MNI INTERVIEW: Nuclear Key To Czech Energy Strategy - Havlicek

Czech Prime Minister Andrej Babis’s government is putting growth and energy security - including nuclear energy - at the heart of its economic programme, First Deputy Prime Minister Karel Havlicek told MNI, ahead of the publication on Friday of its “Economic Strategy 2.0.” (See MNI EM INTERVIEW: Czech To Ease Fiscal Rules-FinMin Schillerova)

The document, which sets out five pillars – people, innovation, capital, infrastructure and environment - is “not a wish list, but a structured plan with a sequence of steps,” to boost productivity and competitiveness, said Havlicek, also Minister of Industry and Trade.

This includes taking full control of public utility CEZ, though Havlicek was unable to say whether details of the takeover will be given at the firm’s June AGM.

“Energy is a strategic area linked to the country's security. It makes therefore sense for the state to have full control over the key infrastructure and production resources. We will inform about any steps transparently as the rules allow.”

Asked if the government is considering splitting up CEZ, Havlieck pointed to “several options in play,” though details cannot be disclosed “as this is price-forming information.”

NEW NUCLEAR

The Czech Republic needs additional and predictable sources of electricity, Havlicek said, with nuclear energy central to the strategy. (See MNI EM INTERVIEW: Czech Industry At Risk From German Energy Cap)

In addition to building two nuclear plants in Dukovany, and plans for two more in Temelin, there is “great potential” over the longer-term in small modular reactors, “especially for industrial sites,” he said.

One of the new government’s first moves was to absorb fees paid by households and firms for renewable energy onto the state budget.

This was a “simple and quick solution that immediately reduced electricity prices for everyone – households and companies. In a crisis situation, speed is crucial. Administratively complex targeting would mean delays and uncertainty,” Havlicek said, in response to criticism that the move had been untargeted.

Lowering firms’ energy costs is one step in a broader package intended to boost competitiveness relative to their European counterparts, notably in Germany, he explained, though “relief alone” is not enough.

“We are addressing investments, permitting, capital and labour in parallel. Competitiveness is not built on one measure, but by systematic work on the entire system.”

Asked if the government could also spend on new power networks - and if a cold back-up system is needed to replace generating capacity lost due to the closure of coal-fired plants - Havlicek said the goal is to minimise impact on households and companies, while ensuring that investments do not hinder competitiveness.

“The development of the transmission and distribution system is a necessary prerequisite for the energy transformation,” he said. “The primary thing is to have capacity mechanisms for the construction of new sources. However, if the situation shows that in terms of security and ensuring energy supplies to end customers it is necessary to have a strategic backup, I would support it.”

The government is not looking at nationalising other companies, Havlicek said, adding that it should “only intervene where the strategic security or essential public interest are at stake, or when its role is unavoidable.”

The government also plans to reorganise state agencies including the National Development bank (NRB), the Czech Export Bank (CEB), the Export Guarantee and Insurance Corporation (EGAP), CzechTrade and CzechInvest, to ensure greater interconnection and a clearer division of roles.

“The goal is for them to function as one ecosystem to support exports, investments and company growth. Less overlap, more cooperation and a stronger focus on results,” Havlicek said.

FISCAL DEFICIT

As to whether the government can keep the fiscal deficit below 3% of GDP while delivering on promised spending increases and tax breaks, Havlicek said growth through increased productivity, not permanent indebtedness, was the way forward. (See MNI EM INTERVIEW: Czech Fiscal Gap To Hit 3% GDP-Council Chair)

“In addition, we are working with repayable financial instruments, better use of private capital and revision of inefficient expenditures.”

Should Economic Strategy 2.0 under-deliver, the government will look to make cuts elsewhere, he said.

“We will look for savings where the state does not bring an added value. However, we consider key investments in energy, infrastructure, education and innovation to be untouchable - they are the ones that generate future revenues.”