Czech_flagUPDATE: Insurer AON/Albert G Ruben has got in touch, saying it has an insurance policy covering producers should the Czech incentive not pay out. AON/AGR bonded two miniseries that shot in the Czech Republic, Dune and Children of Dune, which played on Syfy. “With the insurance, the government incentive should become bankable,” Aon/AGR managing director Fred Milstein tells me.

PREVIOUS: The country began offering its 20% production grant on June 21. The government has earmarked CZK400 million ($19 million) for finance the incentive on a first-come, first-served basis. Although tagged as an incentive for everybody, the Czech grant has Hollywood in its sights. Producers must spend at least CZK15 million ($715,771) locally, with leeway to spend 20% of the budget outside the Czech Republic. The average local Czech film is budgeted at CZK25 million.

Only Hollywood can use the Czech grant at present, because no local banks are yet offering to discount it. Hollywood can take the risk, offsetting the grant against profits. It is unlikely that any of the US indie film banks such as Comerica or Union Bank would lend against the Czech incentive though. And Czech bankers do not have any experience with this kind of almost risk-free lending.

Hollywood movies that have shot in the Czech Republic include Solomon Kane, Wanted and The Chronicles of Narnia: Prince Caspian. Foreign shoots halved between 2003 and 2009.

Producers must have 70% of their budget in place, indicating that the project is a commercial concern. The rebate could take up to three-and-a-half months to be paid from first application though. Any foreign producer thinking about using the grant must either partner up with a local co-producer or establish a Czech subsidiary.

Hollywood producers must pass a Czech/European cultural test. As with other European countries, the Czechs are understood to be quite flexible about this.

George Lucas has told the Czech press that he would consider shooting his Star Wars TV series if there was a foreign incentive. Lloyd Simandl, the Canadian CEO of local service producer North American Pictures, says wryly that any Star Wars sequel passing the cultural test will have R2D2 sporting software that unscrambles the complexities of the EU, “thus causing European culture to expand throughout a galaxy far far away”.

According to the Czech Audiovisual Producers Association, international productions contributed CZK705 million to the local economy in 2008 – down from CZK2.1 billion in 2007.

The European Commission approved the production grant earlier this week. The Czech government first proposed it last autumn.