CEZ sees higher hedged power prices in 2019 – CFO

* CFO says rising wholesale prices should lift hedged prices
* Confirms dividend policy of 60-100 pct payout in 2017
* Says still in talks over Bulgaria asset sale
* Says drawing up rough ideas on possible split, up to new govt
By Jason Hovet

PRAGUE, Nov 7 – Czech utility CEZ expects the average price of pre-sold 2019 output to be higher than in 2018 due to rising wholesale prices, Chief Financial Officer Martin Novak said.
Speaking to news agencies after the largely state-owned company’s third-quarter results on Tuesday, Novak confirmed CEZ’s plan to pay out 60-100 percent of 2017 adjusted net income.
Wholesale prices have rebounded, but CEZ has not immediately benefited as it hedges future sales. It posted third-quarter adjusted net income – from which it pays dividends – near zero on Tuesday.
The utility has pre-sold 81 percent of its 2018 output at a price of 30 euros per megawatt hour (MWh) and 57 percent of 2019 output at 29.5 euros/MWh. Around a quarter of 2020 output has been sold with an average price of 33 euros/MWh.
Czech benchmark contracts for 2018 were trading at 38.17 euros on Tuesday while those for 2019 were at 36.70 euros.
“We still have some electricity to sell (for 2019) and of course at higher prices,” Novak told reporters, suggesting the increase could be of a few euros. “Simple mathematics should bring us to higher levels than 2018 prices.”
CEZ, like other European utilities, has struggled with weak power prices and has seen profit fall since 2009. It has shifted its business towards renewable sources, energy services and investing in new technology start-ups.
The company, 70 percent-owned by the state, expects adjusted net income, stripping out extraordinary effects, to dip to 19 billion crowns this year from 19.6 billion last year.
FUTURE
CEZ recently reached a deal to sell its Varna power plant in Bulgaria. Daily Hospodarske Noviny reported on Tuesday that the firm was close to a deal with India’s Future Energy for the remaining assets, including a distributor.
Novak, though, said talks with several parties were still ongoing.
He also said CEZ could still look at acquisitions in traditional sources like coal-fired power plants and wanted to grow its heating business.
CEZ’s most profitable energy source remains nuclear. The company cancelled a tender to expand its Temelin nuclear power plant in 2014 after not getting state guarantees on prices.
It still wants some state support, and the last government was looking at three options: providing guarantees to a CEZ unit to build new blocks, having the state take over the project, or splitting CEZ up to let the state take over its nuclear and coal units and leaving the rest to shareholders.
Novak said CEZ would draw up rough ideas for strategy possibilities for the third option by the end of the year and has taken on external advisers.
“It will really be about strategic opportunities and possibilities and it will be up to the new government (following an October election) to decide what the strategic thinking of the majority shareholder is in that matter,” he said.

Source: Reuters