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December 7, 2018 www.intellinews.com I Page 7
sufficient bank guarantees and the ability to offer the lowest price, are able to compete for state contracts.
“There are no longer many smaller forestry com- panies in the Czech Republic; the capital-rich market leaders have swallowed them. Most com- panies simply weren’t able to compete with such low prices. If there were criteria for awarding state contracts other than price, there would be more diversity and higher employment in the regions,” Havel said.
Forestry lures the sharks
Before the rules were changed for tenders for working with the state forestry company, Babis and his Agrofert holding had nothing to do with forests. On more than one occasion, he publicly denied his interest in a field he didn’t understand. But that soon changed. Witnessing the effective takeover of the state-owned forests by private companies, Babis would not be Babis if he didn’t try to get a piece of the pie.
After some intentionally misleading public an- nouncements, in 2011, Agrofert bought Wotan Forest, the second largest forestry company in the Czech Republic at the time. Later the same year, it added Uniles, a small forestry company from the north of the country, to its portfolio. It is this small, regional company that soon proved to be the biggest winner of Czech Forests’ new tender- ing system.
Before the takeover by Agrofert, Uniles wasn’t
a particularly large subcontractor for the state. From 2008 until 2012, Uniles received an annual average of $4mn worth of contracts from Czech Forests. In 2013, that number grew to almost $10mn. This year, Uniles has become the single largest subcontractor of Czech Forests with contracts worth nearly $30mn.
Propped up by the financial and administrative might of one of the Czech Republic’s largest com- panies, Uniles suddenly found itself in a perfect position to take advantage of the new tendering
system. It could afford to offer the lowest price for its services, receiving an abundance of state contracts in return. Uniles has quickly become one of the leading forestry companies in the Czech Republic. The average yearly revenue
of the company since its foundation until 2010 was just below $18mn. In 2015, it was almost $123mn.
According to the company’s CEO Petr Jelinek, who until his resignation in March this year also worked as an adviser to the former minister of agriculture Jiri Milek from Babis’ party ANO, the notion that Uniles has somehow profited from the new tendering system of Czech Forests is misin- formed.
What actually happened, he claims, is that the company reshaped its business model after the consolidation of Agrofert’s forestry holding. This resulted, according to Jelinek, not in an increase of state contracts awarded to the company, but a decrease.
“In 2011, Agrofert bought two forestry companies that were doing the exact same thing. After the takeover by our parent company, the decision was made to divide business operations between the two companies. Uniles took over the complex forestry contracts, and Wotan Forest focused on forest nursery and sawmill production,” Jelinek explained during an interview with bne.
“If you look at the data about our contracts from Czech Forests, you will see that Uniles has less state contracts now than the two companies had before the consolidation in 2011. It’s simply not true that we have somehow profited from the new system.”
Although Jelinek is right about the consolidation and the “division of labour” between the two com- panies, the information concerning the amount of contracts is less accurate.
According to the data provided to bne by Czech Forests, the combined value of contracts awarded