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CEZ Shares Tumble to Lowest Since 2008 on Bulgaria: Prague Mover

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Feb. 19 (Bloomberg) -- CEZ AS declined for a fifth day, reaching its lowest in more than four years, after Bulgaria announced it will strip the Czech utility of its power-distribution license.

The stock dropped 0.8 percent to 611 koruna in Prague, the lowest close since October 2008 and the longest stretch of declines since June. The PX index, where CEZ has a 19 percent weighting, ended the day little changed.

CEZ’s license will be revoked after a probe showed the biggest power producer in central and eastern Europe by market capitalization evaded public-procurement rules, Premier Boyko Borissov told reporters in Sofia today. CEZ responded in a statement that the government has no grounds to revoke its license, calling its announcement a “gross violation” of law.

“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 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 3.6 percent decline by the PX index, as tumbling electricity prices worsened the outlook for the utility’s earnings.

The Bulgarian government has asked the financial regulator to conduct a similar probe into the local units of Austria’s EVN AG and Prague-based Energo-Pro. EVN tumbled 4.4 percent today by 5:15 p.m. in Vienna, headed for its steepest drop in 17 months, with share turnover twice the three-month average.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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