The Prague Daily Monitor revealed that the Czech government intends to sell its stake on the capital market, and quoted finance minister Miroslav Kalousek as saying: We have decided to sell the shares on the capital market because it is the most transparent method.
The Czech publication also reported that, while cabinet ministers were in favor of the sale, the opposition was against the state-owned company being privatized, including members of the Green Party, who abstained from voting. Reuters commented that the opposition had voiced fears that, with the loss of its two-thirds majority stake, the government would lose its decision-making capability within CEZ. Nevertheless, the government has the full authority to go ahead with the sale.
Reuters reported Ladislav Kriz, CEZ’s spokesman, as saying that the company intends to propose its buy-back plans to shareholders at its next general meeting, in April 2007. However, Reuters stated that Mr Kalousek had declined to mention the government’s position on CEZ’s proposed buy-back. As the government is the majority stakeholder, if it does not support CEZ’s tender, the utility may face problems.
Although The Prague Daily Monitor commented that CEZ’s buy-back proposal had been criticized, as it would involve the utility spending its surplus capital, Reuters quoted ING analyst Barbara Seidlova as saying: We think a buy-back would be positive for CEZ, because it would improve its capital structure by increasing net debt to equity ratio from 9% to 31%, assuming cancellation of the shares.
According to Reuters, CEZ shares dropped 0.1% to close at CZK874 following the news. Reuters added that, while the stock has decreased from its all-time high of CZK1,013 in December 2006, it is still trading approximately 7% up year-on-year.
