CEZ holds a press conference today at 10.00am CET on the Virtual Power Plant auction. We do not expect CEZ to indicate any result of the auction, which should be announced on August 2. The result, however, should indicate wholesale base load electricity price growth for 2007, which is set in a following auction (later in August). In our valuation, we expect the electricity price to grow gradually to EUR45/MWh by 2010 from the current cEUR36/MWh. The market expect the electricity price to increase by 10-15% y/y for 2007 following the earlier result of the electricity price auction in Slovakia showing a growth of 16% y/y to EUR43/MWh and in Hungary, where wholesale electricity sells at nearly EUR47.5/MWh.
Our view: We expect the virtual power plant auction to show an increase in the electricity price above our assumptions used in the valuation model (6% y/y) suggesting stepper grow in the initial period between now and 2010 then expected.