Daniel Křetínský is undoubtedly a successful businessman. In the summer, his Energetický a průmyslový holding (EPH) entered the Czech top 100 of the largest Czech companies for the first time in history, where it replaced the long-standing number one Škoda Auto. Sales were assessed for the previous year, as the Křetínského conglomerate of power plants, mines, pipelines and other similar companies rode the incipient wave of rising energy prices. This year the situation will be even more interesting. As is well known, the energy sector thrives in times of savage warfare, and EPH sales nearly tripled to $15 billion in the first half of the year. And not in crowns, but in euros.
Net income – still in euro – went from 500 million to 1.3 billion. You read that right, the most successful Czech company earned more in six months than the state spends on the salaries of police officers and soldiers. At the same time, this is not an individual flight, profits are growing in energy literally by leaps and bounds. For example, majority-owned ČEZ just reported an increase in earnings for the first three quarters to eight times last year’s level.
What will the company do in such a situation? ČEZ has announced that it will raise its prices next year. Křetínský goes a bit further, his EPH announcing the day before last Friday that it will move part of it away from the Czech Republic due to what it calls excessive and “senseless” taxation of some newly generated profits.
Indeed, we recall that Křetínský will not withdraw all of his business from the Czech Republic. He will continue to be the owner of the Sparta football club and the Blesk newspaper, and its local power plants and thermal plants, which form the basis of EPH they will continue to work. Only the profitable division that manages the international trade of energy raw materials moves. Even so, the leading domestic billionaire felt the need to put a theatrical spin on his departure from the country. The same company sent a reproachful report to its editors just three hours after the government of Petr Fiala, after months of deliberation and weeks of preparation, approved the bulk of its war tax package in the lower house.
Let the company keep standard profits and only share what falls to it in addition.
Its purpose is to provide the state with money to help consumers with expensive energy. The rationale is that some of the help should be provided by those who are now racking up profits as a result of the global energy somersaults, namely companies like EPH or ČEZ. It is a principle on which the entire European Union agreed in September and which individual member states are putting into practice in recent weeks.
However, it seems that Křetínský was against this procedure. In principle, the company understands the concept of solidarity warfare, but refuses to accept local implementation. In fact, it seems that two logics oppose each other here: one, which seeks to maintain social peace in society through redistribution in troubled times, and the other, which claims that the steps go too far, that they actually threaten the order existing, because Czechia will cease to be interesting for business. Is it possible to exaggerate in asking for solidarity? And what happened to the Czech government?
Two legs
According to the newly approved tax, Křetínský and similar energy entrepreneurs have to contribute in two ways. In the Czech Republic, the former was called the “excess income tax”. It is a novelty that is being introduced throughout the EU, especially for electricity producers. Most of them can produce much less than the sales prices that have gone up this year. For their response, EU countries have chosen not to dictate how much someone can sell; this free and interconnected market will continue to function and each of the producers will continue to have space to do what he can. They only have to share a portion of the sales.
Last week, Fial’s government supplemented this general EU regulation with its own table that determines the acceptable price limit for each type of resource, so producers have enough to cover costs and make a reasonable profit. For example, large lignite-fired power plants, such as Křetínského in Opatovice nad Labem, have this limit set at 170 euros per megawatt hour according to government regulations. That’s still about double what streaming was worth in the stock market this time last year, by comparison, and triple the normal prices of nearly the entire previous decade. In other words, even if the price of coal has increased or wages have increased in the meantime, producers should still be able to easily get under the new ceiling. Last year – without the possibility of predicting war and the resulting price turbulence – all ten would probably have accepted the offer of such a price.
