman of Board of Directors and General Manager of Vychodoceska Energetika

Mr. Šucha also illustrates the important role French companies play in the Czech energy industry. "We are buying some of our equipment from Alstom and Schneider Electric," he says. But the cooperation goes much further as ZCE also acquired important know how in the field of "live working on medium voltage" from EDF. "It is an area where EDF is the absolute number 1 and I find it a very good and innovative company," Mr. Sucha adds.
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