Czech chemical companies to face higher electricity costs - SCHP

27 September 2010 17:33  [Source: ICIS news]

PRAGUE (ICIS)--The Czech chemical and oil-refining industries are to face an approximate 15% increase in electricity charges in 2011 due to a state subsidy scheme for solar power projects that has been hugely oversubscribed, the Association of Chemical Industry of the Czech Republic (SCHP) said on Monday.

A survey of SCHP member companies showed that the extra costs would amount to at least koruna (Kc) 2bn (€81.3m, $109.5m), the association said.

Most chemical companies would be unable to absorb the cost of the more expensive electricity, meaning they would have to pass it on to customers and undermine their competitiveness, the association added.

“It’s clear by now that this is going to put electricity prices up significantly and a lot of producers will have to raise the final prices of products. Efforts must be made to keep the price hike as low as possible,” said SCHP director Ladislav Novak.

According to an estimate by Jan Tomanik, an analyst with investment bank Wood & Company, Czech petrochemical producer and refiner Unipetrol stands to lose 14% of its 2011 operating profit if the projected price rise materialises.

SCHP is one of a number of Czech industry associations calling on the government to shield the industries from the effects of the solar power subsidies.

A renewable energy law forces the main power distributor in the Czech Republic, CEZ, to buy power from start-up solar power producers at a higher cost than traditional coal, gas and oil sources.

The government said it was working on a number of ways to restrain the forecast increases in electricity prices, such as by cancelling subsidies to solar power plants built on farmland after a certain date and reducing subsidies to such plants that are not connected to the grid by the end of this year.

($1 = Kc18.26 /€1 = Kc24.61)

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By: Will Conroy
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