A harsh assessment of government aid. Late, bad and not enough, say companies

A harsh assessment of government aid. Late, bad and not enough, say companies
A harsh assessment of government aid. Late, bad and not enough, say companies

Due to expensive energy, the production of one glass bottle in Sklárny Moravia now costs 80 crowns, which the market no longer accepts. The company has therefore announced that its glass furnace will go out of business. Will the announced government aid make a difference?

“So far, there are several possible interpretations that no one has specified. But it was said that the larger customers could split 30 billion. I understand that not everyone can make it, but when I break it down, we’re at four million per company. If I speak only for us, for us it is ten percent of the amount on the invoice in a single month,” says Radim Bondy, sales director of the glass factory.

“It sounds great as a political gesture, but the reality is different. At the same time, it is speculated that these will be companies with an operating loss, which would harm those to whom no one lends to cover the operating loss,” adds Bondy, adding that the companies are still waiting for the parameters to be clarified, or for further assistance, which should be known on September 30.

Companies are waiting for clarification

At the moment, the government promises that large consumers of electricity and gas will be able to draw support due to high energy prices. 30 billion crowns are prepared for the program, and the Ministry of Industry and Trade will prepare a call by the end of the year. For energy-intensive companies, the maximum support will be 200 million crowns, for others a maximum of 45 million.

“Even if this program is not ideal either, it is significantly delayed and due to the restrictions set by the European Commission it may not be sufficient support for many companies, so we believe that it will at least partially provide help to the companies most affected by energy prices already this year,” says Jaroslav Hanák, president of the Union of Industry and Transport of the Czech Republic.

However, according to the companies that contacted SZ Byznys, the help is too little.

For example, businessman Jiří Hlavatý’s Royal Court Juta is literally being crushed by expensive energy. Because of them, the company is unable to compete with foreign manufacturers, and after starting layoffs, it also closed one of its key plants on September 14, leaving 140 people at home with sixty percent of their salary.

“We don’t have orders, so there is no work for them,” explains Hlavatý. That is why he was impatiently waiting to see how the state would help companies. However, the assessment of government aid is not very positive.

140 people are sitting at home. There is no work for them

“We don’t know the exact conditions, but we rather wanted to cap the prices. I don’t know if we can get help, but if the consumption of 630 MWh is supposed to be the limit for an energy-intensive company, then we do not meet this limit. But who decides that this particular consumption is key?” asks Jiří Hlavatý, noting that his biggest competitor in Poland pays one-third the prices.

“According to the government aid, I will receive perhaps 45 million crowns, but I will pay 600 million more for electricity,” Hlavatý points out. It also calls for the immediate activation of kursarbeit. “Now I’m doing my best, we miss kursarbeit and it’s automatic in many countries. It needs to be activated immediately – and that didn’t happen,” he adds.

How will the state help companies with expensive energy?

  • Companies will be able to apply for support depending on whether they are energy-intensive businesses (those where energy costs exceed three percent of the production value).
  • Energy-intensive businesses can receive up to 200 million crowns, others up to 45 million.
  • They must demonstrate that they are running at an operating loss, with at least half of that loss coming from energy costs.
  • Other companies will be entitled to help if their energy costs increase at least twice. The period from February 1 to December 31 of this year will be compared with the average energy costs of last year.
  • The ceiling introduced by the government on September 12th applies to all entities connected to the low voltage level, including small and medium-sized enterprises with an annual consumption of up to 630 MWh. The call for these companies will be issued by the end of this year.

Source: Ministry of Industry and Trade

Unfair and non-transparent

Even in another energy-intensive field – brick production – they do not see government aid optimistically.

“I think the prices should have been capped for the industry as well. It’s non-transparent like this and it seems to me that it’s too late to support companies that end up making a loss. I was pleasantly surprised, nothing actually happened,” says Jan Smola, CEO of Heluz. His company is already counting on a drop in sales, and therefore shutdowns.

There is also a question from glass factories about capping prices, but mainly they would like to better explain the support.

“We as a group will not make a loss this year, but within the holding we have a glass factory that will be making a loss – will it get support?” asks Leon Jakimič, owner of Lasvit, for example. The company has an advantage in that it sells to end customers and can reflect cost increases in prices. “However, most glass factories in the Czech Republic cannot afford it and have major problems,” adds Jakimič.

Electric motorcycle manufacturer Kuberg, which is subject to a ceiling for energy supplies, is not satisfied either. The government introduced it on Monday, September 12, and it applies not only to households, but also to companies connected to the low voltage level with a consumption of up to 630 MWh.

“Current government capping is at around this level of six times our previous gas price. The good news is that we no longer have to worry about further significant price increases in the future, but the bad news is that we do not consider this price ceiling to be a good and competitive price in the long term,” says company owner Michal Kubánek.

According to him, the government’s capping of energy prices, which are several times the usual prices before 2021, can be understood as a possible insurance policy against the financial collapse of buyers of spot products, but the government did not solve the problem of extremely high prices itself.

Store failures won’t stop it

At least 60 village shops have closed since the beginning of the year due to high energy prices. And the situation of the others will not improve even after the announced government aid.

“Government aid will definitely not stop this decline,” says Pavel Březina, head of COOP, which covers 2,400 stores, mostly in smaller towns and villages.

“For now, we are having it analyzed, but it is already clear that nothing will change about the fivefold increase in energy prices. Neither for people nor for stores. Moreover, it goes through the entire food chain,” explains Březina. In addition, he points out that another wave of food price hikes is hitting stores due to energy.

Even if the owners of some stores, as sole proprietors, reach the capped energy costs, another hundred stores will close by the spring of 2023, according to Březina.

“This ceiling has no chance to change anything. The economy simply doesn’t work anymore,” he adds, adding that the purchasing power of rural stores will also decrease significantly. “For older people, the amounts of advances will be the same as their pensions. People will automatically limit their purchases because they won’t be able to handle it,” concludes the head of the COOP network.

The article is in Czech

Tags: harsh assessment government aid Late bad companies

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