The Bulgarian Privatization Agency announced that the Russian RAO UES won the tender for two power plants (Varna and Rousse) with a bid of EUR 578.8m and EUR 178.2m respectively. CEZ came second with EUR 287m for Varna and EUR 36 for Rousse. We do not regard CEZ’s failure to win the tender negatively given the excessive prices paid by RAO. In our view there are a number of further privatization projects in the region and Poland. In addition, cash not used for acquisitions could be potentially returned to investors in the form of dividends. The sale of the third power producer, Bobov Dol (for which CEZ did not bid), will most probably be cancelled due to the low price offered and protests by miners.
Separately, CEZ said it proposed an 18% price increase for electricity for its three distributors in Bulgaria to finance further investments in the network, which is significantly above our expectation of a 3% increase. The new prices still have to be negotiated with the regulator. The new price proposal will be formally submitted to the regulator by May 29 and should become effective as of October 1. The regulator can approve the prices as submitted or propose a lower increase.