* Says impossible to invest without state guarantee
* Investment also difficult due to low power prices
* Deal was seen valued at $10-15 billion
* CEZ shares rise, room seen for dividend increase
(Adds U.S. embassy comment)
By Jan Lopatka and Robert Muller
PRAGUE, April 10 Czech utility CEZ
cancelled a tender to expand the Temelin nuclear plant on
Thursday, halting a potential $15 billion project because of low
wholesale power prices and the government's refusal to provide
Majority state-owned CEZ had long argued it could not build
two 1,200 megawatt reactors without support, a prospect that
grew unlikely when a centre-left cabinet took power in January.
The decision, however, does not rule out future Temelin
expansion or affect plans for new reactors at its Dukovany plant
or a site in Slovakia, Chief Executive Daniel Benes said.
"This decision does not mean that we are ending the project
to build (Temelin's) third and fourth units," he told reporters.
"We will continue work on the project, CEZ considers itself to
be a nuclear company and will further develop nuclear energy."
CEZ shares rose more than 3 percent, gaining the most in
more than two weeks, and traded up 2.8 percent at 561.20 crowns
at 1403 GMT.
Central Europe's biggest utility had placed an expanded
Temelin at the centre of its future strategy to help cement its
place as a top electricity exporter. But weak demand and
wholesale prices have made those plans increasingly untenable.
Most political parties back nuclear power, but the cabinet
balked at price guarantees for power generated by the new units.
Wholesale electricity prices have more than halved in the
past five years and CEZ said all power plant investments
dependent on revenue from sales were under threat.
"In the future it will be necessary to cooperate closely
with the state in order to secure further development of nuclear
energy," Benes said.
Toshiba unit Westinghouse and a consortium
including Russia's Atomstroyexport were the sole bidders in the
tender, the country's largest ever energy deal. France's Areva
was earlier disqualified.
A spokesman for the Czech-Russian consortium said the group
expected it would be informed about further steps.
Westinghouse said it was disappointed with the cancellation
and that a new tender would cost time and money.
In a rare statement, the U.S. embassy said its government
was "deeply disappointed" with the cancellation.
"As close friends and allies, we are also concerned about
the signal this may send to U.S. and international investors,"
U.S. Ambassador to Prague Norman Eisen said in a statement.
President Milos Zeman said on Wednesday he favoured opening
a new tender with more bidders. That idea was
backed on Thursday by Industry Minister Jan Mladek, who said new
bidders could include Areva and the South Korean utility Korea
Electric Power Corp. (KEPCO), which was part of a
delegation to the Czech capital this week.
"If there is a new tender - and I firmly hope there will be
one within five years - then we will be obviously happy with
more bidders," Mladek told Czech Television.
Minority shareholder Michal Snobr said the decision removed
the threat of the state pushing CEZ into a loss-making project.
The decision also provides CEZ with more scope on dividend
payments, a possible boon for the government which holds a 70
percent stake in the $14.8 billion utility. The finance ministry
has already called for CEZ to pay out all of its 2013 profit,
instead of its traditional 50-60 percent of profit.
Snobr said that, despite falling profits, CEZ would generate
high free cash flow in the coming five years. "CEZ will be able
to maintain a dividend of around 45 crowns," he said.
CEZ paid 45 crowns in 2011 and 40 crowns for 2012.
Nuclear prospects have dimmed in Europe following Japan's
Fukushima disaster and the fall in wholesale power prices.
The industry was keeping a close eye on the Temelin tender
to see whether the government would follow Britain's lead and
agree to guarantee prices for power from new nuclear plants.
"There is overcapacity in Europe and there is no need for
large baseload generators," said Jan Ondrich, an analyst at
Prague-based Candole Partners, a long-time critic of the tender.
"Power prices will likely stay low given expansion of wind
and solar in Germany, low hard coal and low carbon prices."
Other nuclear projects in central Europe are Slovakia's
completion of the Mochovce plant and Hungary's deal with Russia
to build two 1,200 MW new units at the Paks plant.
CEZ operates two nuclear units at Temelin in southern Czech
Republic and four at Dukovany in the southeast.
(Additional reporting by Jason Hovet, writing by Jan Lopatka,
Michael Kahn and Jason Hovet; editing by David Evans and Tom