The state will soon increase its share in the electricity producer ČEZ to almost 70%. Only one thing remains to be done – the company has to cancel 10% of shares it bought back between July 2007 and April 2008. The cancellation has been dragging on due to complaints from creditors, but it will most likely come by the end of February.
ČEZ has failed to reach an agreement with a creditor. According to HN findings, it is the customs authority. “The talks seem to have entered the final stage. Then we will ask for the share cancellation,” ČEZ spokesman Ladislav Kříž said. “And at the end of February we will say what will be further steps regarding another buyback,” he added.
The original plan was for ČEZ to have everything done by the end of last year. However, a proposal for a share capital cut could not be filed without an agreement with creditors.
The cancellation of shares is a condition for the launch of the buyback of further 10% of shares that has been approved already.
Will ČEZ pay record-high dividend?
As soon as ČEZ cancels the repurchased shares, the state’s position as the company’s majority owner will be reinforced despite the fact that the government got rid of 4.6% of shares. The state wanted to sell 7%, but Finance Minister Miroslav Kalousek halted the sale owing to decreasing stock prices.
Before the sale started in August 2007, the state-held share in ČEZ equalled 67.61%, and now it is 63%. After the cancellation of shares, the stake will increase to nearly 70% and will be the highest since the cupon privatisation.
The state, which raised CZK 34 billion through the sale of ČEZ shares, can expect a higher dividend this year.
ČEZ has announced it would distribute 50-60% of its profit among shareholders. If the dividend is in the middle of the interval and with net earnings expected at nearly CZK 49 billion, shareholders would get a record CZK 50 per share.
“Considering the financial crisis and the need to rescue the state budget, it is possible that the state as the majority owner decides on a dividend payment at the upper limit of the interval. That would brought a dividend of as many as CZK 55 per share,” Cyrrus analyst Marek Hatlapatka said.
In that case government revenues would climb to CZK 20.5 billion. Moreover, the crisis still may force the state to shift the dividend interval.
Last year, ČEZ paid out the record-high dividend of CZK 40 per share, which contributed more than CZK 15 billion to the state coffers.
Price favourable for buyback
What the second round of the share buyback is like and whether at all it takes place is not clear yet. But prices are very favourable – ČEZ shares are cheap after falls on financial markets. During the first round of the buyback, the price per share was never below CZK 1,000 and on some days even exceeded CZK 1,400. Last Friday, ČEZ shares closed trading at CZK 838 apiece.
“Besides the share price, it also depends on acquisition opportunities and on the price of money, that means possibilities of external financing. All of these factors will influence our decision,” ČEZ CFO Martin Novák told HN.
Costly and hard-to-obtain financing would rather speak against another buyback, said Novák. But since the financial crisis broke out and the credit market literally froze, it has been getting warmer slowly, he added.
“The situation on the credit markets is gradually improving for companies with a good rating. But it is far from what was common before the crisis,” Novák said.
ČEZ executive director Martin Roman admitted earlier that the second round of the buyback would be on a more irregular basis compared with the first one. Shareholders gave their consent to another buyback in May 2008. It will be in force until November.
Analysts also say that the second round of the buyback would be more relaxed. “ČEZ could use this tool to a greater extent when there are major swings on the market, that is, when share prices go down,” Hatlapatka said.
