CEZ interested in becoming a strategic investor in Poland

CEZ’s CEO in Poland, Kamil Cermak, said that the company is interested in becoming a strategic investor in an energy group located in southern Poland. The Polish Government is expected to announce a long-term energy strategy, which would assume creation of two groups of companies including mining, generation, sales and distribution. One group should be kept in state hand and be created around the leading generation company BOT and network operator PSE and the other around PKE based in southern Poland. Note that CEZ recently acquired two power plants Elcho and Skawina in Poland. We would definitely regard potential strengthening of CEZ’s position in Poland as positive given the growing demand for electricity and strategic position of the market relative to CEZ’s domestic market. Nevertheless, we believe that such a project is in early stage and therefore view the news as neutral. CEZ’s shares dropped by 3.9% w/w underperforming the Czech market (ending flat) on no news. Therefore, we would regard the weakness as a good entry point and reiterate our Buy recommendation on the stock.