Government tasks ČEPS with negotiating purchase of NET4GAS, which owns gas pipelines in Czechia

Yesterday, the government tasked state-owned company ČEPS with purchasing NET4GAS Holdings, which operates an extensive system of gas pipelines and delivery stations in the Czech Republic. The company plays an indispensable role in transporting and supplying gas to Czech customers. The Czech Republic is one of the few European countries that does not control this kind of critical gas infrastructure. The government wants to disclose the purchase price after the sale agreement is signed. Industry and Trade Minister Josef Síkela (STAN) said this at a press conference after a government meeting.

NET4GAS operates 4000 kilometers of gas pipelines, five compressor stations and around a hundred delivery stations, including three at the borders. NET4GAS Holdings is half-owned by a consortium of Allianz Infrastructure Luxembourg and Borealis Novus Parent.

According to Síkela, one of the shareholders has already approved the transaction, while the other is expected to approve it on Thursday. The contract could therefore be signed on Friday. ČEPS is buying the company using its own available funds. The first installment of the purchase price will probably be paid in December, after the transaction is completed and approved by the relevant authorities.

„There is no substitute for NET4GAS. If we want to import gas into the Czech Republic, it will be responsible for doing so. We are therefore buying a fundamental building block of Czech energy security,“ said Industry and Trade Minister Josef Síkela.

According to Síkela, two years ago the company would have been worth tens of billions of Kč, and its price could return to that level in a few years.

According to Síkela, NET4GAS’s financial results between 2015 and 2022 show total profit after tax of 27.7 billion crowns. The company also has financial assets worth 6.8 billion crowns, but it has issued bonds worth 18.5 billion crowns and has loans of 14.5 billion crowns maturing between 2025 and 2028. Síkela said the company’s financial situation deteriorated after GAZPROM Export stopped paying for the contracted transit of gas through the Czech Republic. NET4GAS is therefore entitled to payments from GAZPROM Export amounting to several tens of billions of crowns, he added.

„The state is not just buying gas pipelines and compressor stations, but taking over the entire NET4GAS company, including its experienced management and employees,“ Síkela added, saying that, according to assessments by reputable and trusted institutions, the purchase price is fair to the state. This was confirmed by one of the world’s largest banks and a reputable multinational consultancy.

NET4GAS’s pipelines could form part of a hydrogen corridor envisaging the future transport of up to 16 billion cubic meters of gas a year from Ukraine through Slovakia and the Czech Republic to Germany. Significant investment will be needed to adapt the pipelines for hydrogen. NET4GAS has a strong chance of securing financial support from the European Commission for this project, which the Ministry of Industry and Trade is actively supporting in discussions with the relevant authorities.

The contract for the transit of gas from Russia through Ukraine expires in 2024. If it is not extended, countries such as Slovakia, Austria and Hungary would rely on gas supplies through the Czech Republic.

NET4GAS holds the exclusive license to transport natural gas in the Czech Republic. It manages the gas system in emergencies and declares alert levels, thereby deciding on gas supplies to customers. Any problems with NET4GAS’s pipelines would seriously jeopardize gas supplies to the country.

This month, the state purchased RWE Gas Storage for 360 million euros (equivalent to 8.8 billion crowns) through ČEPS. The company owned and operated six gas storage facilities, with a combined capacity equivalent to one-third of annual consumption. A year ago, the Czech Republic also secured capacity at a liquefied natural gas terminal in the Dutch port of Eemshaven, and the government is also negotiating the construction of new gas pipelines.