New Minister of Industry and Trade considers changing electricity price setting mechanism starting next year. This should lead to more favourable outcome for companies depending on electricity.
Our view:
Any comments from newly formed government need to be taken with limitation and only as some indications of possible actions as there is small probability that government will win a confidence vote. Currently the electricity price is set by the auction of limited amount provided to third parties and the remaining part, which is taken by affiliate CEZ Prodej, fully depends on the results from this auction. As there is increased demand in the region for electricity, we expect the price to rise further and converge to sustainable German levels of EUR 50 by 2009. We see this news as neutral at this point and reiterate our Buy recommendation with new fair value of CZK 1,075.