1/4/2008

United Energy Succumbed to the Pressure of MUS and Signed a Contract on Increased Coal Prices

by Mostecká uhelná (MUS) and signed a contract on coal supplies for 2008 with MUS in the interest of ensuring heat supplies. MUS enforced the price increase through duress by misusing in monopolist position. United Energy insists that this high a price for coal is unjustified and will continue to seek a reduction from the state authorities. “Mostecká uhelná threatened us with a radical reduction in the volume of coal supplies. Such a reduction in coal supplies, however, would in fact lead to the complete suspension of heat supplies, which we could not permit. Therefore, in the interest of ensuring heat supplies for the inhabitants of Most and Litvínov, we were obliged to accept the conditions of Mostecká uhelná and acceded to a considerably higher price for coal,” said the CEO of United Energy, Petr Jeník. If Mostecká uhelná fulfils its obligations arising from the newly concluded contract, heat supplies for Most and Litvínov will not be threatened this year. Just before the end of last year, MUS announced that it will provide the Komořany heating plant with only 300 000 tonnes of coal for the year 2008. Yet this quantity is insufficient for heat production. In order produce and ensure reliable heat supplies, the Komořany heating plant needs about 700 000 tonnes of coal per year. The situation was finally resolved by a substantial compromise on the part of United Energy, which accepted a 27 per cent price increase for brown coal (lignite), which MUS unilaterally demanded as a condition for the provision of sufficient coal volumes. “We appreciate that Mostecká uhelná withdrew from its previous threats of unconditional reduction of coal supplies, thus enabling us to ensure reliable heat supplies for citizens and other consumers,” noted Mr Jeník. “However, we state again that this sharp increase in the price of coal is a result of Mostecká uhelná’s market position, and not an expression of the free will of two parties. Moreover, we are convinced that so substantial an increase in coal prices is unjustified and unlawful,” said Mr Jeník. “We believe the state authorities will not stand by passively with regards to this situation. We expect intervention particularly from the Office for the Protection of Economic Competition (ÚOHS), which has been investigating the affair for over a year without commencing proceedings in the case,” he added. Because of the increase in coal prices, United Energy is obliged to raise heat prices by 9.5% for Most and Litvínov in 2008. “However, it still applies that we are ready to refund consumers for a part of the money paid for heating if we manage to reduce the price for coal,” declared Mr Jeník. The company United Energy operates an energy plant in Komořany with a total installed electrical output of 239 MWe and a thermal output of 974 MWt. It supplies thermal energy to almost 35 000 apartments in Most and Litvínov, as well as industrial enterprises, schools, healthcare facilities, offices and institutions. United Energy, legal successor, a.s., belongs to the consolidated whole of the J&T Financial Group. Martin Maňák J&T Group Communications Director for the energy sector