CEZ Jumps as Billionaire Minister Seeks Higher Dividend

CEZ AS gained the most in nearly five years after Finance Minister Andrej Babis proposed the biggest Czech power producer pay out its entire profit to shareholders for the first time.

The Finance Ministry, which manages the state’s 69 percent CEZ stake, will ask the utility to distribute its entire 2013 net income instead of 50 percent to 60 percent of earnings it paid out previously, Babis told reporters in Prague today. The plan would lift its dividend to about 65 koruna ($3.26) from 40 koruna last year, according to Miroslav Frayer, an analyst at Komercni Banka AS in Prague.

“CEZ should have enough funds to pay higher dividends,” Frayer said in a note today. “We regard the news as a positive signal for CEZ shares. On the other hand, such a high profit distribution is not sustainable over the long term.”

Babis is trying to use all resources to boost state budget revenue as the two-month old cabinet pledged to keep the fiscal deficit below 3 percent of economic output. The billionaire minister, who owns businesses from fertilizer makers to food producers, opposes Prime Minister Bohuslav Sobotka’s proposals to raise corporate taxes to finance increased welfare spending.

CEZ rose as much as 6.7 percent, the biggest intraday gain since July 2009, and closed up 5.1 percent at 569 koruna. The stock was the biggest gainer in the Stoxx Europe 600 Index. The company’s profit was 35.2 billion koruna in 2013.

Temelin Expansion

“I don’t see anything wrong in taking this dividend,” Babis told reporters after a weekly cabinet meeting. “The market took it very positively,” he said, adding that the share price increase boosted the value of the state’s stake.

A higher dividend payout could further delay the planned construction of new reactors at CEZ’s Temelin nuclear power plant, Komercni’s Frayer said. CEZ postponed the decision on picking the supplier for the $15 billion project until next year and is asking the government to provide some form of guarantee that would make the new reactors profitable.

The ruling coalition has yet to discuss Babis’s proposal, according to Prime Minister Sobotka. The government must take CEZ’s investment plans into consideration when deciding on its dividend, he said.

“Dividend policy in one year isn’t something that could complicate, or prevent, construction of new nuclear blocks at the Temelin power station,” Sobotka said at a news conference.

CEZ shareholders will vote on a dividend at their annual general meeting, CEZ spokeswoman Barbora Pulpanova said today in an e-mailed response to Bloomberg. The date of the meeting, which usually takes place in June, is yet to be set, she said.

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