CEZ’s French peer, Electricité de France (EDF), was partially listed (at around 15%) on Euronext on Friday: The IPO price was EUR 33 per share; however the stock went down by 6% to EUR31 per share after the listing. EDF’s main financial indicators, as of 22 November, are: P/E 25.5, P/Sales 2.2, EV/EBITDA 11.1 and EV/Sales 3.3. We consider the EV/EBITDA multiple to be the most relevant, as it reflects the company's operating efficiency as well as capital structure. If we recalculate CEZ’s price with EDF’s multiple of 11.1 for EV/EBITDA, we end up with CEZ’s price at around CZK 773. This is in line with our Buy recommendation on the stock.
The Czech Republic will probably receive fewer CO2 allowances for periods 2008 and 2012, compared with current plan. This should not affect CEZ, and the lower number of CO2 allowances relate to the closure of some coal-fired capacities after the current CO2 allocations were made.