RPT-CEZ falls as government criticised over sale plans

...

By Jan Lopatka

Shares in CEZ, the biggest Czech company, fell 2 percent on Tuesday, as the opposition party and analysts criticised government for keeping quiet on how it plans to sell about 44 billion crowns' ($2.09 billion) worth of the company.

The government decided earlier this year to sell a stake in CEZ , which has a market capitalisation of $30 billion, on the capital market, but has since given no details.

It held a secret meeting on Monday to discuss details of the process, and gave no information other than saying that Erste Bank unit Ceska Sporitelna would be one of the selling agents.

A Ceska Sporitelna spokeswoman confirmed the bank was taking part in the process, but declined to give details. Government and Finance Ministry spokesmen declined to comment on the government meeting on Monday.

"This is a scandalous process which is entirely at odds with the rules in a civilised European society," said Jiri Paroubek, former prime minister and head of the leftist opposition Social Democrats.

CEZ shares were down 2 percent at 1,042 crowns at 1355 GMT on Tuesday, the day's biggest loser on the Prague bourse.

Analyst Jan Prochazka of the brokerage Cyrrus said uncertainty over how the shares would be sold was behind the weakness.

"I have not seen any information about which option they (the government) will use, and that is the most important thing," he said.

Analyst Dan Karpisek of CA IB agreed the government should pick one of the available options and make it public.

"This is not very transparent; they should simply announce how they will do it," he said.

The government could offer the shares in small bits on the market. But it would take over 160 days to sell 7 percent if it offered quarter of a million shares on a daily basis, and the government needs the money fast in order to pay for planned road construction projects.

Another way to sell would be by accelerated book-building, a process in which a broker would solicit bids from various investors and then sell the shares at once.

"If they use book-building, it will go through totally without problems," said Prochazka, adding that a sale through the market could put the share price under pressure.

The government has also voiced concern over potential Russian influence in the energy sector, and has been looking at ways to address that in the privatisation.

Some ministers had in the past mulled selling the stock to CEZ itself, but Prochazka said this raised legal questions.

While the government is preparing its sale, CEZ has started a share buy-back of up to 10 percent to give back cash to shareholders amid limited acquisition opportunities in central and eastern Europe.

The combination of the buy-back and the sale will mean that the government will keep a roughly 67 percent stake in the firm.

CEZ profits and stock have been booming due to rising power prices, fed by shortages in Germany and in the Balkans.

[PRAGUE/Reuters/Finance.cz]