East EU’s Top Utility Gets Relief as Czechs Scrap Split Plan

Krystof Chamonikolas
·2 min read
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(Bloomberg) -- Czech lawmakers scrapped a proposal designed to help the government revamp dominant electricity utility CEZ AS, ending a yearlong tussle with investors that have weighed on the share price.

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While the lower chamber of parliament approved a bill on corporate overhauls on Wednesday, it voted to remove a contested clause that would allow the state to take over part of CEZ — where it holds 70% — without the consent of other owners. Bloomberg reported earlier that the ruling coalition had agreed to adjust the legislation to alleviate shareholders’ concerns about the fate of the $20 billion company.

Last year, the biggest traded power producer in eastern Europe lost about $2 billion in market value on the day when Prime Minister Petr Fiala’s cabinet approved the draft law. Since then, minority shareholders have threatened lawsuits and some government advisers have warned the plan would pose excessive violation of ownership rights.

Read more: Czechs to Scrap Asset Split Plan Weighing on $18 Billion Utility

The bill was devised in the midst of Europe’s energy crisis, which prompted Fiala to declare that the state wanted to gain more control over electricity production. As power and natural gas prices dropped, Fiala has stopped referring specifically to taking over generation assets and has focused on other moves, such as buying gas storage facilities and pipelines.

“Let’s all remember in this assembly where the energy prices were peaking at that time, and when some paternalistic wave of the state’s approach to energy sector — here it was CEZ — was rolling across Europe,” Karel Haas, the lawmaker supervising the proposal in parliament, said before the vote.

The removal of the provision on uneven asset splits gives some relief to CEZ investors, who have also grappled with windfall taxes, declining power prices and a shrinking coal business. CEZ shares rose 2% to 858.5 koruna, the highest close since March 20 and valuing the company at 462 billion koruna ($19.8 billion).

Still, the motion complicates the government’s efforts to get greater control over energy infrastructure at a time when it plans to build more nuclear reactors that potentially cost tens of billions of dollars.

(Updates with closing share price in sixth paragraph.)

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