The Ministry of Industry reportedly wants the state-controlled CEZ to acquire the state’s stakes in regional power distributors, and to sell the national transmission grid (CEPS) to the state. We believe this would be positive since:
ownership of the distributors would help CEZ recapture domestic market share, (ii) as it seems that the ideas were born in CEZ, it may well be prepared for their implementation, and (iii) reportedly, the stakes in the distributors could be exchanged for the CEPS stake in a 1:1 ratio, which we see as favorable for CEZ.
Although a newly elected Cabinet (following the June 2002 general election) could opt in favor of an asset-by-asset privatization (and reverse the above-mentioned transactions), and although anti-trust office approval of the transactions is not certain, this would only return matters to the present status quo. In our view, there is a relatively low downside risk compared to the benefits to be reached should the transactions be carried out. Unlike the majority on the market (the news on the ministry’s intentions was one of the reasons behind the stock’s fall on Friday), we consider this plan to be favorable to CEZ.
Electricite de France lost interest in CEZ privatization after the Cabinet refused to ease any of the strict privatization conditions. Although this was expected by some on the market, the news contributed to the stock’s Friday fall.
The Appian Group of the U.S., the owner of coal-mining company Mostecká uhelná spolecnost, wants to buy the Czech state’s stake in Severoceske doly, another Czech mining company, and wants to buy some coal-fired power plants from CEZ, as stated in a letter sent to Czech Prime Minister Milos Zeman. Nevertheless, it is unlikely that CEZ would sell some of its power plants.
The first reactor at the Temelin nuclear power plant was re-activated on Friday. It will run for five days and will subsequently be halted again for a three-week period for repairs to broken fitting. Expected.
(Jiri Soustruznik)