CEZ Fourth-Quarter Profit Cut in Half by Low Power Prices

CEZ AS’s fourth-quarter profit fell 49 percent as electricity prices sank and the largest Czech power producer wrote down the value of its assets.

Net income dropped to 3.5 billion koruna ($175 million) from 6.9 billion koruna a year earlier, the Prague-based company said today in a statement on its website. That matched the average of 14 analyst estimates compiled by Bloomberg.

The utility is battling low demand and prices, compounded by reduced income from its Romanian wind park and the falling value for its option in Hungary’s Mol Nyrt. CEZ wrote 10.6 billion koruna off its assets in the fourth quarter, including the new Pocerady gas plant which is too expensive to operate under current gas prices.

“The main reason for the year-on-year drop is a considerable drop in wholesale electricity prices caused by massive support for renewable energy sources as well as economic stagnation in Europe,” Chief Executive Officer Daniel Benes said in the statement.

Power for next-year delivery in Germany, where CEZ sells part of its output, tumbled 16 percent last year. The forward contract has extended the selloff this year, falling to record-low 35.35 euros ($48.35) per megawatt-hour on Feb. 25.

For 2014, CEZ forecasts earnings before interest, taxes, depreciation and amortization of 70.5 billion koruna and net income of about 27.5 billion koruna, the company said today.

Forecasts

The utility posted Ebitda of 82.1 billion koruna in 2013, exceeding its 81 billion-koruna target, and reported a net income of 35.2 billion koruna in 2013, compared with a 35 billion-koruna goal.

Fourth-quarter Ebitda fell 16 percent to 10.6 billion koruna, missing analyst estimates. Revenue rose 5 percent to 55.4 billion koruna.

CEZ fell 2.3 percent to 509.1 koruna as of 9:07 a.m. in Prague, a two-week low.

Benes delayed a decision on building two reactors at the Temelin plant until next year after the nation sets out a long-term energy policy. Westinghouse Electric Corp. and a Russian-Czech group led by Rosatom Corp. unit Atomstroyexport are competing for the Temelin project, estimated at $15 billion.

CEZ said it has pre-sold 73 percent of its 2015 output, 37 percent of 2016 production, and 13 percent of 2017 output, according to the statement.

Full-year impairment charges totaled 36.3 billion koruna in 2013 as the utility revised the value of the Pocerady plant, its operations in Bulgaria and a 600-megawatt wind farm in Romania, which cut support for renewable energy in July. The wind farm is receiving only one green certificate for every megawatt-hour generated, instead of two previously.

To contact the reporter on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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