According to CEZ, the new coalition agreement, which assumes preservation of current mining limits and no new nuclear blocks in the next four years, will raise costs of electricity production and will eventually mean dependence of the country on imports. If the current mining limits will be maintained CEZ will be available to replace only 45% of its 5,200 MW capacities, versus 70% when limits are broken. The coalition also will not support building of new nuclear blocks during the next four years. Note that more than half of the CEZ’s production comes from coal power plants and about 40% form nuclear power plants.
Our view: while building of new nuclear power plants during the next four years was not on anybody’s agenda (including CEZ) as the issue is a long-term and therefore should have no impact on both CEZ and electricity production in the near term, preservation of the current limits would mean change of CEZ’s production mix and probably building of gas power plants. Given the price difference and costs of production using a lignite coal and a gas, this would probably lead to more steep electricity price increases. Nevertheless, as the centre-right coalition is likely not to be given the vote of confidence and that all the parties expect the Greens support breaking the mining limits and extension of nuclear capacities we see the news as neutral.