CEZ: SE tender's winner should be recommended today

The Slovak Finance Minister, Pavol Rusko, is expected to submit his recommendation for the Slovenske elektrarne tender winner to the Cabinet this morning. The Cabinet should then make a final decision on Wednesday, October 6. Source: CTK. Note that the privatization advisor recommended Enel as the winner with a EUR 840m bid. CEZ came second with a bid of EUR 690m, while Inter RAO came third. CEZ reportedly submitted two bids - worth EUR 690m and 1.19bn (the latter subject to three conditions that the privatization advisor found unacceptable). While we must point out that the bids are very complex and only limited information is available to the public, we see CEZ's bids as too aggressive and therefore assess its failure to win the tender as positive news for the stock.

Separately, Slovenske elektrarne held a press conference yesterday. The company reported a net profit of SKK 2.29bn in 1H 2004 (-35% y/y). Total sales decreased in H1 2004 by 7% y-o-y to SKK 27.33bn. According to SE management, net income is expected to decrease by the end of 2004 and reach last year's level of SKK 1.3bn. While the interim figures are not encouraging, they are hardly a significant factor upon which CEZ’s bid should be evaluated.

Tomáš Gatěk, Patria Finance