By Jan Lopatka PRAGUE, April 24 (Reuters) - The Czech government welcomes a plan by 70% state-owned electricity producer CEZ to spin off its distribution and other non-production assets and offer a
Czech government backs CEZ spin-off as first step to state takeover, minister says
Government Strategy and CEZ Spin-off Details
By Jan Lopatka
Government Support for CEZ Spin-off
PRAGUE, April 24 (Reuters) - The Czech government is backing a plan by 70% state-owned electricity producer CEZ to spin off its distribution and other non-production assets and offer a minority stake in them to investors, Industry and Trade Minister Karel Havlicek said on Friday.
The plan supports the Czech government's aim to regain direct control over electricity generation, while keeping part of CEZ listed to attract private capital and limit the cost to taxpayers.
Financial and Ownership Implications
Havlicek told reporters the plan would generate cash for a buyout of minority shareholders that would give the government full ownership of CEZ's production business while not harming their rights, burdening the state budget or significantly hurting CEZ's cash flow.
CEZ is one of Europe's largest electricity utilities with a market capitalisation of $31 billion.
The government, which took office late last year, has made taking control of at least CEZ's production operations a priority.
Official Statements and Next Steps
"Yesterday's decision corresponds to our aim. We welcome it, and without doubt it is the first step for it to be achieved," Havlicek told reporters.
The plan will be discussed at CEZ's annual meeting on June 1 and, with government support, should be approved.
Details of the Spin-off Process
Minority Stake and Market Listing
Havlicek said he expected CEZ to float the minority - which CEZ put at up to 49% - of the spun-off assets, including customer sales, trading and power and gas distribution on the Prague Stock Exchange. This would keep a large piece of CEZ listed while the parent company, in which the government aims to hold 100%, would be taken off the market.
Options for Asset Sale
CEZ Chief Executive Daniel Benes told a news conference on Friday the company would weigh all options for a potential sale, including a stock market offering, direct sale, or a share swap in the unit for shares in the parent company. The process may start next year, he said.
Expected Financial Performance
Benes said assets to be spun off are expected to make about half of the group's forecast EBITDA core profitability measure of 103 to 108 billion crowns ($4.95 billion to $5.19 billion) this year.
Leadership and Investor Interest
CEZ Deputy Chairman Pavel Cyrani is the natural candidate to lead the new subsidiary, Benes said.
He said spinning off the mostly regulated assets, such as power and gas distribution, would attract interest from a broader range of investors who have avoided CEZ due to its nuclear or coal assets, and this could increase its valuation.
Additional Information
($1 = 20.8000 Czech crowns)
(Reporting by Jan Lopatka; Editing by Joe Bavier and Jane Merriman)
