Power utility CEZ gets in trouble after CEO removal

29-10-2003

The Czech power utility CEZ is in a difficult position following the removal of Jaroslav Mil from a key post. Among other things, Mil's departure has left it with a legal headache as it no longer fulfils one of the statutory conditions for running a nuclear power plant. The government claims that bad communication and disagreement on strategy lie behind his dismissal, but speculation mounts that there may have been other reasons for his removal.

Jaroslav Mil was dismissed from the post of chairman of the board of directors of the state-run power utility CEZ. He will be removed from the position of general director of CEZ within few weeks. The CEZ power utility is the second biggest energy exporter in Europe and the largest producer within Central Europe. Mil was dismissed even though the company was doing well and planning to expand abroad.

The Minister of Trade and Industry and the Finance Minister were behind the change of personnel, claiming that there were disputes and a lack of communication between the management of the company and the state. The official reason given for the dismissal was the government's disapproval of the company's strategic plans, which focused on prioritising investment over dividends. The government also criticised the large amounts of money spent on advertising. But the true problem seems to be CEZ's participation in the privatisation of coal producers Sokolovska uhelna and Severoceske doly.

The government's tender proposal appears to be tailored for one Czech mining and engineering company. This has even caused disputes between the Government and the European Union.

Nevertheless, CEZ decided to bid for the government's stakes in the mining companies. The power utility wants to ensure that the 37 percent stake it already holds in Severoceske Doly does not lose its value, which could happen if another majority owner were to come in. But this is not in line with the state's view on CEZ's acquisition policy.

The dismissal of Jaroslav Mil has also caused CEZ other major problems. It leaves the company without an atomic-energy expert on its board of directors, which means that it no longer fulfils the legal conditions for operating a nuclear power plant. The dismissal has even angered the unions, which have threatened to go on strike as a result. The fact that Petr Voboril has replaced Mil at the head of the company has also caused problems, as he is a former member of Communist militia which violates the Czech Republic's screening laws barring former Communists from high office. Last but not least, this decision is very likely to have a negative effect on the company's share value.

29-10-2003