On yesterday’s meeting current government agreed on the gradual sale of 16% stake in CEZ to finance environmental and infrastructure projects. Discussed budget counts with CZK 31bn (USD 1.4bn) income in 2007 coming from its CEZ stake. Government plans to place the stock in smaller parts to the market until it get required amount. Social Democrats, the main opposition party, don’t agree with the sale of CEZ’s stake at all and rather prefer to reassess CEZ’s dividend policy.
Our view:
At current market price requested proceeds implies sale of only 7% stake in the first half of next year over the market, which is slightly below recently stated sale of 8 to 10% in the first step. We see this news only slightly positive as market was expecting somewhat higher stake to be placed. This could marginally ease possible speculation of share overhang on the market taking also into account CEZ’s own interest to buy treasury shares, subject to be approved by AGM or EGM. We reiterate our Buy recommendation with fair value CZK 1,075.