The ‘Czech Sphinx,’ who loves dying industries, is now eyeing Royal Mail

The 4,200-acre Profen mine, located 45 minutes southwest of Leipzig in east Germany, stretches to the horizon. The Nazis opened the mine in 1941, forcing hundreds of residents to move from six villages. The mine produces around eight million tonnes of brown coal, which is highly polluting.

Environmentalists are outraged by the mines, including Profen.

The company is part of Daniel Kretinsky’s sprawling empire, a billionaire known as the “Czech Sphinx”, for his complex investment style.

Royal Mail’s parent said that it “minded” accepting Kretinsky’s £3.5 billion offer

Kretinsky, in a rare 2015 speech to Prague students, said: “We want make money in dying industries because we believe they will die slower than what the general consensus believes.” Over the last decade, Kretinsky has built one of Europe’s largest energy groups. It is largely comprised of fossil fuel interests. It’s been called a bet that paid off spectacularly against the green shift

He has acquired a large share of retail, logistics and media operations in the Czech Republic.

Although he prefers working privately and behind the scenes, he made headlines last week when he took an important step toward buying the Royal Mail. Keith Williams, chairman of International Distributions Services Inc. (IDS), Royal Mail parent company, said the company was “minded” in accepting Kretinsky’s £3.5 billion offer.

Both sides of the Westminster divide want assurances that UK residents will not lose their postal service if the Czech succeeds. The politicians also demand guarantees that the company’s assets will not be stripped and its massive pension scheme won’t be raided.

Whitehall sources privately admitted that politicians have little power to stop the takeover. Kretinsky cleared a national-security investigation in December of last year when he increased the stake he held in IDS beyond 25%.

His desire to acquire an asset so important to the nation will lead to further questions about his empire, one that goes beyond his Hampstead 15-bedroom mansion which he rented to Justin Bieber in 2016 for £27,000 per week.

Kretinsky’s UK investments include shares in Sainsbury’s, West Ham United and his north London mansion

Kretinsky, son of a judge, professor of computer sciences, and a former East German coal miner, bought the Profen mine from the Czech state-owned company CEZ Group as part of an agreement to buy Mibrag, which was the first East German miner of lignite to be privatised.

Kretinsky teamed up after that 2011 deal which added to his coal assets in Poland with Petr Kellner’s daughter, Kretinsky’s longtime girlfriend. In 2016, the duo purchased five coal mines in Saxony, Brandenburg and four power stations from Vattenfall. This Swedish state-owned firm.

Environmentalists were appalled by the deal, which created LEAG, Germany’s second largest producer of coal-fired electricity. Vattenfall claimed the deal would make it a cleaner business, but protesters demanded that the plants be closed and not sold to private investors.

Kretinsky’s camp is keen to point out that the billionaire did not receive a single euro as dividends from LEAG. They say that the company reinvests up to €10billion (£8.5billion) in renewable sources of energy such as wind and solar.

Over the years, Kretinsky added renewable energy sources and gas to coal. He has more than 70 assets in Europe including the Langage and South Humber Bank Gas Plants in the UK and the Lynemouth Biomass Plant in Northumberland. The Czechs have reportedly invested around £450 million in the biomass plant.

The most controversial project is Eustream. It’s a 2,273km long gas pipeline from Russia to western Europe that crosses Slovakia. This investment is believed to be the reason for the allegations made by Jonathan Reynolds, shadow business secretary in 2022, about Kretinsky’s “links to Russia” in a letter he sent to Grant Shapps at the time.

Kretinsky, along with Macquarie, an Australian financial giant, jointly own a 49 percent stake in Eustream. The company was acquired from Germany’s E.ON Ruhrgas & France’s GDF Suez for $2.7 billion in 2012. Slovak government, which is in turmoil following the murder of Prime Minister Robert Fico, holds a majority stake, but Kretinsky enjoys management control.

Eustream, which links Ukraine to the east with the Czech Republic to the west is one of Europe’s major gas arteries. Even though President Putin’s gas dependence has decreased significantly since his invasion of Ukraine on February 20, 2022, EU countries still have not weaned themselves off it. Fitch analysts said Eustream’s annual average run rate had dropped from 44 billion cubic meters between 2015 and 2020 to 13.5 billion cubes — 85% of which came from Kremlin controlled companies. They added that “Russian Gas is Still Flowing”.

Kretinsky’s sources insist that he does not contract directly with the Kremlin controlled Gazprom, but only co-owns this pipeline. Trading companies purchase Russian gas, and then rent pipeline capacity to deliver it. The Czech camp compares it to having a highway where Russian trucks use an intermediary for their journey. The majority of Russian gas that travels through the Eustream pipe is believed to finish its journey between Austrian and Italian.

Sources close to Kretinsky have pointed out that he publicly condemned Putin’s conflict with Ukraine, not least due to the fact that he has relatives who are Ukrainian. Sources close to him said that Kretinsky’s share of the spoils is small, about €60m last year compared to a €7.3b profit. However, €60 for transporting primarily Russian gas is still €60.

Kretinsky has not only forged business interests with Fico’s blessing. In 2013, Fico’s government approved Kretinsky’s company to enter the semi-state energy sector in Slovakia. The deal was highly lucrative, and led him declare 2013 a “leapfrog” year for his business empire.

Kretinsky acknowledges that he can’t maintain his low profile forever

Kretinsky’s media interests are a third area of contention. International media giants, after the financial crisis hit advertising revenues for Czech broadcasters and press, sold their operations in the country to powerful local businessmen. This process was dubbed the “oligarchisation” of the media. Analysts and journalists said that their goal was to gain power. Andrej Babis became Prime Minister for one of them.

Kretinsky and two Slovak entrepreneurs jointly own Czech Media Invest. The company has radio stations, websites and newspapers in the Czech Republic. It also owns the rights to Elle magazine and the weekend celebrity magazine France Dimanche in France.

Kretinsky purchased a stake of Le Monde in 2018, provoking a backlash among journalists. He then sold the stake to French billionaire Xavier Niel, last September.

Many journalists have left their jobs to create their own websites to maintain their independence after the acquisition of media brands in their home country by wealthy investors. Marius Dragomir of the Media and Journalism Research Center who studied the Czech media said, “We found the involvement of his media to be extremely problematic.” His business dealings were very opaque.

The Centre for Eastern Studies has claimed that Kretinsky’s media consistently oppose climate protection concerns, despite the fact that central and eastern Europe is more conservative in its stance on global warming. One of the billionaire’s ally’s said, “He is more pro-climate than most in the Czech Republic.”

Kretinsky’s team stated that he adheres to a strict policy of not interfering with editorial decisions. It may be true, but Kretinsky seems to avoid putting himself in a position of uncertainty when he speaks out. In his first newspaper interview with Kretinsky, he said that the “low-profile scenario” would not be possible.

This low-profile seems even more impossible now that he is preparing to purchase Royal Mail. He is convinced that investing in Royal Mail away from the spotlight of the stock market will pay off, and he’s willing to take a number of legally-binding commitments to ensure the future of the firm. Politicians have demanded “ironclad” commitments. The question is how strict they will be and for how long.

Kretinsky, after all, is a “man who makes money in dying industries”. The British will hope that he doesn’t see Royal Mail this way.