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The representatives of CEZ a State Property Fund have signed a contract about the purchase of the state-owned shares in REAS, and CEZ and Osinek signed an agreement about the sale of its 51% equity share in CEPS

28. 6. 2002

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The representatives of CEZ a State Property Fund have signed a contract about the purchase of the state-owned shares in REAS, and CEZ and Osinek signed an agreement about the sale of its 51% equity share in CEPS

Today, the representatives of the CEZ Power Company and the Czech State Property Fund (SPF) signed a contract covering the purchase of state shares in eight regional distribution companies (REAS). The representatives of CEZ and Osinek company also concluded a contract which covers the sale of 51% CEZ-owned shares in the transmission network provider, CEPS company.

 

Today, the representatives of the CEZ Power Company and the Czech State Property Fund (SPF) signed a contract covering the purchase of state shares in eight regional distribution companies (REAS). The representatives of CEZ and Osinek company also concluded a contract which covers the sale of 51% CEZ-owned shares in the transmission network provider, CEPS company. The intended sale of another 15% share in CEPS to the Ministry of Labour and Social Affairs should be carried out in the immediate future.

By accelerating the integration process we may look forward to a decrease in the prices of electricity even in the course of this year. This would be especially true for the households supplied by rainbow electricity.

This interconnection is aimed principally at adapting the structure of the Czech power industry to the standard organisation layout of power companies in western Europe, and consequently at increasing the competitiveness of CEZ. Through this transaction, CEZ will build up a new position in the existing electricity sales and distribution network, quite in compliance with the market liberalisation principles valid in the EU electricity market the principles of free competition are already covered in the Czech Republic by a number of legislative regulations and the gradual opening of the electricity market is yet another guarantee of an established competitive environment.

The state sells its majority share in two distribution companies, StĹ™edoÄŤeska energetika (Central Bohemian Power Company) and ZapadoÄŤeska energetika (West Bohemian Power Company), and its minority share in the remaining six companies. If we take into consideration the fact that the German company E.ON has recently offered 2.4 billion CZK for a minority share in JCE (South Bohemian Power Company), the current pricing of the distribution companies seems to be appropriate. Another evidence resides in the fact that the analysis issued by Wood and Company brokerage house on 19.3. 2002 estimated the value of the equity share in REAS at 32.8 billion CZK, and the equity share in CEPS at 13.2 billion CZK. This estimation was almost identical with the one elaborated by an officially appointed expert, Mr. Robert MatiÄŤka.

  The newly established structure of power industry complies with the relevant EU standards and corresponds with the model of structuring or consolidating advanced power companies that provide for the whole chain covering raw material extraction, electricity production and sales. All significant European companies have already been interconnected according to this model, including e.g. the German companies E.ON and RWE, French EdF, Italian ENEL, Swedish Vatenfall, Belgian Electrabel, British Shell, etc. We have also sought prior approval of the EC Anti-Monopoly Authorities, whose reply was quite unambiguous. It has confirmed that the intended interconnection is a standard merger as applied in the EU countries, which pays full respect to the market principles. Moreover, the same interconnection has already taken place in the case of the Czech gas industry, said the Chairman of the Board of Directors and the Chief Executive of CEZ, Mr. Jaroslav Mil, in connection with this issue.

The sale and purchase of the state-owned shares in REAS and CEPS, as the next step in the process of privatising the state property participation in the entrepreneurial activities of CEZ (after the unsuccessful privatisation of CEZ and REAS through selling the CEZ to a foreign investor), was approved by governmental decrees passed on March 11, May 6 and June 12, 2002. The sale of state-owned shares in the power company, which had been jointly proposed by the Ministry of Industry and Commerce and the Ministry of Finance, concerns the equity participation in the eight REAS; in return, the CEZ will remunerate the state with a 66% share in its (fully owned) daughter company CEPS, a.s., plus a supplementary payment arising from the difference between the prices of the traded state-owned equity in REAS and CEZ equity participation in CEPS.

As for the sale of the 66% equity in CEPS, a. s., owned by CEZ Power Company; this share will be sold to a chosen company controlled by the SPF (51% equity share, i.e. 91 064 240 shares, will be transferred for payment to the OSINEK joint-stock company, a fully owned daughter company of the State Property Fund) and to the Czech state (15% equity share, i.e. 26 783 600 shares transferred to the Ministry of Labour and Social Affairs). An officially appointed expert determined the price of the 66 % shares at 15 billion CZK. Both parties agreed that yet another expert estimate would be carried out after the completion of the whole transaction. This second estimate may have some influence on the final price.

As for the purchase of the shares by CEZ; the shares of the eight REAS will be incorporated into the assets of CEZ, including all shares owned by SPF and the Czech Consolidation Agency (CCA) in those cases when the equity share of SPF (or CCA, respectively) together with the CEZ equity participation, accounts for a majority share in the individual REAS and 34%, resp. 33.4% of the equity share in those REAS, where the SPF and CEZ had been unable to acquire the decision-making majority. CEZ will attain majority equity participation in SeveroÄŤeska energetika (North Bohemian Power Company), Severomoravska energetika (North Moravian Power Company), StĹ™edoÄŤeska energeticka (Central Bohemian Power Company), VĂ˝chodoÄŤeska energetika (East Bohemian Power Company) and ZapadoÄŤeska energetika (West Bohemian Power Company).  CEZ will also attain blockage minority in the remaining REAS, (34% equity share in JCE and PRE, 33.4% in JME). An expert estimate of the aggregate price of all the traded shares in REAS amounts to 32.1 billion CZK. 

Ladislav Kriz, Press Officer