Industry minister sees solid growth for 2016 but says renewables and OKD questions still need to be addressed

Jan Mládek, photo: Filip Jandourek

Ministry of Industry and Trade Jan Mládek sees Czech economic growth this year at 3.5 percent, that’s a slight drop from the 4.5 percent expected this year. One of the reasons for the slowdown will be diminished pumping of EU funds which probably contributed one percentage point to growth this year.

Jan Mládek, photo: Filip Jandourek
Some analysts see the 3.5 percent as rather optimistic, putting the growth figure at around 2.5 percent, and even Mládek said it would take an impressive effort to turn his 2016 prediction into reality. The minister on Tuesday gave a press conference summing up his ministry’s performance last year and hopes for this year.

Mládek hinted at more foreign investment in the pipeline after the major successes of 2015. US technology General Electric was tipped as one likely source of further investment in the Czech Republic. The minister added that more investments from China could also be in the pipeline. Before last year, Chinese investments in the Czech Republic were almost significant, and overshadowed by that of Taiwanese-based Foxconn. Diversification of investment so that it covers more sectors and regions where has so far been lacking is one of the main themes of the ministry, Mládek said.

The minister stressed two main themes in his press conference. The first is the apparent resolution of the spat with the independent energy regulator, ERÚ, which was threatening to stall payment of around 42 billion crowns in renewables subsidies for 2016 unless it was given sufficient assurances that objections from the European Commission would not be raised.

The authority gave final approval to the payment of the renewables funds just before the new year. But there are still questions over the broader payment of the renewables funds given that there are widespread suspicions that past Czech payments of subsidies were overgenerous. A so-called Czech solar tax sought to remedy that problem in the past but it still looks possible that renewable project owners might have been given more than the guaranteed return on initial investment and profit margin than they were entitled too.

The woes of the hard coal company OKD is also very much on minister’s in tray for the upcoming year. Mládek said Tuesday that the mining company looks certain now to close the Paskov mine, with the loss of up to 1,800 jobs, but the government would like to buy more time for the remaining two mines the combined Karviná and Darkov and ČSM could be continued for as long as possible. The government would like to buy time for the region to prepare for a no coal future.

One of the major problems though now appears to be that the ownership structure for OKD is so opaque that its now clear who all the owners are and if the OKD management sent to negotiate with the government can really deliver on any commitments they give or what the value of any undertakings may be.

OKD was subject to an extensive restructuring in 2014 in which its debt was reduced and with shareholders agreeing to transfer some of that debt into new bonds. Part of the confusion about the current ownership stems from that process and the exit of Czech millionaire Zděnek Bakala from the management of the coal company.