UPDATE 2-CEZ takes firm to court in Czech coal battle

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By Marek Petrus

PRAGUE, June 29 (Reuters) - Czech power utility CEZ took a key coal supplier to court on Friday to try to ensure long-term coal deliveries for a planned plant, as it faces rising competition in its home market.

CEZ, which is central Europe's biggest company by market capitalisation, said Czech Coal had refused to follow up on a preliminary agreement from 2005 and sign a final deal on coal supplies until 2055.

Czech Coal, a closely held energy trader, controls mining firm Mostecka Uhelna, the country's second largest by output.

The dispute is undermining CEZ's plan to build a 1,300 MW power station in Pocerady in the northwest of the Czech Republic at a time when Germany's E.ON AG is intensifying its efforts to boost power generation capacity in the country.

CEZ and Czech Coal had talked about creating a joint venture to build the plant, but the plan fell through due what CEZ said were unacceptable demands of its partner.

A Czech Coal spokesman said the company would refrain from commenting before Saturday's deadline for closing the deal.

A report carried by the business daily Hospodarske Noviny on Friday quoted unnamed Czech Coal officials as saying their group could see a different partner to build a new power source.

E.ON, the second largest Czech power supplier after CEZ with nearly one quarter of the market, wants to be first in line.

E.ON spokesman Vladimir Vacha said the utility would like to talk to Czech Coal if it fails to agree with CEZ. "We are focusing on this. In the Czech Republic we will exploit any opportunity to enter generation," he said.

He said E.ON would ideally increase its generation capacity to 50 percent from 2 percent of local sales. It buys 80 percent of power from CEZ for its distribution companies.

CEZ spokeswoman Eva Novakova said CEZ's lawsuit against Czech Coal had nothing to do with E.ON's expansion plans.

The new power plant would represent about 9 percent of CEZ's existing capacity, according to analysts.

"Chances that an agreement will be reached seem low at this moment and the situation is unclear, thus the stock might give back a bit of its recent gains," said Tibor Bokor, analyst at Wood & Company.

Shares in CEZ held near three-week highs at midday on Friday, trading flat on the day at 1,087 crowns and lagging a small gain in the blue-chip index .

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Keywords: CEZ COAL/