15 November 2010


Desperate solar investors protest against retroactive measures imposed by Czech government

Introduction of „unique“ solar tax

The solar tax will be charged from FIT revenues to be paid to solar investors who commissioned their solar plants with installed capacity over 30 kWp in 2009 and 2010 respectively. After strong protest s from local investores, the deputies decided to limit a duration of the solar tax to only 3 years (2011-2013). The tax will vary from 26% (FIT for sold power to grid operators) to 28% (so-called Green Bonus payments for electricity produced and consumed in the consumption place).


Dramatic Consequences for investors

Despite the fact, that the tax should be valid only for 3 years (2011-2013), it will severely hurt many solar investors whose projects  are financed via bank loans. Many of them will not be able to restructure their loans and will go bust.
It is indeed a unique and unparallel action taken by the politicians within a member state of the European Union. "Retroactive taxation is a flagrant violation of the original rules of the game which can hardly be justified,"   Jakub Hajek, attorney of the Prague-based law firm Glatzova & Co.  said.“If this happens the state will be swamped in arbitration suits.”


Loss of jobs

The new amendment will also jeopardise more than 5,000 jobs which the photovoltaic industry has created, according to Frantisek Smolka, the President of the association whose members are investors in photovoltaic plants.
Moreover, it will harm the future developement of the solar industry as both investors and businessmen will be severely damaged.

In a big rush

Both The Czech cabinet  and the Czech politicians are in a big rush with the preparation and approval of this plan to establish the tax as part of an amendment to the bill on support to production of energy from renewable sources. The bill would then have to be approved by the lower house by mid-November 2010.
The reason for the legislative rush is simple. The Czech politicians are afraid of the possible intervention from the side of European Commission. They know what has recently happened in Spain and therefore they do it in a very secret and prompt manner.

The new legislative measures must be effective from  January 1, 2010. It has been prepared without a due legislative procedures and without any talks with representatives of local solar industry.


Other retroactive measures

The Czech Governement has also approved other legislative measures (many of them are of retroactive nature) including:
• End of tax holildays for all operators of PV plants to be applied retroactively
• Change of write-off scheme (its deterioration) applied retroactively to all PV plants
• No more state support for off-grid systems from 2011
• FIT payments limited to only rooftop PV systems with maximum installed capacity of 30 kWp

Dangerous outcomes
The House of Deputies (the lower house of the Parliament) will likely pass this new legislation next week which will stand for a big threat but not only for solar investors but also for the state itself.

The proposed measure is the largest expropriation of private property in the Czech Republic since 1948. If implemented, the 26% tax on revenues will have the following results:
• Law suits and arbitration proceedings against the Czech Republic amounting to several EUR billions
• Loss of investor confidence in the Czech Republic – a disaster for future economic development of the country
• Credit rating: a potential reduction in the country’s rating leading to higher funding cost of the state budget deficit
• A higher risk premium for all Czech assets including listed Czech companies, in particular in the energy sector.

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