Prague based ČKD group hits problems over key contracts

One of the Czech Republic’s engineering icons, the Prague-based ČKD group is, according to many media reports, facing serious problems.

Photo: archive of ČKD Praha DIZPhoto: archive of ČKD Praha DIZ The company has over the last decades been noted for its large contracts, often in the gas and electricity sectors, for power plant modernisations, refits to hydro plants, or compressor stations for gas pipelines. Many of the contracts have been in the former Soviet Union though it has also landed a sizeable raft of contracts on the home Czech market as well.

Now it appears, some of the contracts are appearing to turn sour. Part of the problem is low oil and energy prices generally. With such low prices new energy infrastructure and plant is simply not being built as companies move to curb costs. But some of the damage also appears to be self-inflicted.

Thursday’s edition of the business daily, Hospodářské Noviny, outlined in particular how three major contacts have been into major problems.

The first is a pioneering, and somewhat controversial, project by the municipally owned Plzeň heat and power company for an incinerator on the outskirts of the city at Chotíkov. Plzeňská Teplárenská is reported as saying that ČKD unit, ČKD Praha DIZ, has at least for half a year failed to pay its sub-contractors with the bill now mounting to around 130 million crowns. The 2 billion crown project is already overdue and should have started operating according to the original timetable at the start of the year. Plzeňská Teplárenská’s boss says he is now trying to deal direct with the sub-contractors to complete the work and sideline ČKD Praha DIZ altogether.

Insolvency procedures against ČKD Praha DIZ were started at Prague’s Municipal Court on Thursday by one of the creditors in the Chotíkov incinerator contract, The business paper adds that a billion crown contract with the Czech-Polish consortium TAMEH composed of Czech steelmaker Arcelor Mittal Ostrava and Polish energy company Tauron to cut emissions has also collapsed.

The final deal in trouble, according to the paper, is a 900 million contract to build a new polyethylene unit for Czech oil refining and chemical group Unipetrol. In mid-May ČKD was the target of a swoop by a special police squad combatting corruption.

They were investigating possible tax fraud. The company said in a statement that the pressure was being exerted in a move to discredit it pending arbitration proceedings over the Blanka road tunnel. ČKD Praha DIZ was the general technology provider for the Prague road tunnel opened after large cost increases and many delays in September 2015.

Hospodářské Noviny, said one of the recent problems with the ČKD group is that majority owner, Petr Spechal, also the owner of the Sparta Prague ice hockey club, has taken whatever revenues the engineering group generated in the recent past to invest in other ventures. These, the paper said, include revenues from the sale of daughter companies.