The average electricity price offered by CEZ for 2005 should only rise by just under 11% y/y, compared with the 15.6% indicated on August 24. The move is partially a reaction to the price positioning of the IPPs, and is a reflection of volume-related cost optimisation. The increase is thus marginally above our previous expectations of 5%-10%. The reduction corresponds to 3% decrease in EBITDA; net income would be reduced by 4.6% or CZK 1.03 per share (i.e., against the level implied by the previously published indicative offer). The negative impact of lower price growth may be compensated for by a higher amount of electricity sold and cost optimisation related to the increased volumes produced.
Separately, the Ministry of Industry (IM) said that it will submit its own plan for the distribution of national emissions credits. The plan assumes an increase in the emissions limit to 116.3m tonnes. The IM disagrees with the Ministry of Environment (EM), which wants the limit to be 99.5m tonnes. The EM is seeking to start negotiations on the matter in Parliament as soon as possible. Given the experience of other EU countries, we tend to believe that the IM’s proposal will win the support of the majority of the politicians.
Tomáš Gatěk