Fitch affirms Czech energy group CEZ at A- but says it may review ratings on more aggressive dividend policy

By bne IntelliNews April 18, 2014

Fitch Ratings has affirmed the long-term foreign currency Issuer Default Rating (IDR) of the largest Czech energy producer CEZ at A-, with a stable outlook, and its short-term foreign currency IDR at F2 citing the company’s prudent financial policy amid a challenging environment, the ratings agency said in a statement. Fitch has also affirmed CEZ's foreign currency senior unsecured rating at A-.

Fitch said it expects CEZ’s funds from operations to decrease in both 2014 and 2015 mainly as a result of falling power prices but this will be offset by lower capital investments. The ratings agency assesses positively CEZ’s decision to scrap an up to CZK 300bn (EUR 11bn) tender to expand its nuclear power plant Temelin. The company decided on April 10 to cancel the tender citing low power prices and the government’s refusal to provide guarantees on the purchase price of electricity from the two new units.

Without the investments for the new nuclear capacity Fitch forecasts CEZ's free cash from dividends to turn positive from 2015.

Yet, the ratings agency cautioned that it may review CEZ ratings if the company adopts a more aggressive dividend policy. CEZ usually pays between 50% to 60% of earnings to shareholders but finance minister Andrej Babis has proposed the company to distribute its full-2013 profit in dividends. CEZ is nearly 70% owned by state.

At the moment Fitch sees as limited the option for raising CEZ's ratings. Still, an upward revision may be triggered by stronger business risk profile due to a significantly higher share or regulated and quasi-regulated businesses in EBITDA.

Related Articles

EU to fund feasibility study on Slovakia’s proposed Eastring gas link to Balkans

The EU has agreed to help fund a feasibility study on the Eastring pipeline project, which would link Slovakia to the Balkan markets, Slovak transmission system operator Eustream announced on May 26. ... more

Hungarian PM's "proxy" moves into the nuclear industry as Paks tenders approach

Firms controlled by Hungarian oligarch Lorinc Meszaros have purchased a 51% stake in the Hungarian subsidiary of Czech nuclear ... more

CEZ set to place Czech nuclear assets in new unit

Czech state-controlled energy group CEZ is set to place all nuclear-related activities into a new division, local media reported on May 17. The move raises speculation that the company is ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Dismiss