Czech Republic Segment

General conditions in the Czech Republic

The COVID-19 situation in the Czech Republic increasingly eased during the 2021/2022 fiscal year. Following this, the Czech government rescinded most of the measures to prevent the further spread of the COVID-19 pandemic.

Although this had a positive effect on the economic development of the country, the generally difficult conditions on the energy market and the Russia-Ukraine war on top had a negative impact on the economy. Inflation in the Czech Republic rose sharply during the reporting period, reaching a peak of 18% in September 2022. The unemployment rate settled near full employment during the 2022 calendar year.

In the Water unit, a new price regulation between the operator and the infrastructure owner – in particular relating to the maximum permissible costing margin on drinking water, and wastewater charges – was agreed as on 1 January 2022. One significant innovation here is determining a permissible margin based on the replacement values of the non-current assets in operation. This will create sufficient funds for the owners to replace infrastructure.

At the same time, the Czech regulatory authority for the heating sector enacted a change in heat pricing on 1 January 2022. Based on this, the maximum profit is now calculated, among other things, by the inflation-adjusted acquisition value of the assets in operation. From today’s perspective, these regulatory adaptations will not have any negative impact on the Czech Republic Segment.

In the reporting period, the energy crisis with sharply rising market prices exposed trading companies for electricity and gas in particular to massive pressure, ultimately triggering insolvencies and the departure of numerous market participants; this also affected the Czech Republic Segment. This has led to further massive price increases for energy customers who now have to procure replacements at high prices on the spot market – in part for volumes that had already been secured. On top of this, energy suppliers are refusing to conclude new contracts in many cases. As a consequence the commodities to be procured are being distributed across several suppliers in order to minimise the risk of default.

High gas prices were particularly relevant for the heating business of Energie AG’s Czech Republic Segment, as a large proportion of heat is generated by gas-fired boilers and combined heat and power plants. In the case of water supply and waste water management, higher market prices impacted on electricity expenses for water and waste water treatment and allocation. However, the remedial actions taken, including passing on the increased energy costs to the customers or damage agreements with the previous supplier, have substantially mitigated the impact.

The Czech koruna steadily strengthened against the euro in the course of the 2021/2022 fiscal year. The exchange rate was around EUR/CZK 24.6 towards the end of the reporting period.

Business development in the Czech Republic Segment

In the 2021/2022 fiscal year, the Czech Republic Segment generated sales revenues of EUR 194.7 million in its water and heating business. This was equivalent to an increase of 12.4% compared with the previous year and was attributable to exchange rate effects, price and volume increases and the services sector. In addition, the sales revenues of the Czech Republic Segment now also include the activities of RATE s.r.o., which was acquired by Energie AG Bohemia s.r.o. as of 3 January 2022.

The EBIT in the Czech Republic Segment amounted to EUR 6.0 million in the reporting period. This is equivalent to a decrease of 45.9% (previous year: EUR 11.1 million), which is mainly due to the significant rise in energy overheads, triggered by replacement purchases of electricity and gas, as well as the massive price increases due to the Russian-Ukrainian war.

Stable volume development in the Czech Republic

In the Czech Republic Segment, a total of 49.2 million m³ of drinking water (previous year: 48.2 million m³) and 45.2 million m³ of waste water (previous year: 45.1 million m³) were invoiced in the reporting period. In total, this corresponds to slightly higher volumes in drinking water and waste water business, although developments varied from region to region.

Invoiced drinking water volume

in m³ mill.

Invoiced waste water volume

in m³ mill.

All major tenders for drinking water and wastewater were won, the most important being those in Přeštice, Žirovnice, Dobřany (ČEVAK a.s. in all cases) and those of the association of local authorities JEKOZ (Energie AG Kolín a.s.).

The heat sales volume in the Czech Republic amounted to 198 GWh in the reporting period, which is 5.0% above the previous year’s figure (189 GWh) due to the acquisition of a heat supplier in Štětí and despite the mild winter.

In organisational terms, the focus in the reporting period was on company mergers in the western part of the supply area and in the central Prague region. In the process, the companies Energie AG Teplo Rokycany s.r.o. and Tepelné zásobování Rakovník, spol. s.r.o. were merged and now operate as Energie AG Teplo Bohemia s.r.o. In the second half of the reporting period, the focus was also on preparing the strategic merger of the water and wastewater activities in the central region around Prague. The first step was the takeover of VAK Zápy s.r.o. by its affiliate company VAK Beroun a.s.

Additionally, 100% of the shares in RATE s.r.o. were acquired by Energie AG Bohemia s.r.o. on 3 January 2022. The company, which has a workforce of 23, is located 80 km north of Prague and uses industrial waste heat from the paper industry to supply heat and hot water to approximately 10,000 inhabitants of the town of Štětí and surrounding communities.