CEZ reportedly bids CZK9bn for SD

Reuters reported quoting a source close to the transaction that CEZ is reportedly paying CZK 9bn for the state’s 56% stake in Severoceske doly (SD). Should the information prove correct and the state accepts the bid, we would view the acquisition as positive. We estimate the 56% of SD to be worth CZK 10bn. The value of SD would increase above CZK 10bn for CEZ should the current mining limits be broken and CEZ is able to replace 4,500MW of coal power plants (the most bullish scenario). The acquisition of SD is strategically important for CEZ as it would secure a stable coal supply and price. The stability is also important in relation to CEZ’s coal power plant capacity replacement plan.