CEZ Lowers Full-Year Earnings Targets on Dispute in Albania

CEZ AS, the Czech Republic’s largest power producer, cut full-year earnings targets because of losses in Albania where it’s locked in a dispute with the government.

Net income attributable to shareholders of the parent company rose to 6.6 billion koruna ($312 million) in the third quarter from 2.4 billion koruna a year earlier, the Prague-based company said today in a statement. That missed the 8.5 billion-koruna median estimate of 15 analysts surveyed by Bloomberg.

The utility reduced its full-year targets for earnings before interest, taxes, depreciation and amortization to 85 billion koruna from 87.9 billion koruna. The forecast for net income was reduced to 40 billion koruna from 41 billion koruna because of continued losses of the Albanian unit. CEZ incurred a nine-month operating loss of 3.8 billion koruna in Albania, where it has so far been unable to resolve a dispute with the government over tariffs and taxes.

“The results are disappointing, as is the lowered outlook,” Bohumil Trampota, an analyst at J&T Banka, said in a note.

CEZ fell 1.5 percent to 712 koruna as of 11:04 a.m. in Prague. The stock is down 9.4 percent in the year to date.

Quarterly profit was higher than a year ago when earnings were reduced by the revaluation of CEZ’s share option in Hungarian refiner Mol Nyrt. CEZ also ramped up production at the Dukovany and Temelin nuclear plants and installed new capacity at the Romanian wind parks of Fantanele and Cogealac, offsetting the Albanian losses.

Management Replaced

CEZ’s relationship with the Albanian government deteriorated to the point that the Czech utility was forced to replace its management in the country with negotiation experts from the U.K. company Schindlers. A complete exit from the market is “the most likely solution,” Chief Executive Officer Daniel Benes said during a press conference in Prague.

The company pre-sold 94 percent of the 2013 power output for an average price of 51 euros per megawatt-hour and 48 percent of the 2014 power output for “slightly above” 50 euros per megawatt-hour as of Nov. 1, Trading Director Alan Svoboda said during the press conference. CEZ doesn’t see a “positive impulse” for power prices in Europe in the short term, he said.

The utility is offering some of its aging coal-fired power plants for sale to end a European Union investigation into an alleged anti-competition behavior. It expects to get improved bids for its Chvaletice and Pocerady plants tomorrow from rival utilities Energeticky a Prumyslovy Holding AS and Czech Coal AS, and will make a decision by the end of the year, Benes said.


The company also received four bids for its Detmarovice plant. Ceska Energie offered the highest bid of 7 billion koruna, while Polish utility Gascontrol offered 1 billion koruna and Energeticky a Prumyslovy Holding offered 600 million koruna, Hospodarske Noviny reported on Nov. 6.

CEZ is also in the process of choosing a supplier to build two new reactors at the Temelin plant. It excluded Areva SA from the tender last month, saying the Paris-based company hadn’t fulfilled legal and commercial requirements.

Areva said it will file a complaint with the Czech anti-monopoly office, which may slow down or even halt the bidding process. CEZ said it expects to keep the schedule, choose a winner by September next year and sign the final contract by the end of 2013. Westinghouse Electric Corp and a Russian-Czech group led by Rosatom Corp.’s Atomstroyexport unit are still competing for the $10 billion Temelin project.

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