According to Reuters citing CEZ’s finance director Jan Brozik, CEZ decided to halve planned medium-term eurobond issue from EUR 4.0bn to EUR 2.0bn. The size of the total sale is flexible and first tranche may be sell as early as 4Q2007 depending on the results with investors. CEZ plans to use the proceeds to finance acquisitions and possibly including a 10% stake in .
CEZ announced plans to issue medium-term Eurobond at the end of May this year to supplement domestic bond issue of CZK 7bn, which was placed in August with a fix coupon of 4.3% p.a. CEZ’s capital structure is worse then its western peers, when D/E ratio stood at 20% at the end of 2006. We see the decision of CEZ to halve the bond issue slightly negatively as the desired D/E ratio of 40-45% may not be reached, having negative effect on WACC by some 25bps and subsequent effect on the fair value estimate by approx. CZK 40. Slashing down the volume of the issue could be consequence of less buying opportunities in the CEE and SEE region, which are being prolonged or mulled.