Yesterday, as expected CEZ signed a preliminary agreement to purchase a coal power plant Varna (Bulgaria) for EUR 206m and further EUR 100m and further investments of EUR 40m bring the total price to EUR 346m, which is 21% above its original bid. Varna’s installed capacity is 1,260 MW with total availability of 8,700 GWh. The implied valuation based on the total price assumes EV/EBITDA of 28.8 and EV/Installed capacity of 2.04 (in mil. EUR). While we note that the current multiples seem high, we stress the upside potential in the power plant. Varna has been historically operating at a load-factor below 30%, which is expected to increase to 60% for the next 10 years. In addition, the six block are of Russian designed and come from the 60s and 70s hence an upgrade should significantly improved Varna’s efficiency. The power plant should also benefit from Bulgaria’s electricity growth expected to reach 4% annually for the next decade. We are awaiting mode details regarding the power plant to quantify the impact on the acquisition on CEZ’s share price nevertheless it is positive from the strategic point of view. As the acquisition was expected we would consider the new as rather neutral. We reiterate our Hold recommendation.