(Adds CEZ comments on interest in project)
Olja Stanic
BANJA LUKA, Bosnia, Jan 28 (Reuters) - Czech power company
CEZ <> said on Wednesday it would sell its stake in a
planned 1.4 billion euros ($1.85 bln) power project after
blaming the Bosnian Serb government for breaches of contract.
"We have informed the government that we aim to sell our 51
percent stake in the joint venture because of contractual
breaches," Aleksandar Obradovic, general manager of the joint
venture Nove Elektrane RS, told a news conference.
Selling its stake to its joint venture partner, the Bosnian
Serb government-owned power utility EPRS, however, may not be
the end of its involvement in the project, it said.
CEZ, the biggest listed stock in central Europe with market
capitalisation of $21 billion, said it was still interested to
see the plan to build a power station and operate mines.
The plan is to build a coal-fired power plant of 660
megawatts, develop a mine and upgrade an existing power plant in
the southeast town of Gacko in what was to be the largest-ever
investment in the Serb Republic.
However, Bohdan Urban, CEZ project manager, said CEZ decided
to pull out after the Bosnian Serb partners failed to register
property in a timely manner, issue concessions, expropriate land
for the mine, and put forward to parliament a 2006 feasibility
study.
So far, the partners have not invested much into the joint
venture, and CEZ said its stake would be sold to EPRS for a
price to cover part of its project costs so far.
But Urban later said in Prague that CEZ could still revive
the plan if its partners meet the conditions set in the
contract.
"We still believe that it is most favourable for both
parties to complete the project and we will strive for that," he
said.
The Serb Republic energy ministry said it would review in
detail the CEZ motion.
"The power utility EPRS had some objections to the
feasibility study and has engaged experts to offer alternative
solutions in the interest of both parties," the ministry said in
a statement.
It also said "both parties have the right to seek
compensation regardless of the outcome of the dispute".
Srdjan Blagovcanin, of the Bosnian branch of the
Transparency International anti-corruption watchdog, said the
CEZ announcement would damage the reputation of the Serb
Republic as an investment destination.
"This will send a catastrophic signal to investors who may
have intended to invest in the Serb Republic and will also hurt
the bourse," he told Reuters.
Investors, activists, financial market analysts and media
said the government conducted negotiations with secrecy, failed
to provide timely and accurate accounts, and had agreed to terms
that hurt the interests of small shareholders.
Critics also said the government failed to get a fair price
by evaluating RITE Gacko at 204 million euros at a time when its
market value was 390 million euros.
At the same time, small shareholders, who owned 20 percent
in the firm through a post-war share compensation scheme,
complained they ended up losing part of their savings without
being consulted.
($1=.7573 euros)
