CEZ's split would not help deal with current energy crisis

A split of semi-state energy group CEZ would not help in the current energy crisis because it would be a process that would take several years, but nationalisation of a part of the firm would help the state gain control over energy prices, according to experts. They, however, differed in opinions on whether the split would be a good step or not.

Prime Minister Petr Fiala said in an interview published by the server of daily Hospodarske noviny (HN) on Thursday that the government was considering restructuring CEZ but that such a step required more thorough analyses.

It is not year clear which part of CEZ would be nationalised. According to Komercni banka analyst Bohumil Trampota, it should be the part that generates electricity.

"In the part that generates electricity, the state would have to buy out the minority shareholders... The state/government would thus gain complete control over power generation and could do whatever it wants with it. There are reasons such as critical infrastructure and the security of supplies and prices, as well as political reasons," Trampota said.

"This is a path that the German utilities E.ON and RWE have followed in recent years, and this process is also underway at France's EDF. If this happens, the impact on the price of electricity will be in the hands of the government," Trampota said.

The influence on CEZ shares should be positive. "The government would buy out shares from minority shareholders and would have to offer a premium to the market price, which can be expected to reach tens of percent at current market prices," Trampota said.

ENA analyst Jiri Gavor, too, believes a division of CEZ would be a good path.

"In the coming years, the state will be in great need of a competent and strong energy company that can help implement the state's energy strategy in situations where private business faces barriers of too high risk and uncertain returns," Gavor said.

The state ownership should include the production part of the conventional energy sector of CEZ and the planned construction of nuclear power plants, according to Gavor. "Given the current situation, I would also include the trade sector, which could be private in normal times. Everything else could be fully privatised and, given the interest of investors in distribution and renewables, the demands on the state budget would be minimal," he said.

If the state wanted to retain full distribution, which would also be useful, it would have to take into account a, adequate payment to the existing private shareholders. If the procedure is fair, it would be a win-win project, Gavor said.

Such a process would, however, require time so it cannot be a recipe for the current acute crisis with high commodity prices, he added.

According to Capitalinked.com portal analyst Radim Dohnal, a split of CEZ is not a good path. "It will just be a distraction for several weeks, but it will not help," he said.

If CEZ were to be split, nuclear and coal-fired power plants should fall into the state's hands, according to Dohnal.

"A nationalization and division of CEZ would help only in the sense that the state as the sole owner would influence electricity prices, but not gas prices. And it would take about two years before all the necessary steps are taken," Dohnal said.

On the other hand, fully state-owned CEZ could materialise the construction of a new nuclear bloc more easily, he noted.

Source: Hospodarske noviny and CTK