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UTILITY WEEK | 14Th - 20Th NovEmbEr 2014 | 21 Finance & Investment Analysis G iven the biomass subsidies lavished on Drax, it looked as though its York- shire neighbour, the 1,960MW coal- fired Eggborough plant, was destined to close next year. From le-of-field, a saviour seems to have emerged late in the day, in the form of the Czech-based Energeticky a Prumyslovy Hold- ings (EPH), which has struck a deal, sub- ject to EU approval, to acquire Eggborough, which currently generates 4 per cent of the UK's power. Few details have been disclosed, not least any payment terms. Eggborough seemed to have run out of options, so it is unlikely that any payment will have been substantial. For Eggborough's 300-strong workforce, the news is clearly positive, especially in the light of EPH chairman Daniel Kretinsky's enthusiasm for coal firing there – absent, of course, a mid-term biomass conversion offer that proves financially irresistible. Although CEZ remains the dominant energy player in Eastern Europe, EPH is expanding from its Prague base. EPH is privately-owned, effectively by Patrik Tkac, an investor, and Kretinsky. It employs some 8,400 people. Its core operations are the distribution of gas in Slovakia and shipping gas from Russia; it also has an electricity generation capacity of 1,750MW along with various electricity and heating businesses in the Czech Republic In Germany, EPH owns Mibrag, a large coal mine, and the nearby Schkopau power plant. In the 1990s, both were partly owned by the privatised PowerGen and subse- quently sold to NRG Energy in the US. EPH's latest available figures con- firm earnings before interest, tax, depre- ciation and amortisation (Ebitda) of about €1.3 billion. The Eggborough deal represents EPH's first steps in the so-called liberalised UK energy market; further UK deals may follow. At a general level, a combination of cheap coal, a weak carbon price, barely competitive gas-fired plant and various technical faults at some nuclear stations have provided the remaining UK coal-fired plants with an Indian summer. Indeed, despite all the environmental hue and cry about emissions, coal-fired plant is now the largest contributor to the UK's elec- tricity output. Buying the Eggborough plant from a com- pany that is clearly hard-pressed to continue financing it is understandable. Furthermore, with new-build investment stalling, little additional base-load capacity will material- ise for some years. Although EPH has been tight-lipped about this deal – as a privately-owned com- pany, it has every right to be so – Kretinsky has said: "The acquisition of Eggborough power plant reflects our genuine inter- est in the UK market and our apprecia- tion of the highly competent management, skilled employees, technology and location of the plant." Like a stressed estate agent seeking to sell a property, the location aspect is emphasised. Kretinsky's team will have rigorously assessed Eggborough's strategic position on the grid, especially in the context of an elec- tricity supply system currently operating on an ultra-low plant margin. Aer all, Eggborough is not at the end of a remote peninsula but in the heart of North Yorkshire. Furthermore, it has top-class grid connections. For now, assuming EU approval, Eggbor- ough's output is likely to remain coal fired. Its former owners will have envied Drax' consummate political ability to attract prodi- gious biomass subsidies. Kretinsky will, no doubt, pursue the bio- mass conversion route, albeit realising that the Treasury has recently imposed a ceiling on renewable generation subsidies of £7.6 billion by 2020/21. Importantly, Eggborough has pre-qual- ified for next month's capacity auction, which will take place under the auspices of National Grid, in respect of the 2018/19 gen- eration requirement. With an estimated base need of 48.6GW of capacity – recently reduced from 50.8GW – Eggborough is odds-on to be called up. Just 62.5GW of capacity actually pre-qualified – the less well-sited coal-fired Longannet plant did not. More generally, given the many fossil-fuel plants currently for sale – officially or other- wise – EPH may be planning to expand its UK base further. Centrica's trio of combined cycle gas tur- bine plants are the most prominent, but Eon and RWE may well be interested in plant dis- posal options. Both German companies have expressed dissatisfaction about their financial returns from their UK plant and may well listen to potential offers. Nonetheless, although EPH's 2012 Ebitda of about €1.3 billion is substantial, it is relatively modest when set against the €16.8 billion Ebitda that EdF reported last year. Consequently, any future EPH plans to expand in the UK will inevitably raise fund- ing issues. Of course, given the non-disclosure of the acquisition terms for Eggborough – or whether any material tax advantages accrue – it is difficult to be more specific. But EPH is a new kid on the UK generation block and, with GdF Suez and others, may play a more prominent role in the future. Eggborough wins late reprieve Czech firm EPH has struck a deal to save the Yorkshire plant, which was facing closure next year. Utility Week considers what other ambitions EPH may have in the UK. Energeticky a Prumyslovy Holding: Czech it out • EPH includes 40 energy companies in the Czech Republic, Slovakia, Germany and Poland, employing 8,000 people. • The third largest extraction company in Germany • The second largest Czech electricity producer • The third largest extraction company in Germany • Key shipper of Russian natural gas to the EU • The gas industry leader in Slovakia