Prague - When a small Pacific islanders' country asked the Czech Republic to halt a refit of one of its outdated coal-fired power plants, arguing that it would threaten its existence, the news made international headlines.

But the request by the Federated States of Micronesia earlier this year was really more of a distraction from the real power plays going on in the Czech Republic, officials have said.

Instead, the case is a testimony to domestic political battles before the Czech Republic's May 28-29 general election and to the influence of the country's energy giant, CEZ.

"CEZ is capable of pushing its interests with all political parties. It leads people to say that this is not the Czech Republic but CEZ Republic," political scientist Jan Kubacek, who lectures at Prague's Charles University, told the German Press Agency dpa.

Earlier this week, the energy firm recorded yet another victory.

After numerous delays and one minister's resignation, the Czech Environment Ministry approved the CEZ plan to upgrade the Prunerov II power plant in the country's north - the controversial project opposed by Micronesia and the environmental groups.

"Building these large, inflexible, remotely sited power plants is old thinking. It represents an out-of-date approach to electricity," Walt Patterson, an energy expert at the London-based Chatham House think tank, told dpa.

At the core of the dispute is the planned refit's efficiency and resulting emissions of carbon dioxide (CO2), a greenhouse gas responsible for global warming. Countries like Micronesia fear the climate change as scientists expect melting ice to raise sea levels and flood such islands.

Prunerov II, in operation since the early 1980s, is the Czech Republic's dirtiest power station in terms of CO2 emissions. In 2008, it belched out 6.4 million tons of the greenhouse gas and ranked the European Union's 43rd biggest emitter, the EU data showed.

CEZ has insisted it is installing technology that would greatly ease air pollution in the plant's vicinity and cut its current CO2 emissions by nearly one third, the company said.

The selected technology, however, would annually emit 205,082 more tons - or 5 per cent - of CO2 than the best technology available for such a refit, found an independent study commissioned by the ministry.

The cleanest option has been out of question for CEZ as it allegedly does not make business sense. It would increase the project's 25-billion-koruny (1.3-billion-dollar) price tag by another 7 billion to 8 billion koruny, a company spokesman said.

CEZ only seldomly loses its battles. Last year, the parliament passed a law under which CEZ gets carbon credits worth 60 billion koruny (3 billion dollars) for free, rather than paying for them to the state.

The company's critics say that CEZ is increasingly confident when approaching politicians.

"In general, CEZ was used to, even in matters that were at odds with existing legislation, approaching us and telling us this is the way it will be," former deputy environment minister for the climate, Ales Kutak, recently told Czech Television.

Kutak was fired shortly before the ministry approved the Prunerov renovation. He said that CEZ already tried to get him sacked, chiefly over his critical stance to the refit, a year ago.

Observers note that the Czech cabinets have been schizophrenic in their dealings with CEZ, in which the state owns a majority stake.

Politicians appear to prefer using the highly profitable company as a public finance cash cow, giving up their voters' interests. Their pre-election promises already count upon rising CEZ profits, based upon upwardly surging household energy prices.

"You can either defend the interests of the public against CEZ or you want high profits that often come at the expense of the citizens," Erik Tabery, the editor-in-chief of the Respekt weekly, told dpa.

But standing up to CEZ rarely reaps political reward.

Jan Dusik, a former environment minister who was nominated to the Czech caretaker cabinet by the Greens, resigned in mid-March rather than saying no to the project fiercely opposed by his party.

He was replaced by Rut Bizkova, a former spokeswoman of CEZ's coal-fired power plants, who gave the project a green light, fired Kutak and dissolved Kutak's climate change department.

Weeks before the polls, the ministry was under tremendous pressure to approve the renovation. The refit even made a list of government- backed projects aimed at creating jobs amid the slacking economy.

"The government included Prunerov in its package to fight unemployment," Tabery said. "CEZ gets anything it sets its eyes on."