E.ON announced yesterday that it wants to terminate its import contract for electricity supplies from CEZ. E.ON is under the pressure from German and Austrian activists protesting against nuclear-generated electricity imported from CEZ via E.ON. CEZ said in a press release that it would search for a solution that would not be harmful to either company; meanwhile, CEZ considers its current supply contracts to be a firm basis for its exports.
In the worst scenario take place, CEZ would not find alternative sources for exports and would be left faced with a possible production reduction. The loss of revenues related to E.ON could amount to more than CZK 1 billion per year. E.ON’s help with the search for the alternatives is crucial and is likely to be influenced by the company’s interest in CEZ privatization.
The stock lost 1.5% after the E.ON announcement yesterday. Nevertheless, we estimate that even in the worst scenario, the fundamental value of the stock will remain above the current market price. Therefore, we stand by our short- and long-term buy recommendations. Important next for CEZ will be the search for alternative export sources.
Separately, 70,000 liters of mildly radioactive water leaked from Temelin yesterday, though the radiation levels were extremely low-not an accident according to international standards. The stock is unlikely to react to the news.
(Jiří Soustružník)