Foto: Martin Siebert

Iberdrola, which already obtained a wholesale power trading license for activities on the Czech market in October 2009, has been steadily increasing its footprint in Central and Eastern Europe (CEE) for the last few years. Starting trading activities on the Czech market would be another step toward increasing development, Raquel Blanco, head of Iberdrola’s business development department for Europe, told CBW.

Iberdrola plans to trade power over the counter (OTC) and on the Prague-based Power Exchange Central Europe. Interconnections among the Czech Republic, Germany, Poland, Slovakia and Hungary make things easier in this regard. 

Currently, Iberdrola is looking to open its first physical office in Prague and it is recruiting people to staff the office, Blanco said. The size of the office will depend of the activity development on the Czech market. “We believe that in the summer of 2010 we shall already have our office in place and start our trading activities,” Blanco said. 

Blanco emphasized that CEE has still numerous development opportunities that the Spanish group wants to enjoy. The region has a high potential in the future growth of power consumption per capita. Several factors are stimulating new entrants. These include privatizations that are still to be made in certain countries and the boom in co-generation. Currently, Iberdrola has 160.5 MW of wind power installed capacity in Poland through four wind farms in Galicja, with 12 MW; Kisiliece, with 40.5 MW; Malbork, with 18 MW; and Karscino, with 90 MW. Through its subsidiary Iberdrola Renovables, it also owns the Kisigmand wind farm in Hungary, the country’s largest with 50 MW of capacity, in addition to two more sites currently under construction that will total 74 MW of capacity. The company is also in the process of obtaining a trade license in Romania, where an office has already opened. Future countries under consideration for expansion are Bulgaria and Serbia, but there are no clear plans in this direction for the moment, Blanco said.       

In the Czech Republic, Iberdrola doesn’t exclude a future expansion into power generation. Yet, there are no concrete projects at this point. “This is a challenging market, which makes it even more interesting for us,” Blanco said. 

In need of power and transparency

Power in Central and Eastern Europe is still a sector full of opportunities, but it is also burdened by excessive state involvement, unclear market rules and disadvantageous tariffs. This was the consideration of power experts who met in Prague on February 2–3, 2010, at the Fourth Annual Central and Eastern European Power conference organized by Platts, an energy information provider.

“From a geographical perspective, we may be a bit more West than Vienna and Berlin. Yet, when we look at the power market, it can be understood why many think we’re still in the Wild East,” said Alan Svoboda, executive director of sales and trading with the Czech energy group ČEZ. Svoboda spoke about the ČEZ strategy in the CEE region, which is to grow organically, yet conservatively, by avoiding inner turbulences of such Wild East markets. Svoboda complained about the fact that CEE countries are still applying high tariffs for energy exports and imports. The leader in this perspective is Bulgaria, with €9 (Kč 235) per MWh for exports, including a green fee, followed by Romania, Bosnia and Greece. Regulated prices still give distorted signals about the markets, which make investments more difficult, he said. “The only feasible solution for investors is to apply conservative valuations with large risk premiums,” he said.

Other participants emphasized that, as the economic crisis has been sweeping the CEE region, one of the side effects is that it brought power consumption down to 2005 levels. “It took at least some five years back,” said Nicola Cotugno, member of the board and director of the power division of Enel Slovenské elektrárne. As heavy industry is planning to move further east, attracted by cheaper labor force, this consumption could go even lower. “It’s time to reconsider market needs and reshape the investment plans focusing on priorities and long-term sustainability,” he said. 

In terms of renewables, opportunities abound in CEE as well, according to Franz Heldwein, chairman of the management board of the Austria-based CE Energy Holding. One of the tools he recommended using when planning for a renewable power generation project is humility. “Nothing kills a project faster than arrogance and lecturing to a certain community or partner about how things should be done,” he said. He also recommended careful pricing. “Before starting the project, budget in all costs, multiply by two and bank it all in,” he said.