A yesterday's CEZ EGM surprisingly reject the proposed energy-sector restructuring plan (i.e., the sale of a 66% stake in CEPS, the transmission-grid operator 100%-owned by CEZ, to the state for CZK 15 bil., and the acquisition of the state stake's in regional distributors for CZK 32 mil.). The National Property Fund, which holds a 68% stake in CEZ and which voted down the proposal yesterday, cited technical and legal objections to the assets transfer (e.g., the unresolved rights of the state's "golden" shares in distributors and an unsigned contract between the NPF and the expert who evaluated the stakes). Consequently, since the likelihood that the plan will be approved before the June 14-15 general elections has considerably declined and probability of a restructuring plan reversion is higher after the elections, the news is negative for CEZ. Indeed, the stock lost 4.5% yesterday. Source: NPF, Reuters, CTK.
Separately, the rejected sector-restructuring plan would have seen CEZ pay an additional income tax of CZK 4.1 bil. This would be significantly more than we had expected (CZK 1.5 bil.). Nevertheless, if a revised plan is approved and the transaction above effected, it would boost CEZ's value, we expect, by at least CZK 7 bil. (CZK 12 per share).
(Jan Hajek)