Forests of the Czech Republic sold CZK 3.5bn in biomass to billionaire Paukner without tender

Forbes reported last year that billionaire Petr Paukner had succeeded in concluding a ten-year contract with the state-owned enterprise Forests of the Czech Republic (Lesy ČR) for the purchase of logging residues. The details were not known at the time, but Paukner himself said it was a “huge contract”. New information was reported by Hospodářské noviny, according to which the total value of the contract is around CZK 3.5bn. The contract was reportedly signed on behalf of Lesy ČR by Josef Vojáček, the now-dismissed chief executive.

Petr Paukner's CB-EKO concluded a contract with Lesy ČR last year for the sale of logging residues. Over the full ten-year term, it is expected to cover approximately 5.5 million m³. Hospodářské noviny puts the total value of the contract at an estimated CZK 3.5bn. The current market price of wood chips stands at CZK 130/GJ.

As with other energy commodities, the price of wood chips has risen significantly over the past year. Following the end of the bark beetle outbreak, and given the shift by many district heating plants from burning coal to biomass, which is considered carbon-neutral under legislation, their price can also be expected to rise in the future.

The purchase price of logging residues for CB-EKO was to be CZK 33/GJ in 2021 and 2022. It should be noted that the wood must first be chipped and transported to district heating plants.

The total cost of transport is then affected by the volume of wood chips transported, which depends on their calorific value. The calorific value of wood chips depends on their water content. Immediately after harvesting, moisture content is usually around 55%. Bulk density is approximately 300 kg/m³ and the calorific value usually ranges between 8-12 GJ/t.  Drying increases the calorific value.

Even so, some experts consider CZK 33/GJ to be too low a price. Others point out that Lesy ČR previously supplied piles of brushwood to buyers more cheaply, or even free of charge. The price is to be adjusted after 2022 according to market conditions.

However, the scale of the deal, under which Lesy ČR sold a large share of its biomass to a single trader without a tender, has surprised market participants. They agree that this is highly unusual and has not happened before. CB-EKO can also exercise an option for a further 10 years.

Million-crown bonuses for Lesy ČR management

Lesy ČR counters that selling to a single trader is advantageous. It also cites the long-term lack of interest in logging residues. The contract for Lesy ČR was signed by Josef Vojáček, who was dismissed by Marian Jurečka at the end of last year over a failed reorganisation of the company.

Despite this, Hospodářské noviny reported this week on high bonuses for the company's top management, which amounted to millions of crowns in recent years. For example, Vojáček alone reportedly received nearly CZK 5.5m in bonuses last year.