You don’t just see such growth. Since the beginning of the year, the shares of the energy giant ČEZ have been strengthening sharply, when on Friday afternoon the title was traded on the Prague Stock Exchange just under a thousand a piece. On Tuesday, the price reached up to CZK 1,047 per piece, which was the highest since mid-August last year.
The reason for such a strong growth this time is not the increase in electricity prices on the stock exchanges, but speculation surrounding the division of the ČEZ group and the 100% control of the production part by the state. “Rocket growth is driven by the fuel of a possible restructuring of the company, which is increasingly resonating in the ether,” Komerční banka analyst Bohumil Trampota commented on the strengthening of shares.
The most important shareholder of ČEZ is the state, with a share of around 70 percent of the share capital, while the rest of the share package is held by minority shareholders.
It is between them and the state that things have been boiling over in recent months. The Ministry of Justice is revising the draft amendment to the law, which would allow the state to enforce the division of ČEZ. On Wednesday, the newspaper Právo reported this information with reference to its reliable sources. The amendment is subject to criticism by lawyers and minority shareholders of ČEZ, and its original form was not even recommended by the Legislative Council of the Government, as reported by SZ Byznys.
According to the original proposal, 85 percent of the shareholders present at the general meeting, attended by at least two-thirds of the shareholders, would be sufficient to approve the division of a joint-stock company of strategic interest – now the limit of 90 percent of shareholders applies, but it is difficult to meet.
“With the new rule, the state would easily push through the division of ČEZ, at general meetings before the covid pandemic around 80 percent of shareholders were normally present, since covid the participation is lower,” commented ČEZ minority shareholder Michal Šnobr on the original form for SZ Byznys.
Redemption bets
“Government officials have set themselves the goal of ensuring national energy security for this year. In this respect, the restructuring of ČEZ plays a pivotal role, in which the state is trying to gain greater control, especially in terms of the production part. ČEZ shares have gained almost 30 percent since the beginning of the year,” said equity analyst Cuong Manh Le from Patria Finance.
In his opinion, this increase is mainly due to bets on the purchase of shares of minority shareholders by the state at a price including a premium to the market share price. “Another supporting factor could be the stabilization of prices on the electricity market, which could lead to an earlier end to government measures in the form of price ceilings and an extraordinary tax already after 2023,” the analyst estimates.
However, according to an interview in E15, the minority shareholder of the energy company and one of the richest people in the country, Pavel Tykač, does not believe that ČEZ will eventually be nationalized. He does not assume that the government is ready to pay the amount that comes out of the expert opinion.
During his visit to the Ministry of Finance on Thursday, Prime Minister Petr Fiala (ODS) reiterated that the government wants to strengthen the state’s control over the energy infrastructure. The Prime Minister expects a decision on how to achieve this by the end of this year. The statement is consistent with previous statements by government officials. Speculation on the purchase of all or part of the company by the state is one of the reasons for the growth of shares in recent weeks.
“In the case of fair treatment of minorities, as assured by Prime Minister Fiala, the government would have to offer other shareholders a significant premium for full control of the entire company or its production part. But it’s a question of what the government will ultimately decide on,” says Česká spořitelna equity analyst Petr Bártek. According to him, the government must take into account not only the energy sector, but also the economy.
Above average volumes
“ČEZ is by far the most important title traded on the stock exchange, almost 14 percent of its shares are held by tens of thousands of small investors, who often perceive them as their ‘supplementary pension insurance’. At the same time, it is also possible to arrange the necessary investments in new power plants in a completely different way than by increasing the government’s stake in ČEZ. The buyout of minorities or the division of the company are thus far from certain, and this also results in the current high volatility and high volumes of trading with this title,” explains Bártek.
Only twice in the last year did the volume of trading in ČEZ shares exceed one billion crowns. During Thursday’s trading session, the volume of traded shares amounted to over CZK 950 million, thus approaching the billion mark. On Friday, the volume of traded shares was CZK 647.6 billion.
“Investor activity continued to intensify, when already in the previous two sessions liquidity rose to an above-average amount of more than CZK 700 million. For comparison, last year the average daily trading volume on ČEZ shares was roughly a third. ČEZ shares recorded the largest volume of CZK 1.14 billion in 2022 on June 27. On that day, the shares fell by more than a tenth, when they reacted negatively to the then initial considerations about the sector tax,” comments Jiří Zendulka from the Kurzy.cz portal on the increased activity.
