Milan Urban, Minister for Trade and Industry said that the government approved his proposal for CEZ to pay an extra dividend for the state in amount of CZK 2bn to finance damages caused by the floods. Given that state holds a 68% stake in CEZ, the total dividend would equal to CZK 2.96bn (CZK 5.0 per share). Note that any dividend must be approved by CEZ's general meeting for which an invitation must be sent 30 days ahead.
CEZ holds its AGM on May 23 and considers upward revision of its dividend policy to come in line with the average of European utilities with a yield of 3.4% implying dividend of up to CZK 28 per share. The decision is expected to be made before invitation for AGM is sent, i.e. before April 23. Therefore, we believe that it is more likely that the state may push for a larger dividend payout rather than calling an EGM before the AGM and proposing an extra dividend payment. Hence, we regard the news as rather neutral but cannot rule out a slight positive market reaction. We reiterate our Hold recommendation.