CEZ holds a virtual power plant auction (400 MW, i.e. 3% of total CEZ’s capacity) today, with results being available later in the afternoon a c4.00pm CET. The virtual power plant auction has been ordered to CEZ by the anti-monopoly office last year in exchange for CEZ being able to keep the Severoceska energetika distribution company.
Our view:
As we informed previously, based on indications from recent strengthening of electricity prices in Germany (EUR 57/MWh) and the result of electricity auctions in Slovakia and Hungary showing a 16% y/y growth to EUR 43 and EUR 47.5/MWh respectively, we believe that the result of virtual power plant auction should show electricity price increase at the higher end of expected 10-15% y/y range or even slightly above. Note that the wholesale base load electricity price equals EUR36.5/MWh in the Czech Republic. Also, note the virtual power plant result is a good indication for the auction of the base load wholesale price for 2007 to be held shortly afterwards (towards the end of August).