European Comission (EC) proposed to cut CO2 allowances for selected industries by 11% on average in 2013-2020 period from 2008-2012 period. The draft legislation should cap allowances at an average 1.87bn tons of CO2 a year, compared with 2.08bn during 2008-2012. The draft is slightly more strict than the initial rumours of 1.89bn tons. EC expects that the electricity price may increase by 10% to 15% by 2020. As a result of auctioning process, EC expects revenues between EUR 30bn and EUR 50bn in 2020 and this assumes a CO2 permit price of EUR 39/ton. Our view: As we mentioned yesterday we don’t see significant downside risk for CEZ as we believe higher price of CO2 credits which could result from the auctioning process should be reflected in the price of electricity. The final effect for CEZ will depend on the split of its generation assets and their efficiency comparing to the competition. CEZ produces some 36% of its electricity in the nukes, while rest is currently generated in coal power plants and minority in wind power plants. This proposal could result in different approach towards retrofit or construction of new coal power plants, but we believe it should not be that different as CEZ was counting with CO2 credits between EUR 30 and EUR 40 per ton in their projections.