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Czech energy company CEZ signs gigafactory agreement with government

Highlights

Minister says state prepared to offer several billion Koruna in incentives

Annual capacity of gigafactory seen between 40-55 GWh

Volkswagen, LG in advanced negotiations as potential partners

The Czech Mininstry of Industry and Trade and the country's dominant power company, CEZ, signed an agreement July 27 over plans to attract a gigafactory for electric car batteries to the country.

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Industry minister Karel Havlicek said in an accompanying press conference that the Czech government was prepared to give direct and indirect state support "worth several billion koruna" to help land the factory in which investment will total at least Koruna 52 billion ($2.4 billion) with battery production capacity of at least 40 GWh/year and up to 55 GWh/year.

The proposed state incentive package was approved by the Czech Cabinet July 26, with notification for approval by the Euroepan Commission expected in 2022.

Havlicek added that CEZ is in advanced talks with Germany-based car manufacturer Volkswagen and South Korea's LG over their separate interest in being major partners in a Czech battery manufacturing consortium alongside CEZ. Other possible partners are also in the running, with CEZ expected to narrow down its choice in the autumn, the minister said.

"We believe the Czech Republic should have at least one such factory," Havlicek said, given the country's role as a major auto manufacturer and one of the most industrialized countries in Europe. The minister added that as a result of ongoing negotiations, the Czech Republic could eventually be chosen as the site for two electric auto battery manufacturing facilities.

CEZ's CEO and board chairman, Daniel Benes, said its role in a future battery manufacturing consortium was "as a basic developer" and co-investor within a larger consortium. He added that one potential favorite site for the future gigafactory would be at CEZ's Prunerov coal power plant site in the north of the country, which has good road and rail links.

Benes pointed out that CEZ is already the main shareholder in a project to develop Europe's biggest lithium mine in Europe, at Cinovec in the north of the Czech Republic near the German border, with the likelihood that locally mined lithium would be used in the Czech battery factory. CEZ subsidiary Geomet has a 51% stake in the mining project, with Australia-based miner European Metals Holdings having the remaining 49%.

Cinovec is estimated to have reserves of 7.22 million mt of lithium carbonate equivalent in the biggest hard rock lithium deposit in Europe and the fourth-biggest non-brine reserve in the world.

"We expect to take the decision whether to go ahead with the lithium mine by the end of next year, mining should start in mid-2025 and reach full production by mid-2028," Benes said during the press conference.

CEZ said in an investment presentation and conference call July 22 that it expects annual capital expenditure in battery-related investments to reach around Koruna 2.9 billion/year between 2021 and 2025 before falling to around Koruna 0.2 billion from 2026 to 2030. It said these investments were based on its 51% stake in the Cinovec mining project and a 10% stake in a battery factory.