06-11-2003

Five bidders shortlisted in coalmine privatisation

Five investors have been shortlisted in the privatisation of two profitable brown coal mines in north-western Bohemia. According to the privatization agency, the National Property Fund, three firms will be allowed to perform due diligence in Severoceske Doly and two in Sokolovska Uhelna mining companies. The fund did not release the names of the bidding firms. The government is selling majority stakes in the two companies and hopes to raise five to seven billion crowns (or 180-250 million USD) in total. The sales are planned to be completed this year. The government set strict conditions for the bidders, excluding major foreign energy groups. At the same time, the cabinet strongly opposed the participation of the dominant Czech power producer CEZ in the competition. Coal is the Czech Republic's key energy source. The three largest brown coal mines - Severoceske Doly, Sokolovska Uhelna and Mostecka Uhelna - have a combined annual output of 46 million tonnes.

CEZ excluded from Czech coalmine sale

CEZ announced that it was not among the five investors shortlisted in the sale of the two brown coalmines. CEZ said in a statement it had received a letter from the National Property Fund adviser on the sale informing it that the power utility had been ruled out of the sale for failing to meet the basic competition requirements. It did not say which criteria were not met. CEZ already holds about 37 percent of Severoceske Doly and took part in the competition in order to protect its investment, which could be damaged when a large investors takes over the mining company.

Central Bank softens minimum reserves requirement for banks

The Czech National bank has made life easier for commercial banks by softening the minimum reserve policy. As of Thursday, November 6, banks will be able to include money in their cash accounts in the compulsory minimum reserves, so that they will need to deposit less money with the Central Bank. The measure makes it possible for commercial banks to invest the newly available funds and increase profits.

Czech government keeps 2004 economic outlook, cuts budget gap forecast

The Czech Finance Ministry announced that it had not changed its economic growth and inflation forecasts for next year, but said the fortunes of the economy hinged on a global recovery. The ministry predicts that GDP will grow 2.8 percent year-on-year in 2004 when the country joins the European Union. This year GDP is expected to rise by 2.5 percent, the ministry said in a quarterly update of its forecast series which forms the basis for budget projections. The ministry said in a commentary attached to the predictions that the risk for economic growth in both 2003 and 2004 remains the development of the external environment. Economic stagnation in the EU has kept a lid on growth in the export-dependent Czech economy. Analysts have said no sharp rebound is likely until a major recovery in key EU markets, and particularly neighbouring Germany, the Czech Republic's biggest trade partner.

The ministry also said the country's public finances would show a record deficit of 6.6 percent of GDP this year, lowering the estimate from a previous 7.0 percent. It saw the gap narrowing to 6.2 percent next year when it hopes a package of fiscal reforms to take effect. The measures include increases in indirect taxes and cuts in welfare spending. The Czech Republic needs to reduce its widening public finance deficit below three percent of GDP before it adopts the single European currency in 4 to 6 year's time.

06-11-2003