Czech Republic Infrastructure Report Q4 2009

Czech Republic Infrastructure Report Q4 2009

The Czech Republic is feeling the squeeze of the global economic slowdown, and the country’s energy
sector is one of the few showing signs of life in the latest quarter. BMI’s latest forecast is that
construction industry value will amount to CZK208bn in 2009, down from the CZK211bn we were
forecasting earlier this year. The figure represents a decline from the CZK209bn that the national
statistics office gave as the value of the construction industry in 2008. Construction’s decline is, of
course, in line with the country’s general economic slowdown.
Forecasting beyond 2009, BMI sees construction industry value rising to CZK215bn in 2010, a 1.8% rise
in real terms, and to CZK229bn in 2011, a real increase of 4.3%. We expect growth rates to accelerate to
above 5% in the years after that. Such optimism is based upon the current global economic crisis coming
to an end and recovery taking hold.
The latest quarter has brought signs of global economic improvement, with strong growth now evident in
the major Asian countries and indications in the developed world that economic activity is picking up.
The Czech Republic is more dependent upon the powerful export economy of its neighbour Germany
than it is on China or U.S., but recovery in global economic engines should eventually be felt in Central
Europe.
Our forecast for the Czech economy is that it will contract by 3.1% this year, a deterioration from our
previous forecast of a 2.1% contraction. BMI sees growth of 1.1% in 2010 and 3.2% the following year.
Construction figures early this year were the worst in a decade, and business sentiment has been
extremely pessimistic. But the Czech Republic has few of the systemic risk factors that might discourage
investors, and BMI anticipates a quick rebound. As a key country at the crossroads of emerging
economies and powerful EU economies such as Germany and Austria, the Czech Republic has
infrastructure strengths that some of its emerging neighbours cannot match. But the slowdown is
nevertheless severe. Housing construction was dramatically down in the latest quarter, and one minister
openly suggested that CEZ, the country’s energy company, pay a dividend to the government to finance
infrastructure spending elsewhere. The idea does not seem to be finding traction, but its appearance at all
at ministerial level underlines the depth of the contraction.
CEZ was the driving force behind a disproportionate number of infrastructure initiatives this quarter. The
company announced plans to build two gas-burning electricity generators, scheduled for completion in
2013 and 2015, to replace coal-fired plants that will be closed. CEZ also signed the joint venture deal to
build a Slovakian nuclear reactor. German energy giant RWE also announced two gas pipeline projects.

Executive Summary ...5
Market Overview..7
Czech Republic .. 7
Global Overview ..8
Governments To The Rescue: The Global Surge In Infrastructure Spending 8
Table: Infrastructure Stimulus Plans List ... 9
SWOT Analysis..15
Czech Republic Infrastructure SWOT 15
Czech Republic Political SWOT.. 16
Czech Republic Economic SWOT .. 17
Czech Republic Business Environment SWOT. 18
Major Infrastructure Developments And Key Projects..19
Transport Infrastructure Overview.. 19
Road And Rail Heavy 19
Airports Developing In Tandem With Tourism Industry 20
Natural Transport Networks 21
New And Ongoing Projects.. 22
Airports 22
Railways .. 23
Energy And Utilities Infrastructure Overview 24
Supply To Outstrip Demand. 24
New And Ongoing Projects.. 28
Power Plants And Transmission Grids . 28
Oil And Gas Pipelines... 30
Water 30
Construction Overview .. 31
New And Ongoing Projects.. 32
Residential Construction.. 32
Commercial Construction 32
Major Projects33
Title: Major Projects Table – Transport... 33
Table: Major Projects – Energy And Utilities.. 35
Table: Major Projects – Construction .. 37
Industry Forecast Scenario.. 39
Table: Table Industry And Construction Data. 39
Business Environment ...41
Eastern Europe Infrastructure Business Environment Ratings .. 41
Table: Regional Infrastructure Business Environment Ratings 45
Limits of Potential Returns .. 46
Risks To Realisation Of Potential Returns 46
Table: Design And Construction Rating ... 49
Table: Commissioning And Operating Rating . 50
Table: Overall Project Finance Rating. 52
Macroeconomic Outlook .53
Table: Czech Republic – Economic Activity 55
Political Outlook56
Domestic Politics... 56
Foreign Policy 58
Company Monitor.60
Skanska CZ . 60
Metrostav. 62
PSJ, a.s. ... 64
Country Snapshot: Czech Republic Demographic Data ..65
Section 1: Population 65
Table: Demographic Indicators, 2005-2030 65
Table: Rural/Urban Breakdown, 2005-2030 ... 66
Section 2: Education And Healthcare 66
Table: Education, 2002-2005 . 66
Table: Vital Statistics, 2005-2030.. 66
Section 3: Labour Market And Spending Power . 67
Table: Employment Indicators, 2001-2006.. 67
Table: Consumer Expenditure, 2000-2012 (US$) ... 67
Table: Average Annual Wages, 2000-2012.. 68