ČEZ profits down big in Q2

State-owned power company ČEZ announced second-quarter annual profits down 40 percent year on year, a drop the energy giant blamed on new taxes, appreciation of the Czech crown and losses taken in stock re-evaluations.

ČEZ's annual net profit for the first half of the year was down 16.6 percent to 23.9 billion Kč, but the subdued results didn't stop the company from raising estimates for 2011 profits by 0.5 billion Kč to 40.6 billion Kč.

"It's insignificant and just cosmetic," said Bohumil Trampota, an analyst with J&T Bank. "Their guidance is still quite conservative, and there is still the possibility they may even raise their guidance yet this year."

Reuters had reported the quarterly results a day before their official release Aug. 16, in an apparent information leak.

"They got into the internal publication system which contains only public information, but released at a certain time," said ČEZ spokesman Ladislav Kříž.

At an Aug. 16 press conference, ČEZ representatives said the results also reflect two newly introduced taxes: a donation tax on emissions permits and a withholding tax on power generated by photovoltaic power plants. The appreciation of the Czech crown was also blamed for the lower postings, as most ČEZ sales actually occur in euros. The company also said higher electricity prices in the Czech Republic at present had done little to boost profits since they sell power at least one year in advance.  

"A secondary reason [for the poor second-quarter results] was the re-evaluation of stocks in the MOL plant in Hungary," Trampota said.

Last year, ČEZ benefited from a 600 million Kč rise in share value for its investment in the MOL plant, but this year the company was not so fortunate.

In its press statement, ČEZ tried to put the disappointing results in a European context by drawing comparisons to German rival E.ON, which fared slightly worse in the first six months of 2011, posting 22.8 billion Kč in net profits.

"You can't compare those two sets of numbers because [E.ON] has a lot of costs related to the closing of nuclear power plants in Germany," Trampota said.  

Emily Thompson can be reached at
ethompson@praguepost.com