CEZ shortlisted for Electrica Muntenia Sud

CEZ has been shortlisted in tender for 67.5% stake in the most profitable Romanian power distributor Electrica Muntenia Sud, which serves 1.08m customers. Besides CEZ four other companies have qualified: Italian Enel, French Gaz de France, Spanish Iberdrola and German RWE. Given the tight competition Romanian Government expects according to latest news to receive cEUR 750m, which implies cEUR 695 per customer. That is significantly more than EUR 153 per customer what CEZ paid for Electrica Oltenia last year. Privatization of Electrica Muntenia Sud should continue in two stages: 1) submitting improved bids and 2) holding talks with two top bidders in order to get the highest price. Although the official deadline for the results is not set, it is expected to be finished by April or May ’06. Until the results are known we see this news as neutral and reiterate our Hold recommendation for CEZ with fair value of CZK 864.