As we expected, the Anti-Monopoly Office is analyzing whether CEZ’s purchase of the state’s stakes in regional distributors effectively represents a subsidy to the state-controlled company. The AMO’s inquiry is mainly based on the purchase price CEZ would pay for the controlling stakes, which, at CZK 32 bil., is significantly below what a comparable transaction in Slovakia implies (CZK 60 bil.), and what privatization bids for the distributors from last year imply (CZK 50 bil.-60 bil.); our valuation of the distributors implies CZK 40 bil. for the stakes. The AMO may demand the transaction to be halted completely, or that a new valuation of the distributors be performed.
Separately, Bohuslav Sobotka, a top candidate for the finance minister in the new government, yesterday told Reuter’s that CEZ privatization “could wait”. Although a privatization delay would not be encouraging for the stock, the comment may suggest that a new Cabinet would firstly push sector restructuring (CEZ acquiring the state’s stakes in regional distributors as per the above) to shield CEZ from foreign competition. Should the plan be accomplished, it would easily out-weigh a privatization stall in terms of stock value.
Jiri Soustruznik