CEZ Quarterly Profit Jumps 24% on Albania Exit, CO2 Windfall

CEZ AS, the Czech Republic’s largest electricity company, reported first-quarter earnings that beat analyst estimates after exiting unprofitable Albanian operations and trading carbon permits.
Net income rose 24 percent to 17.9 billion koruna ($912 million) from 14.4 billion koruna in the year-earlier period, the Prague-based company said today in a statement. The average estimate of nine analysts in a Bloomberg survey was for profit of 14.7 billion koruna on that basis. Sales fell 1 percent to 60 billion koruna.
CEZ posted a one-time gain of 1.5 billion koruna from trading carbon permits in the quarter. Earnings were also buoyed by 1.9 billion koruna from the separation of operations in Albania, where the utility lost its license last year. These contributions helped counter the effect of lower power prices and enabled the company to raise earnings forecasts.
“CEZ managed to offset lower electricity prices and production with gains on carbon trading,” Petr Bartek, an analyst at Erste Group AG in Prague, said in a note. “The guidance seems still somewhat conservative in the light of the first-quarter results.”
The stock rose as much as 2.3 percent to a three-week high of 582 koruna, and traded at 573.7 koruna as of 12:25 p.m. in Prague.
The utility raised its full-year earnings guidance after concluding a 50-year contract for supplies of brown coal. The target for 2013 net income was increased to 37.5 billion koruna from 37 billion koruna, while the goal for earnings before interest, tax, depreciation and amortization was raised to 81 billion koruna from 80 billion koruna.
Boost Earnings
CEZ announced the sale of its Chvaletice coal-fired plant for 4.12 billion koruna on March 19, the same day supplier Czech Coal AS backed away from a threat to double the price of coal for CEZ’s Pocerady plant. The Chvaletice disposal, which may add a further 2 billion koruna to this year’s net income, hasn’t yet been calculated into the new earnings targets as it must first be approved by the anti-monopoly office, Chief Financial Officer Martin Novak told a press conference.
“The two agreements will significantly contribute to the future stability of our company as well as the stability of the coal and electricity market in the Czech Republic,” Chief Executive Officer Daniel Benes said in the statement.
Wind Park
The deals offset the effect of low electricity prices and a plunge in the value of carbon permits following the European Parliament’s rejection of a proposal to delay the issuance of some permits last month. First-quarter Ebitda was also boosted by about 400 million koruna from CEZ’s completed 600-megawatt wind park in Romania.
The company presold 63 percent of its 2014 electricity output for an average price of about 47.7 euros per megawatt hour, 39 percent of 2015 output at 45 euros per megawatt hour, and 15 percent of the projected 2016 output at 43 euros per megawatt hour, Trading Director Michal Skalka said during the press conference.
CEZ is fighting Bulgaria’s attempts to withdraw its license for alleged violations of the public procurement law. The national regulator said on April 16 it will make additional checks during the next two months before making a decision.
The utility is planning to pick a supplier of two new reactors at the Temelin nuclear power plant and sign a contract by the end of the year. Westinghouse Electric Co. and a Russian- Czech group led by Rosatom Corp. are vying for the contract valued at $10 billion.

Bloomberg, 07.05.2013