Gas distribution to be monopolised again

After a controversial decision to privatize the Czech Republic's main electricity producer together with all of the regional distribution companies in one package, the Czech government has decided to apply the same principle to the privatization of the monopoly gas importer and regional distributors. According to analysts, however, both decisions will prevent competition on the Czech market in these sectors. Vladimir Tax reports:

The government has agreed to sell at least 50 percent in Transgas, the monopoly importer of natural gas to the Czech Republic, together with state-owned stakes in regional gas distribution companies. The government will appoint an advisor for the privatization by the end of November, who should select potential investors by August 2001.

According to economic analyst Petr Zahradnik of Conseq Finance, the main advantage of this solution lies in the economy of scale. On the other hand, the scheme also poses a danger for competition: Competition on the market was one of the main arguments used by Finance Minister Pavel Mertlik, who advocated a separate privatization of Transgas and the distribution companies. However, as in the case of the recent decision to privatize the power utility CEZ together with regional energy distributors, Mr. Mertlik was outvoted. As Mr. Zahradnik pointed out, the decision may have a negative impact on household prices if foreign competition is not allowed to enter the market: So far, three companies have expressed a preliminary interest in acquiring the whole package. These include Gaz de France, and German E.ON and Ruhrgas, all of which already hold minority stakes in some of the Czech Republic's regional gas distribution companies.