CEZ management held a meeting with analysts yesterday, our key conclusions are:
* management considers as fair the lower end of the unofficial reported range of cash payments likely required for the state’s stakes in regional distributors (CZK 20 bil.–35 bil.); the government’s sector restructuring plan (CEZ selling the state a controlling stake in CEPS, the transmission grid operator, and buying the state’s stakes in the regional distributors) is expected to be implemented in June/July;
* management’s unconsolidated 2002 CAS net estimate is CZK 4.5 bil., including CZK 1.5 bil. profit earned from the planned sale of the company’s headquarters. This figure does not include profit from the planned sale of a 66% stake in CEPS;
* an increase in exports and domestic market growth should partially compensate for SME (a regional distributor) not buying electricity from CEZ in 2002.
Although the 2002 outlook does not seem very optimistic (we expect a 25% y-o-y decline of net profit), the restructuring plan provides a significant upside—provided that the transaction prices are not unfavorable for CEZ. We do not expect the information provided at the meeting to move the stock.
Also, the Czech Cabinet should receive today a regular quarterly report on progress at CEZ’s Temelin nuclear power plant. Insignificant for CEZ stock.
(Jiri Soustruznik)