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State to unload 7 percent of ČEZ

36 billion Kč gained will be used to cover gap in 2007 budget

By Paul Voosen
Staff Writer, The Prague Post
March 21st, 2007 issue

The government is moving forward with plans to sell 7 percent of state-controlled power giant ČEZ on the Prague Stock Exchange. The sale will net the Czech Republic an estimated 36 billion Kč ($1.7 billion), which will be used to cover a gap in the budget. It will lower the state’s stake in the company below two-thirds, from its current 67.6 percent.

Finance Minister Miroslav Kalousek announced March 19 that the Cabinet accepted his ministry’s proposal. Ministers from the Civic Democrats and Christian Democrats voted unanimously for privatization, while the Green Party abstained.
The sale doesn’t require Parliament’s approval because the privatization of state-owned companies falls within the governing powers of the Cabinet.
The sale will drop state ownership below the 66.6 percent necessary for a supermajority, said Ladislav Kříž, spokesman for ČEZ. However, the government retains power beyond its own share percentage and could still strongly influence more than 80 percent of the votes cast at the firm’s general meetings, he said.
The Social Democrats oppose the sale, former Industry and Trade Minister Milan Urban told the Czech News Agency March 14. ČEZ’s stock price is rising, and selling off shares for one-time improvements would mean forgoing more money for the country in the future, he said.
“Splintering ČEZ at this moment only to patch a hole in government finances is a bit irresponsible,” he said.
ČEZ hopes to buy the majority of the shares, Kříž said. ČEZ would then have a year and a half to resell the shares. Alternatively, it could cancel the shares and reduce its capital.
Because the shares will be sold on the exchange, however, ČEZ will not be in a privileged position to buy stock, and it is unlikely that it could secure them all, analysts say.
This year’s budget projects the deficit at 91.3 billion Kč. The budget was controversial when passed because it included surpluses from the partial sale of ČEZ, which were to pay for improvements of the highway network. Without the sale, the deficit would stand at 122 billion Kč.
The Transportation Ministry has said that it needs funding for the State Transport Infrastructure Fund (SFDI) by the third quarter of this year. Otherwise it will have to postpone its construction of 74 kilometers (46 miles) of roadway, including work on the D8, D1 and D47 highways.
Karel Hanzelka, spokesman for the Transportation Ministry, admits the sale will only cover the SFDI’s operations this year, meaning that the state will have to find another method to finance the fund next year.
“This will be a patch that we put on certain projects, but we will need more money,” he said.
Naďa Černá contributed to this report.

Paul Voosen can be reached at pvoosen@praguepost.com


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