* Next Czech government faces key energy questions
* Retail power prices likely a target
* Nuclear expansion strategy a top issue
By Michael Kahn
PRAGUE, May 21 (Reuters) - Energy has become a central issue
in next week's Czech election and presents urgent challenges the
next government must tackle, including the future of a flaghip
nuclear plant.
A likely left-wing victory could clear the way for tighter
regulation of local power markets and mean a shorter leash for
state-owned CEZ.
Polls show the left-leaning Social Democrats leading their
main right-wing rival, putting them in the strongest position
for post-election talks on forming a cabinet.
The Social Democrats have targeted consumer power prices and
the 69.8 percent state-owned CEZ <>, promising to raise
the dividend Central Europe's biggest company pays out to fund a
bonus to pensioners.
Some investors also fear a Social Democrat government could
follow the lead of leftist Slovak Prime Minister Robert Fico
whose 2006 election victory included a promise to shield
consumers from high energy bills.
Once in office he threatened foreign shareholders with
expropriation of their holdings if they sought to overcharge
customers.
Any government will be tied by EU rules and would find it
difficult to squeeze the wholesale market, but the stake in CEZ
is a powerful tool.
"A win for the Social Democrats is a risk for CEZ," said
Petr Novak, an equity analyst at Prague-based Atlantik. "Much of
it is campaign promises but investors are afraid of them coming
to power and increasing regulation like they did in Slovakia."
TEMELIN NUCLEAR PLANT
The next government in the coal-dependent country also faces
big decisions on expanding nuclear power, finding a cleaner fuel
mix and deciding on a long-term energy policy to raise energy
security, mainly in gas supplies that come mostly from Russia.
One high-ranking Czech official believed the only issue that
matters for the next government was choosing a supplier for the
expansion of the Temelin nuclear power plant in a deal that,
including other nuclear units planned by CEZ, could be worth
some 500 billion crowns.
The decision -- which will cement the Czech's spot as one of
Europe's top electricity exporters -- will determine whether the
former Soviet bloc nation looks east to Russia or west toward
the European Union, said Vaclav Bartuska, the country's
ambassador-at-large for energy security.
He made clear his view that a Russian supplier could present
difficulties was his own and not that of the Czech government,
which has taken no position on the suppliers. A final contract
was expected to be signed in 2012.
Toshiba <6502.T> unit Westinghouse, a group of Russia's
Atomstroyexport and Czech Skoda JS, and France's Areva
<CEPFi.PA> are bidding to build the 2 new units at Temelin, in
the southern Czech Republic near Austria, and up to three other
units in Slovakia and its eastern Czech Dukovany station.
"By far the biggest issue over the next four years will be
deciding who should be the supplier for Temelin," Bartuska told
Reuters. "If the next government gets this decision right it can
be forgiven about anything else."
"The decision will define where this country wants to
belong," he said. "We really believed up to 1989 that making it
into the EU and NATO meant safety. It took us a few years after
joining to realize the world is not so simple. I think it is a
bad thing to look east."
Bartuska cautioned it could take months for the winning
party to form a government after the May election, a scenario
that could delay any decision and put off interested companies
who may feel the Czechs are not serious about moving forward.
In general the right-wing Civic Democrats have been more
wary of Russian influence in the Czech energy sector but no
party has said any bidders should be eliminated in the process.
The Social Democrats have also said they could force the
closure of the Prague-based Power Exchange Central Europe as
part of their effort to keep a tighter grip over energy prices.
Whether the party follows through if they win is an open
question, but they could certainly pull state-run CEZ from the
exchange. This would deprive the bourse of its market maker and
dry up liquidity, effectively shutting it down.
"What they can do as a major shareholder in CEZ is to force
them to leave the PXE," one market participant said. "Any
stricter regulation or closing the exchange would be bad for the
market."
