With net income rising by 47%, HI 2001 results confirm positive trend set in QI 2001. Auxiliary services fee collection accounts for the big part of the performance improvement, obviously the impact of the new methodology of the fee collection (the fee collected from all electricity delivered by regional distributors) was underestimated by the market consensus again. In addition, while domestic electricity demand grew (high voltage +3.4%, low voltage +1.5%), CEZ domestic market share stopped falling and rose by 0.6%. This resulted in CEZ’s rising electricity production which was accompanied by approx. 3% rise of average electricity price.
CEZ says that rising domestic demand and new export opportunities will eliminate the effect of E.ON’s electricity purchase termination in the second half of 2001 (CEZ expects 12-13 TWh to be exported this year, in line with its budget and our expectations). Notably, CEZ CEO said that limits to production volume growth are not represented by the demand constraint but CEZ’s production capacity – delays in Temelin’s activation. The power plant should be reactivated in August, 100% production capacity should be reached at the end of the year.
Based on the above we conclude that while the market largely undershot due to the fears of the Temelin’s shut down combined with overestimation of negative impact of the E.ON issue, the share fundamental value actually appreciated due to improving operating performance. Although we acknowledge that that risk remains the key market short-term characteristics of the stock, we believe that the fundaments will prevail eventually and we are confident to reiterate our short-term and long-term buy recommendation.
| CZK mil.||HI 0IA||HI 00A||change|
| Pretax income||8,360||6,174||35,4%|
| Net income||6,897||4,692||47,0%|