According to Bloomberg, EVN, which owns two distribution companies in southern Bulgaria will ask local energy regulator to increase power prices by an average of 6.3% starting in October.
Our view:
All three power distributors in Bulgaria are asking for price increases, when
E.ON is asking for increase in average by 6.5% and CEZ by 10.0%, which was announced already in February. All price increases are still subject of regulatory approval. For the moment we expect that CEZ's Bulgarian sales from distribution will increase by 11%y/y in 2007 and 8% y/y in 2008, based on 3% y/y price increase and the rest by increasing demand. Should the approved price increase is higher, i.e. 6.5% (similar to other power distribution requests), this would have marginally positive effect on our valuation by
CZK 4-5/share. Note that Bulgarian sales represent only 9% of total CEZ's sales. We see this news as neutral for today's trading as the request of CEZ to increase power prices is on the table from February.