October 1, 2009 / 5:25 PM / 10 years ago

UPDATE 1-CEZ to quit Kosovo tender unless terms improved

* CEZ ready to quit Kosovo power plant tender

* Will stay in if government improves conditions

(adds details, background)

PRAGUE, Oct 1 (Reuters) - Czech power group CEZ CEZPsp.PR will pull out of a tender to build a 2,000 megawatt coal-fired power plant in Kosovo unless the government sweetens the deal, a company official said on Thursday.

Vladimir Schmalz, CEZ’s head of acquisitions, said the company had not yet dropped out — contrary to media reports in Kosovo — but was not satisfied with some of the legal and financial conditions involved in the 3.5 billion euro ($5.10 billion) tender.

He did not give specific details.

“We are still in the tender but at the given conditions it is not attractive for us,” he told Reuters. “If they create some decent conditions, we will certainly look at it. But we hope the conditions will be improved.”

CEZ, which carries a low debt load, said last year it would look at expansion opportunities beyond its core region due to a lack of takeover targets in its traditional markets.

But Schmalz told Reuters last month that due to the economic crisis, which has tightened access to financing, CEZ is now more cautious about acquisitions and has put on hold expansion plans in regions like Russia, Kazakhstan and Vietnam.

The same is true of Balkan countries like Montenegro and Bosnia, though Schmalz noted that CEZ would not exclude good opportunities even in regions it viewed as riskier.

The company’s main focus at the moment is on its core market in central and south-eastern Europe, namely the Czech Republic, Slovakia, Poland, Hungary, Romania, Bulgaria, Serbia, Germany and Turkey.

For the tender in Kosovo two companies have so far pulled out of the race, moves that raised concerns about the flow of badly needed foreign investment in a country plagued by power outages.

Italy’s Enel (ENEI.MI) and Greece’s Public Power Corp (DEHr.AT) Sencap and another group including CEZ and AES (AES.N) (AES.N) of the United States are still in the running to build the plant.

The country which has Europe’s second largest coal reserves suffers power cuts due to outdated capacity and a lack of investment over the past 20 years. (Reporting by Jan Korselt and Michael Kahn; editing by james Jukwey)

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