CEZ AS headed for its worst monthly slump since September 2011 on speculation record-low electricity prices will undermine the biggest Czech utility’s future profits.
The stock fell 0.1 percent to 614.40 koruna by 3:22 p.m. in Prague, taking January losses to 9.7 percent and trading close to its lowest level since 2008 at 613 koruna reached three days ago.
European stocks dropped and power for next-year delivery in Germany, where CEZ sells part of its output, slid to an all-time low today as retail sales in the continent’s biggest economy declined more than expected. The electricity price is set for the worst monthly retreat since 2009 as a dispute within the European Union over its cap-and-trade program has sent the price of carbon-emission allowances plunging.
“Should electricity stay at these low levels for a longer period, this would obviously gradually reduce CEZ profits,” Josef Nemy, an analyst at Komercni Banka AS in Prague, wrote in e-mailed comments today.
Lower electricity prices for a longer period would not hurt CEZ until next year because the company sold its 2013 production before this month’s decline, Nemy said. CEZ sold 94 percent of this year’s output in the first 10 months of 2012 while presales for 2014 stood at 48 percent, the company said on Nov. 8.
Nemy recommends buying CEZ shares with a 12-month price estimate of 740 koruna.
The electricity price slipped 1.3 percent today to 40.45 euros a megawatt-hour, the lowest level since Bloomberg began tracking the futures contract in 2007. Carbon permits have slumped 47 percent this month to an all-time low of 3.54 euros.
Falling carbon prices are reducing the profitability of CEZ’s investments into low-emission technologies, Hospodarske Noviny newspaper reported on Jan. 25, citing the company’s Trading Director Alan Svoboda. The utility generates more than 40 percent of its output from zero-emission nuclear stations and operates the world’s largest wind park in Romania.
The European Parliament’s industry committee recommended a week ago rejection of the European Commission’s proposal to curb an excess of permits by delaying their further issuance. The plan, designed to lift the cost of pollution and push generators toward cleaner technologies, is mainly opposed by Poland, which has no nuclear reactors and relies mainly on high-emission power stations burning brown coal.