The Slovak Cabinet is expected to make a final decision on the SE tender winner today. Note that Slovak Finance Minister Pavol Rusko recommended Enel as the tender's winner and said that he believes the Cabinet will agree with his recommendation. Enel offered EUR 840m while CEZ came second with EUR 690m. Two opposition parties, Smer and Lidova strana - HZDS together with company owners associated in Klub 500 reportedly disagree with the sale to Enel. Source: CTK Nevertheless, the decision lies solely with the Cabinet and so we see the chance of CEZ winning the tender as unlikely.
In other news, CEZ said that domestic demand for electricity is growing faster than consumption. Domestic electricity sales of CEZ increased by 23.4% y/y to 24.3 TWh in 1H04. and wholesalers demanded nearly 2TWh more for 2005 than in 2004. Given the expected rise in electricity prices in 2005, we estimate that the extra 2TWh demanded for 2005 should lead to a maximum of CZK 2bn of additional revenues and CZK 1 of additional EPS (subject especially to the level of switching production capacity and sales from exports to domestic sales - full substitution would yield additional revenues of just CZK 414m). CEZ also reported that it will become the leading supplier of ancillary services in the next three years (supplying 48.5% of total ancillary services next year). The company does not expect last year's record electricity exports to be repeated and plans to primarily focus on domestic sales. In 1H04 exports were 34.1% lower compared with 1H03, at 5.8 TWh. Source: CTK, CEZ, Bloomberg.
Separately, Romania has postponed the deadline for submitting binding bids for both Romanian power distributors (Electrica Moldova and Electrica Oltenia) to 18 October from 6 October; CEZ is taking part in the tender. Source: CTK
Tomáš Gatěk, Patria Finance