UPDATE 1-Czech cabinet approves sale of CEZ stake

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PRAGUE, March 19 (Reuters) - The Czech cabinet approved on Monday a plan to sell a 7 percent stake in electricity maker CEZ on the capital market in order to fund road construction, Finance Minister Miroslav Kalousek said.

The state holds 67.6 percent in CEZ, the largest Czech company, which has a market capitalisation of $24.8 billion.

The 7 percent stake is worth 36.2 billion crowns ($1.74 billion).

"The revenue from the sale of the 7 percent will be a state budget revenue, which will then be transferred into the State Fund of Transport Infrastructure," Kalousek told a news conference.

The company is considering a simultaneous share buyback, expected to be discussed at a general meeting on April 23.

Kalousek declined to say what the government's position on the potential buyback plan would be.

CEZ shares dropped 0.1 percent to close at 874 crowns, underperforming the PX index which gained 0.64 percent.

The stock has fallen back from a record 1,013 crowns in December but is still about 7 percent up on a year ago.

Prime Minister Mirek Topolanek said the government wanted to get 31 billion crowns from the sale, in line with an amount it has previously said was needed for the road fund.

The sale has met some opposition because the state will lose its qualified two-third majority in the company, which is needed to make some significant company decisions.

But Kalousek and Industry and Trade Minister Martin Riman have said the government should still be able to command two thirds of the vote at general meetings, which are not attended by many small shareholders.

The government has not made any plans for further sales of CEZ, with one eye on energy security.

The Finance Ministry has said that without the privatisation revenue, the central state budget deficit would rise to 122 billion crowns this year from the planned 91.3 billion crowns.