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October 12th, 2008
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Cabinet discusses limiting ČEZ sale

Government in talks to trim privatization, thanks to record share prices

By Michael Heitmann
Staff Writer, The Prague Post
January 9th, 2008 issue

Sometimes, less is more.

Almost a year ago, the government rushed ahead to begin the sale of a 7 percent share in the energy giant ČEZ on the Prague Stock Exchange. So far, the state has sold a mere 1.63 percent of the company. And, since the sale began, ČEZ’s share price has risen to 1,345 Kč ($75.6), prompting a laconic attitude from Prime Minister Mirek Topolánek.
“This operation has been a brilliant success,” Topolánek said in the daily Hospodářské noviny Jan. 7. “The government set a minimum price of 950 Kč per share, and today shares sell for 1,400 Kč,” he added.
Since ČEZ’s share price is so high, discussions within the Cabinet are going in a new direction, Topolánek said. Now the question is “whether we sell only until we have reached the required income, or whether we sell the total percentage of shares.”
A decision on the sale’s future has not yet been reached, Topolánek added.
Finance Minister Miroslav Kalousek announced the plan to sell a 7 percent share in ČEZ last March. Money received from the sale is expected to pour about 30 billion Kč into the state’s road and traffic infrastructure fund. At current share prices, selling only a 4 percent share would meet these requirements.
Whatever route the government takes, it is set to remain ČEZ’s majority owner. The Finance Ministry still holds more than a 65.98 percent stake in the energy giant, according to the Prague Securities Center.
Analysts estimate that the state’s dividend income from ČEZ will reach 14.8 billion Kč in 2008, up from 8 billion Kč last year. The dividend payouts provide the state budget with a steady income stream. Because of this, drastic steps toward privatization have been all but ruled out.
The market could welcome a move by the state to sell less of the company.
“If the state decides to sell only until it has reached the required income, the market might receive this as good news,” said Petr Novák, an analyst at Atlantik FT, one of the country’s largest stockbrokers.
Currently, ČEZ is repurchasing almost all of its shares that go on the market; it purchased about 8.1 percent of these shares last year, spending 54.3 billion Kč on the transactions. However, should the company finish its buying spree and the state keep selling, the market could be flooded with ČEZ shares, lowering their value, Novák said.
Also reportedly buying shares this month, under their options plan, will be 13 of ČEZ’s top managers. Under the plan, CEO Martin Roman, for example, can buy shares at a discounted price of only 139 Kč.

Michael Heitmann can be reached at mheitmann@praguepost.com


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