This week in business: PepsiCo may sell its Central European division to Karlovy Vary Mineral Waters; electricity prices will rise next year, partially thanks to a new government proposal; the Czech Confederation of Industry publishes a bleak outlook for Czech businesses; a new computer system that would detect rigged public tenders is undergoing testing; RWE Transgas will not have to pay major fines to Russia’s Gazprom; the Czech potato harvest is down this season with uncertain consequences on consumer prices.
Central European PepsiCo is looking for buyers
The soft drinks giant PepsiCo is looking to sell off its Central European division. The daily Mladá fronta Dnes reported on Monday that Karlovy Vary Mineral Waters, which bottles water for the Mattoni, Magnesia and Aquila brands, may be interested in the purchase. The west Bohemian company is the largest mineral and spring water producer in the Czech Republic and would welcome the expansion of its portfolio to non-water products. The two companies have been in talks for a few months over the sale of operations in the Czech Republic, Slovakia and Hungary, which would include the hand-over of brand names like Mirinda, 7UP, Schweppes and Toma juices in those countries.
Government proposal will contribute to rising electricity prices
On Thursday, the Czech cabinet approved a proposal that raises state subsidies for renewable energy source, but also lowers the government contribution to the energy costs for consumers. As a result, Czech households will pay 2 to 4 percent more for electricity in 2013. The government subsidies will be raised by 7.2 billion crowns to a total of almost 43 billion, while the amount that the government will give to compensate for the rising prices of electricity will go down from 11.7 to 9.7 billion crowns. Starting next year Czechs will be paying out an average of 2,200 crowns per year as their contribution to state subsidies for renewable energy, which is over ten times the amount they paid in 2009.
Czech Confederation of Industry gives a bleak outlook
A study by the Czech Confederation of Industry carried out among almost 200 of its members in the third quarter of this year presented a fairly bleak forecast for the Czech economy. According to the study that was released on Thursday, the economy is at its weakest in two years, and the upcoming months will not see much industrial growth or a significant drop in unemployment. Although Jaroslav Hanák said the prognosis is not catastrophic, he foresees a tough time for Czech businesses in the beginning of the new year. Companies expect that real wages will stagnate, and although unemployment will continue to drop it will not be a significant change. The outlook for 12 months from now is more optimistic, but the uncertainty over tax rates next year and the general direction of the economy is making most businesses nervous.
Supreme Audit Office tests a new system to prevent rigged tenders
As the number of scandals over rigged government tenders increases, the Czech Supreme Audit Office has begun testing a new computer system that should detect problematic and illegal tenders. Based on various factors such as the number of bids received and the prices offered, the system should indicate that a given public tender may have been rigged. The controller is hoping this will help them catch problems early, before public funds are actually dispensed.
RWE wins in a landmark arbitration case over Gazprom
Czech gas importer RWE Transgas will not have to pay 9.6 billion crowns in fines to the Russian gas giant Gazprom for not drawing the minimum amount of gas that was stipulated in their contract from 2008 to 2011. The arbitration court in Vienna thus overuled the “take-or-pay” clause by which Gazprom fines its customers for not importing all the gas that they originally said they would. The court decision may serve as a precedent for other European customers of Gazprom that have been unhappy about the strict and lengthy contracts that the Russian company tends to impose on them. Gazprom representatives said the company will appeal the verdict with the Austrian Supreme Court.
Potato harvest is down this year
According to early estimates, this year’s potato harvest will be a fifth lower than last year’s. The Potato Growers Association estimates that Czech farmers harvested just over 650,000 tones of potatoes this season. The yield per hectare is lower than last year, in addition to which the area harvested is down by 10.6%. This is good news for Czech potato farmers, who will get a better price for their produce, but it’s not yet clear how this will affect consumer prices for this staple on the Czech dinner table.