Ahead of the auction of the baseload wholesale electricity, CEZ published the conditions for the auction including maximal prices per MWh. The maximum price indicates that annual wholesale base load electricity price, forming 85% of CEZ’s output should be capped by cCZK1,248MWh ~ EUR44.5/MWh and would imply a growth of 20% y/y against the price level achieved in the last year's auction and exceeds the price achieved in the earlier Virtual Power Plant auction of CZK1,220/MWh ~ EUR43.5MW/h (based on CZK/EUR of 28.03) by2.3%. At the same time, price of the other electricity products should not growth more then 10.8% y/y. The result of the auction should be known by August 15.
We believe that the auction will result in the average price lower than the maximum base load price of CZK1,248/MWh ~ EUR44.5/MWh and we believe that it is fair to conservatively assume a 15% y/y increase in the wholesale electricity price for 2007 to CZK1,200/MWh ~ EUR42.8/MWh; the is the lower end of the current expectation of 15-17% y/y increase. The maximum price also indicates that the recent political pressures on electricity prices do not have any impact on the price-setting mechanism.