* Carbon tax part of broader plan to cap power price hikes
* Tax calculated on market price on Feb. 28 each year
* Heat generation exempt from tax
(Adds details, background, analyst quote, byline)
By Roman Gazdik
PRAGUE, Nov 2 (Reuters) - The Czech government has proposed
a 32 percent tax on carbon credits that power producers are set
to receive in 2011 and 2012 as the government seeks money to
offset power price increases resulting from a solar energy boom.
The carbon emissions tax proposed on Tuesday, which will be
calculated according to the market price for the credits on Feb.
28 each year, is part of a plan to halt a boom in the solar
sector which, through high guaranteed feed-in tariffs, threatens
to hike electricity prices.
The centre-right government aims to cap household and
industrial electricity price increases at 5.5 percent while the
support it has offered for solar power, which is now hard to
withdraw, might imply increases of up to 30 percent.
It plans to raise 4.8 billion Czech crowns ($273.5 million)
a year from the carbon credit tax in 2011 and 2012.
The new tax, on the credits that are given to electricity
generators as part of an EU scheme to limit emissions of
greenhouse gases and combat climate change, will mainly burden
majority state-owned CEZ <>, by far the country's
biggest power producer.
A CEZ spokesman said the company had to study the proposed
legislation before making an estimate of its impact.
CEZ shares were down nearly half a percent to 782 crowns
while the Prague bourse's PX index <.PX) rose 0.29 percent to
1161.
Analysts have said the tax, to be discussed by parliament
this week, has mostly been priced into CEZ's share price.
Josef Novotny of Czech brokerage Fio calculated the levy
would cost central Europe's biggest utility 3.7 billion crowns,
500 million crowns above his original estimate based on a 25
percent carbon tax.
"We assume a slightly negative reaction in the market,"
Novotny said.
For plants that produce both electricity and heat, the tax
would only apply to carbon credits related to power production,
Deputy Industry Minister Tomas Huener told Reuters.
SOLAR INVESTMENT BOOM
The Czech Republic, a country of 10.5 million people, was
the third-biggest solar nation in Europe last year in terms of
new installed capacity due to an investment boom sparked by
generous feed-in tariffs.
This year, installations have accelerated ahead of cuts in
the feed-in tariffs. By late October, the installed capacity was
1,341 megawatts.
As part of the same legislation as the carbon credit tax,
the government has also proposed a 26 percent tax on solar power
sales by large producers.
Solar plant operators and banks, which have funded many of
the projects, said part of the government's plan could spark
lawsuits.
The Czech Photovoltaic Association said the tax on large
solar plants could force many solar power generators into
bankruptcy while a group representing investors noted banks had
lent out 50 billion crowns to finance plants.
"The proposed withholding tax will negatively influence cash
flow of all projects," said an analysis by Glatzova & Co., a
legal firm representing dozens of Czech and foreign investors.
"The banks would have on their hands only unsecured toxic
assets."
(Reporting by Roman Gazdik and Jan Korselt, Writing by Michael
Kahn, Editing by Anthony Barker)
