The Czech daily MFDnes reports that besides the government’s energy-sector restructuring plan itself, the Anti-Monopoly Office (AMO) is also examining the price for which, according to the plan, CEZ would acquire from the state controlling stakes in regional power distributors (REAS). The AMO reportedly considers the proposed price of CZK 32 bil. for the stakes to be too low, effectively representing a state subsidy to CEZ.
We have been pointing to the fact that comparable transactions (e.g., the privatization of distributors in Slovakia) imply price above CZK 50 bil., and our previous DCF-based valuation implied a price of CZK 40 bil. Nevertheless, after reflecting upon significant end-user electricity-price reductions planned by CEZ for 2003 (and expected continuous downward pressure on prices in the following years), we currently value the REAS stakes at approximately CZK 34 bil. (i.e., CZK 2 bil. above the proposed purchase price). Based on this, we believe CEZ stock could be negatively affected should the AMO press for a significant re-valuation of the stakes.
The industry minister, J. Rusnok, said it is necessary for CEZ to have access to regional power distribution. He also said he expects some re-distribution of the REAS stakes between CEZ and foreign investors (whom already have significant stakes in some REAS) afterward.
The minister reiterated that CEZ privatization will be considered only after the state’s new energy policy is set (expected in the next 12 to 14 months); CEZ could be sold to a strategic partner or partially privatized via capital markets. No new information.
Jiri Soustruznik