Czech Cabinet officials held informal talks about swapping a 16% stake in CEZ (where the state holds 67%) for the Slovak state's 49% stake and management control of Slovenske elektrarne (SE), the dominant Slovak power producer, Bloomberg reported on Friday.
However, Czech Industry and Trade Minister M. Urban reportedly prefers to keep the government's holding in CEZ intact, or sell 16% on the capital market. He also said that a decision on the 16% stake would not be made this year.
We consider the swap scenario as very unlikely, partly due to the industry minister’s stated reluctance and also given (i) the Slovak government's present preference for cash payments in privatization cases, and (ii) the difference between the estimated fair values of the 16% stake in CEZ (at least CZK 10 bil.-11 bil. should it be placed on the market) and the 49% stake in SE (CZK 3.5 bil.-4 bil., or CZK 5 bil.-6 bil. including management control, we estimate), which would require an additional cash payment by the Slovak to the Czech government.
At the moment, we consider the news as neutral for CEZ stock.
Jiří Soustružník