Karel Komárek’s business empire loses some of its shine

Karel Komárek, photo: ČT24

The diversified business empire of Karel Komárek is having its fair share of problems from being frozen of the Russian oil business to failing to make the hoped for impact as a gas and electricity retailer on the Czech market. In adversity comes opportunity might be the new catchphrase for his optimistic managers.

Karel Komárek,  photo: ČT24
Maybe not the man with the Midas touch, but from almost nothing to the third richest Czech and knocking on the door of the world’s top 1,000 billionaires is not a bad track record. Czech billionaire Karel Komárek has taken his original flagship oil and gas company Moravské Naftové Doly (MND) and diversified into the travel business, lotteries, real estate, telecoms, and health sectors.

The KKCG empire of his main holding company now stretches from the Sazka lottery business to its Greek counterpart and downstream into the Russian oil business. Controversy, courts and a lot of legal bills have accompanied much of the expansion.

Photo: ČT24
But there are signs that not everything in the Komárek garden is rosy. First of all low oil prices are clearly eroding profits, although in an interview with Monday’s edition of the daily Mladá Fronta Dnes, KKCG’s head of investments Pavel Šaroch said that with average operational costs at 14 dollars a barrel, the oil operations are still making money even at current world prices. Šaroch even added that the pressure on other oil companies with higher costs might even turn into investment opportunities. That’s called looking on the bright side.

Photo: P.matel,  Wikimedia CC BY-SA 3.0 CZ
But the bright side is hard to see in the case of the Russian oil terminal in the Samara regional, and alongside the Druzhba oil pipeline and Volga river, which the Czech company bought with such euphoria a few years ago.

Now it appears that the project for the first private oil terminal in Russia has more or less been frozen out of the market by Russia’s big state-controlled power companies. While the Czech company in theory has the right to obtain oil supplies from pipeline company Transneft, in reality it has refused to open the tap on such supplies and the new terminal is just ticking over with no profit to show.

Photo: Marián Vojtek,  Czech Radio Archives
MND also went downstream in the Czech energy market last year, starting sales of gas and electricity. But the surge of new customers did not come in spite of a very expensive tv ad campaign playing up the idea that you could buy your energy from source. According to some estimates, astronomic sums were paid for every new client landed. MND bosses are now complaining that the market is not sufficiently liberalized and needs to be reformed but they still hold out hopes for further developments.

And now the tax plans of Czech finance minister Andrej Babiš look like they will penalize lottery giant Sazka more than other sectors and companies in the gaming sector when new rates take effect from 2016.