CEZ will hold an AGM tomorrow

CEZ will hold an AGM tomorrow, July 4. Personnel changes at both the supervisory board and the board of directors are expected, though it is not clear how many board members might be replaced and who the new board members will be. A new BoD would then name a new CEO. The previous CEO, Stanislav Svoboda, was replaced earlier this year. Petr Voboril, the acting CEO, is a hot candidate for the position. Separately, the local daily MFDnes quoted a source from the Ministry of Finance as saying that Electricite de France (EdF) is a favorite to acquire the government’s stakes in CEZ (68%) and the regional distributors (50% in most of them). According to the report, the government is resolved to sell all the power companies to EdF. While we consider it possible that the government or a particular ministry may have a preference for EdF, we find surprising that this would be a conclusive decision, because: (i) the government has several times delayed a decision on the timing and method of selling CEZ (i.e., together with the distributors or separately, with or without the transmission grid, etc.), and (ii) we expect a tender to be held, whichever method is chosen. It is therefore possible that the decision to sell CEZ to EdF is not as firm as has been reported, and that the debate over the sale of CEZ—how, when, and to whom—shall continue. Also separately, after many weeks of rumors, there has been finally some news on CEZTel. The investigative local newsweekly EURO reported that Vivendi is currently performing due diligence in CEZTel (though it did not suggest how near a deal might be). As for the possible market response today to the news above, EdF is a respected name, and lumping of CEZ together with the distributors in a sale would likely minimize the distributors’ current effort to diversify power purchases away from CEZ. In this respect, the reported decision to sell CEZ to EdF could help the stock, no matter how strange such a sale would appear (we are nonetheless waiting for some official comment in response to the report). Moreover, the news related to CEZTel could also help CEZ stock. Our CEZ recommendation remains a buy.
(Ondřej Daťka)