CEZ May Raise 2013 Profit Targets on Power-Plant Disposal

CEZ AS, the Czech Republic’s largest electricity company, may raise full-year profit targets after clinching the sale of its Chvaletice power plant and concluding a 50-year contract for supplies of brown coal.

The utility may push up the forecasts for earnings before interest, tax, depreciation and amortization by as much as 2.5 percent and net income by about 10 percent when it releases first-quarter figures tomorrow, according to an estimate by Monika Tabanyi, a Budapest-based analyst at Concorde Securities. Philip Gottschalk, a Paris-based analyst at Exane BNP Paribas, is predicting increases of 1.9 percent in CEZ’s forecast for Ebitda and 5.4 percent for net income.

Supplies of lignite to CEZ’s Pocerady coal-fired plant were jeopardized by a dispute early this year with provider Czech Coal AS, which threatened to double prices. Prague-based CEZ forecast in February that Ebitda would total 80 billion koruna ($4.09 billion) and net income would amount to 37 billion koruna. The utility announced a settlement with Czech Coal on March 19, the same day it agreed to sell the Chvaletice plant for 4.12 billion koruna to end a European Union antitrust probe.

“Not raising the full-year guidance would be a negative signal,” Bohumil Trampota, an analyst J&T Banka in Prague, said in a report, predicting that CEZ will raise its 2013 forecasts to Ebitda of 84 million koruna and net income of 38.5 billion koruna.

Analysts’ Predictions

CEZ is likely to forecast Ebitda of 82 billion koruna and net income of 40.6 billion koruna, Concorde’s Tabanyi said in a report on April 30. Exane’s Gottschalk estimated in an April 29 report that CEZ will target Ebitda of 81.5 billion koruna and net income of 39 billion koruna.

The supply contract and Chvaletice disposal may offset the effects of stagnating electricity prices and a plunge in the price of carbon permits. Earnings may be held back by a dispute with Bulgaria’s energy regulator, which is threatening to withdraw the Czech company’s power-distribution license for allegedly violating rules on public tendering for subcontracts, according to Petr Bartek, an analyst in Prague at Erste Bank.

CEZ may say first-quarter net income fell 4.7 percent to 14.1 billion koruna, according to the average of seven analyst estimates compiled by Bloomberg. Barbora Pulpanova, a CEZ spokeswoman, declined today to comment on the analysts’ predictions before earnings are released.

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