CEZ AS tumbled to near its lowest in more than four years after Bulgaria announced it will strip the Czech utility of its power-distribution license.
The stock dropped as much as 2.2 percent to 602.5 koruna, matching the lowest intraday level since October 2008 reached on Jan. 28. It traded down 0.7 percent to 612 koruna by 3:47 p.m. in Prague, down for a fifth day and set for the longest retreat since June, according to data compiled by Bloomberg.
CEZ’s license will be revoked today after an investigation showed the biggest power producer in central and eastern Europe by market capitalization violated public-procurement rules, Prime Minister Boyko Borissov told reporters in Sofia today. CEZ responded in a statement that the government has no grounds to revoke its license, calling Borissov’s announcement a “gross violation of legal norms.”
“Should CEZ really be unable to continue its operations in Bulgaria, this could lower 2013 earnings before interest, taxes, depreciation and amortization by about 1 percent to 2 percent,” Josef Nemy, an analyst at Komercni Banka AS in Prague, wrote in an e-mail to Bloomberg. “The impact on this year’s net income is hard to predict at this moment given the risk that CEZ might write off some of its Bulgarian assets.”
CEZ derived 9.9 percent of its 2011 revenue from Bulgaria, making it the company’s second-biggest market after the Czech Republic, data compiled by Bloomberg show. CEZ shares have dropped 10 percent in 2013, compared with a 3.7 percent decline by the PX index, as tumbling electricity prices worsened the outlook for the utility’s earnings.
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