CEZ agreed to buy Energotrans and sell its 50% stake in Germany’s Mibrag coal mine as the company focuses operations on electricity distribution and heat production in order to gain larger exposure to the stable part of the value chain and lower its above average leverage to wholesale power prices. The German market has become “riskier” following the country’s decision to phase out its nuclear power plants, CEZ added. The companies’ boards approved the deals, CEZ said, without giving the transaction costs. CEZ will sell the Mibrag stake, including a project to build a coal-fired power plant, to its partner Energeticky a Prumyslovy Holding, which owns the other half. CEZ also said that it is going to acquire Energotrans, a company supplying heat from Melnik to Prague.
CEZ’s intention to sell Mibrag was already “leaked” by local newswire, Hospodarske Noviny and reportedly the transaction was only awaiting the approval of Supervisory Board. Therefore we expect to see neutral market reaction. As no details were disclosed it is very difficult to evaluate the transaction. CEZ bought Mibrag in 2009 for € 200m whereas we pencilled in Mibrag into our valuation at its book value of CZK 8,950bn (€ 370m). Energotrans has been a desired assets for CEZ for a long time as it can secure CEZ’ position to deliver heat to Prague. Both transactions are consistent with CEZ’s plans of realigning its geographical footprint and focuses on its domestic market as well as of decreasing its gearing to the volatile wholesale power prices.