The largest European military conflict since WWII, the attack of Russia on Ukraine, has been changing the established rules of politics and economics not just around Europe. One of the key takeaways from Russia’s aggression is a redefined view of the energy industry.
EU countries can no longer be dependent on Russian gas, and so the temporary rehabilitation of nuclear power plants, a return to coal, and even importing natural gas from deposits outside of Europe are all being considered. The dramatic changes going on around fossil fuels are also being monitored by the largest privately-owned energy company in the Czech Republic, Sev.en Energy.
A strong group with international ambitions
Sev.en Energy works in a wide array of energy-related areas. It has mining and refining operations producing the highest-quality brown coal in Europe, it produces electric energy and heat from coal and gas, has stakes in power plants in Great Britain and Australia, supplies coking coal to the USA, and has a successful European commodities trading desk.
The group extracts over 10 million tonnes of brown and coking coal in Czechia and the US per year and is able to produce 4502 GWh of power and heat in two of its Czech power plants and two heating plants. It employs over 3000 people in Czechia and has traded a total of 45.6 TWh of electricity on the European market in 2020.
Since 2019, Sev.en Energy owns a 50 percent share in InterGen N.V., an international energy producer with four gas power plants in Great Britain and two state-of-the-art coal power plants in Australia. This February, InterGen was granted official consent in Britain to build a 640 MWh battery storage project next to its Coryton combined-cycle-gas plant. It will be the largest battery storage of its kind in Great Britain, with the capacity to power 300 thousand households for an entire year. These acquisitions – including a full buyout of the US Blackhawk Mining company, a major producer of metallurgical coal – are now being handled by the Sev.en Global Investments branch of Sev.en group.
Where it all started
To find the historical roots of the group, you would have to go back to the Austro-Hungarian empire, which found the fuel for its industrial development in the mines of the Krušné Hory basin in northern Czechia. In times when wood was the main source of fuel, the young banker, Moses Petschek, understood the potential of the industrial extraction of brown coal. Through the gradual acquisition of shares, he built up his position, and in 1880, his son, Ignaz Petscshek, established a company for selling coal. This business also kept growing, and in 1905, he even managed to get his hands on the majority of shares in the von Hohenlohe ducal mining operations.
The Petschek family mining operation saw its biggest boom following WWI. Hailing from the city of Most in northern Czechia, this company turned into the strongest mining operation in Czechoslovakia in the 1920s. By the early 1930s, it was in control of half the mining in Europe. Through successful acquisitions, the company obtained many mines, focusing largely on Germany. The growth of the coal empire was only stopped by the onset of the Nazi regime, which confiscated their mines due to their Jewish origins.
The mines remained in state ownership after WWII, having been nationalized by the new regime. Despite miners and their work being celebrated by the communists, the forty years of their rule left the mines underfunded and the burning of brown coal without any regard to the noxious byproducts destroyed the environment and left forests ruined by acid rain in its wake.
Not only was there much more interest in protecting the environment (sulfur and nitrogen were filtered from coal plant fumes) after the fall of communism in 1989, but many lignite mines and some power plants were sold to private owners. In 2006, one of the richest Czech people – investor Pavel Tykač – bought shares in two major lignite mines in northern Czechia from their former owners.
He has been building up his position in the direct production of electricity since 2013. After acquiring the 820 MW Chvaletice plant, in 2020, he obtained the Počerady plant (1000 MW) and heating plants in Kladno and Zlín. The company also started expanding into the UK, Australia, and the US in 2019.
Strategic development, partner negotiations, and government relations – these are the responsibility of chairman of the board of both Sev.en-owned Czech power plants, Jan Dienstl. What are his views on the future of the energy industry in Czechia and the role Sev.en Energy can play in its stabilization while there is a military conflict happening 400 kilometers from state borders? “I must first add that we have always warned against rapid changes in the country’s energy mix. Our coal plants were supposed to be terminated in 2038 the latest, according to a decision of the Czech Coal Committee, but last year the new government was already considering phasing out coal by 2033,” he says. “We are trying to make it clear that changing the current energy mix before new sources are built is simply not possible.” The company has been preparing heavily for the aforementioned deadlines, while also making major investments to modernize its plants and make them more environmentally friendly. Coal was to be phased out in Czechia primarily by new nuclear plants, which will most likely be built by the government. Renewable sources such as wind and solar produce little energy in Czechia and are not suitable to power the country, especially in the winter when there is little wind and the cloud cover and shorter days make solar plants near useless. Solar is able to provide three percent of the national consumption, while wind covers only one percent.
Nuclear power plants are providing roughly 40 percent of the required energy, another 40 percent of power is supplied by coal plants. According to the Green Deal, coal was to be temporarily replaced by Russian gas, which represents about 10 percent of national power consumption and is key for the entire Czech heating network. The Russian attack on Ukraine scrapped this plan, however. Standing up for Ukraine’s interests while implicitly financing the war by buying Russian gas is not a possibility. “The Czech Government is now faced with a major decision,” says Jan Dienstl. “If it does not wish to keep paying big sums to Russia, it will be forced to reconsider its coal plans. Even if the construction of new nuclear plants started tomorrow, they would only be available in ten, maybe fifteen years. Renewable sources offer rather bleak prospects locally due to Czechia being landlocked as it is.”
A challenge as well as an opportunity
Other than turning back to coal, we are only left with a grandiose plan of energy cutbacks, which will be very hard to accomplish in our industrial country. Let us not forget that heating is another issue on the agenda. Jan Dienstl sees an opportunity in natural gas imported from deposits outside of Europe. “Even that will be very demanding for our country, and is not doable right away,” he points out. According to him, this new energy situation in Czechia presents both a challenge and an opportunity for Sev.en Energy in how to make use of the competencies it has historically built up. Precisely in keeping with the 150-year tradition of the company.
Jan Dienstl, chairman of the board of Sev.en Energy’s Czech power plants.