UPDATE 2-Czech CEZ seals MOL alliance, raises outlook

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By Jan Korselt

Czech power firm CEZ agreed on Thursday to buy a 7 percent stake in Hungarian oil and gas firm MOL , sealing an alliance that will boost CEZ's presence in the region and may help ward off a takeover bid for MOL.

CEZ, the largest listed company in central Europe with market capitalisation of $44.9 billion, also raised its profit outlook and dividend, and confirmed plans to take over a lignite mine key to plans for a renewal of its power plant portfolio.

MOL said in a separate statement CEZ was buying its stock directly from the company at 30,000 forints ($169.7) per share, and MOL would have a three-year option to buy it back at 20,000 forints.

The Czech firm said that after subtracting an option premium it will receive, it would pay around 560 million euros ($804.6 million) for the stake.

"Cooperation with MOL is an opportunity for CEZ to strengthen its position on electricity markets in central and south-eastern Europe with the contribution of a strong, established partner," CEZ Chief Executive Martin Roman said in a statement.

CEZ shares closed 1.3 percent up at 1,384 crowns, rising after the profit outlook and closing before the news on MOL. The Hungarian company's stock closed 0.46 percent down at 23,600.

The two firms formed a joint venture that will build gas-fired power plants, starting with two 800-megawatt stations at MOL's refineries in Hungary and Slovakia that will cost 1.4 billion euros. The 50-50 joint venture will also focus on Slovenia and Croatia.

Analysts have said the alliance, which the firms roughly outlined in August, may help MOL in its defence against Austrian rival OMV , which has accumulated a 20 percent stake in MOL and has said it was ready to bid $20 billion for the firm, which has rejected the approach.

MOL and related parties control about 40 percent of the firm's stock, including the 7 percent sold to CEZ.

EARNINGS OUTLOOK

CEZ also raised its 2007 net profit forecast to 42.6 billion crowns ($2.33 billion) before minorities from a previous estimate of 41.4 billion.

It raised dividend payout ratio to 50-60 percent of net profit from the previous 40-50 percent. The ratio is related to profit before one-offs, forecast by the company at 37.3 billion crowns in 2007.

The firm added it expected 2008 net profit to rise to 46.6 billion crowns.

It confirmed it has been in talks to take over Czech lignite miner Mostecka Uhelna, but the negotiations have so far yielded no result.

CEZ said it would potentially acquire the firm, valued by Czech media at 28 billion crowns, together with investment group J&T, because CEZ was only interested in one of the firm's mines. (Reporting by Jan Lopatka, Editing by Alan Crosby, Paul Bolding)

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Keywords: CEZ/OUTLOOK

[PRAGUE/Reuters/Finance.cz]