Will Strnad's CE Industries Gain Control of Liberty Ostrava Through Electricity Distribution?

At the beginning of February, the media reported that the CE Industries group of businessman Jaroslav Strnad was discussing the possibility of entering Liberty Ostrava. This company is currently in crisis and had to suspend production due to electricity debt. It has been speculated that Strnad's interest in the site is not yet certain.

Although no agreement has been reached yet on the possibility of Strnad buying Liberty Ostrava, he has now come up with an interesting way of inserting his foot into the premises (into the door) unobtrusively, with the help of a state authority that is supposed to be completely independent by law—the Energy Regulatory Office (Energetický regulační úřad, or ERÚ).

To explain how Strnad is supposed to do this through friendly entities, we must first look at how the electricity supply and distribution works at the Liberty Ostrava site. Although this company has now lost its electricity supply from the producer, Tameh, to which it owes approximately CZK 2 billion, Liberty Ostrava still holds a license to distribute electricity in the so-called local distribution system, which is defined by the premises in Ostrava Kunčice. Thus, electricity supplies continue to flow to selected companies on the site—specifically to those companies that purchase energy from suppliers other than Tameh.

Last week, ERÚ announced that it was concerned about the collapse of the power supply to the companies in the Liberty complex and initiated a procedure that would result in the local distribution system being taken over by the company of billionaire Pavel Hubáček—UCED Vítkovice from the Creditas group.

"The precautionary initiation of the procedure is in the interest of customers to avoid interruption of supplies if the situation suddenly deteriorates. However, the fact that the procedure has been initiated does not mean that measures beyond the license will actually be imposed. If the situation is resolved and the licensed entity does not cease its activities, ERÚ has no legal grounds to impose such a measure," Michal Kebort, spokesman for the energy regulator, told seznamzpravy.cz.

It is not clear on what basis ERÚ is considering imposing an obligation beyond the scope of the license on UCED Vítkovice and to impose such an obligation on UCED Vítkovice, ERÚ must revoke Liberty Ostrava's license (or at least initiate proceedings to revoke the license). The reason given by ERÚ is that Liberty Ostrava has not secured the energy to operate the LDS. What is worth noting, however, is that there is a long history of cooperation between the Creditas group, which includes UCED Vítkovice, and the CE Industries group, which wants to buy Liberty Ostrava.

So, what is the relationship between Creditas, which owns UCED Vítkovice and is owned by Karel Hubáček, and CE Industries, which is owned by industrialist Jaroslav Strnad?

The most visible evidence of the collaboration is the fact that both groups are based in the same building in Prague's Florenc district. The building belongs to the Olomouc financier Pavel Hubáček, owner of Unicapital Group and Banka Creditas, and one of the floors is occupied by the industrialist Jaroslav Strnad and his holding CE Industries.

It was Hubáček's Creditas group that helped Jaroslav Strnad in the past to finance key acquisitions. Among other things, they also coexist very closely in Ostrava's Vítkovice. In 2021, the company Skatlop of the Olomouc businessman Karel Hubáček auctioned the Ostrava Vítkovice Heavy Machinery (VHM) for CZK 1.2 billion, i.e., for three times the asking price. The auction sold as a single unit of the complex on more than 50 hectares of land, including huge halls, machinery, materials, employees, and know-how.

Before Skatlop, the majority owner of Vítkovice Heavy Machinery was Strnad's holding, CE Power Industries. An insolvency petition against VHM was filed in 2020 by the management of that company. The company had been losing money for a long time and was unable to pay its obligations, especially for energy supplies.

However, Strnad did not completely disappear from Vítkovice with the sale of VHM—his two companies, Vítkovice Railway Repair and Vítkovice Transport, are still based in Vítkovice. It should be noted that the owner of Skatlop, Karel Hubáček, is a cousin of Pavel Hubáček from the Creditas group.

As can be seen, Creditas, the Hubáček cousins, and CE Industries have very close relations with each other—they share buildings and buy each other's companies. And they even promote each other. On its website, CE Industries glosses over last year's All for Power 2023 conference and specifically praises the fact that the entry of UCED (CREDITAS bank) into the major energy sector has brought a breath of fresh air after years, especially in the area of focus. CE Industries even acknowledges here the existing collaboration with UCED, seeing it as a great opportunity for CE ENGINEERING, and we believe that this collaboration will create room for the use of our sister companies such as Chemcomex and MICO.

And this is not Strnad's only collaboration with UCED. In 2021, UCED Energy entered into a contract with CE Industries for the delivery of the construction project "Greening of the thermal management in the Sigma Hranice campus," which was to reduce energy costs along with emissions.

Does anyone else have any doubts that the control of the local distribution system at the Liberty Ostrava site by a company belonging to a long-time ally of Strnad is the imaginary foot in the door to controlling the whole of Liberty Ostrava?

If ERÚ decides that it will be UCED Vítkovice that will operate this local network, then it gives Strnad's associate a great deal of power over the fate of the other companies that continue to operate on the site despite the interruption of production. But what this would mean in reality, we will tell in the next part of this series.