You can also listen to the commentary in the audio version.
–
The state’s loan to the Czech energy giant, ČEZ, in the amount of 3 billion euros (about 75 billion CZK) intended for advances in their energy deals is extremely questionable by comments emphasizing the illegitimacy or unfairness of a potential extraordinary tax on the company’s profits.
–
At the same time, however, this loan of a volume that is already significant in macroeconomic terms dramatically reduces the probability that the company will find itself in existential problems. But of course, on the contrary, this increases the value of the company’s shares, without the state receiving anything for it except interest from the loan. It is more than surprising that a loan of a volume that would cover, for example, more than three quarters of the Czech state’s defense expenditures this year, does not become the subject of a more lively political debate.
–
First, let’s specify what the state ČEZ is lending for. The Czech giant earns most of its income from the sale of electricity by selling electricity that it will only produce in the future, thereby securing – fixing its price. At present, however, the “today’s” price of electricity is considerably higher than the price at which ČEZ sold it, and thus it is forced to guarantee itself, that is, to pledge funds to the energy exchange in Leipzig corresponding to the difference between today’s price of electricity and the much lower price for which it was sold in committed to deliver in the future. The more the price of energy rises, the more funds ČEZ will be forced to supply to the exchange for advances.
–
Therefore, CEZ does not make money from the rising price of electricity for already concluded contracts, on the contrary, it has to deliver an ever-increasing advance on these contracts to the exchange on which it concluded them (mostly, I assume, to Leipzig). Of course, it earns from the energy it produces beyond the scope of the concluded contracts. Just to give you an idea, through future contracts, ČEZ is selling more than three quarters of the electricity it will produce this year, and at the moment half of the electricity it will produce next year.
–
Perhaps a useful comparison for someone else – the sale of energy produced in the future is equivalent to the sale of anything, typically of course “short” shares, with delivery in the future. If the price of what I sold “short” today with delivery in the future falls, I make a profit, but if it goes up, I make a loss, and I will often be asked to deliver some collateral that reflects my loss. It is no different for the sale of electricity with future delivery.
–
Abnormal time, abnormal solution
The fact that ČEZ needs to borrow funds from the state that it would already have difficulty obtaining from private financial institutions is, in my opinion, just another reflection of the abnormality of today’s times and the disruption in which the European energy markets are found. Abnormal times lead to the search for and finding abnormal, non-market solutions.
–
If, of course, we accept that ČEZ will receive a loan from the state that solves risks that could, in the extreme case, even represent an existential problem for it, we should also be prepared for the fact that at such a time, simply to ensure the energy security of citizens or the stability of the budget they debate and adopt even extraordinary solutions. Such as an extraordinary sectoral tax on energy sold above long-term normal prices.
–
Already because the company evidently considered these prices to be “good” when they happily sold their future production for them. In the same way, at a time when many suppliers are raising prices for their customers, despite concluded contracts, citing “force majeure” and, in addition, the fact that they will not supply them with energy otherwise, we can ask why ČEZ is not considering such a procedure.
–
Is the management of the company worried that there would be no interest in such energy in today’s situation? Kinda funny…
–
If, on the other hand, someone considers today’s times to be so standard that the state should treat the local energy giant as an ordinary shareholder on the ordinary market, it must be stated that the loan makes no sense. If the time is standard, one cannot help but state that the company’s management concluded not very favorable contracts in the past, which now increase the company’s risks, but today it should resolve this with standard market entities, and thus borrow from banks and other financial institutions.
–
And if this is not possible, the value of the company, and thus primarily of its shares, simply has to reflect these existential risks and fall. Let the shareholders sort it out with the management.
–
On the contrary, if the state solves the situation of this “ordinary shareholder” with an extremely large loan and, in the best case, at ordinary interest (it is worth considering that the telecommunications company CETIN, for example, borrowed euros for five years this year for a similar interest), it reduces this “ordinary shareholder” its risks and increases the value of shares to shareholders without asking for anything in return.
–
And that it would probably be a lot to ask for, is shown by examples of how similar situations are handled by other EU governments beyond our borders.
–
The state helped…
But from the point of view of the increase in the value of shares, it is very likely that the “needle is out of the bag”. The state simply “greased” ČEZ shareholders with a loan, from whom, according to the statement, it will want to buy back the shares that it valued itself in the future.
–
In my opinion, the state increased the value of ČEZ by eliminating the risks to its liquidity without corresponding consideration, and I can imagine the chance of a reversal of such a situation when using the phrase “unauthorized support”. I’m not a lawyer, I’m not going to go down this path.
–
Personally, I believe that in times of “out of joint” one can help the country’s main electricity supplier and one can ask for more than we want for it. None of this is a reflection of the anti-market nature of the government that rules at such a time.
–
And one more note about communication. The loan of 75 billion crowns to ČEZ offers those who are waging a political battle with today’s government the opportunity to create a summary such as “the state lends ČEZ huge sums of money so that it will not be excluded from the Leipzig Stock Exchange and can thus continue to sell cheaply produced energy in our country through it” .
–
Perhaps it would therefore be good if the government or its ministries prepared some kind of communication for the given situation. So far, 99% of the communication about the loan has been conducted only by the spokesperson of ČEZ.
—
