UPDATE 2-CEZ sees fourth year of declining profit on price drop

Thu Feb 28, 2013 7:17am EST

Related Topics

* 2012 net profit CZK 40.2 bln, meets reduced guidance

* CEZ expects net profit drop in 2013, EBITDA seen down 6 pct

* Lower power prices, Albania losses hit CEZ

* Says coal supply deal would boost outlook (Adds CEZ comments on guidance, output, share reaction)

By Jan Korselt and Jan Lopatka

PRAGUE, Feb 28 (Reuters) - Czech power company CEZ forecast a fourth straight year of declining profit in 2013 on Thursday, under pressure from falling electricity prices and lower domestic production.

CEZ, central Europe's largest listed company with market capitalisation of $16.5 billion, said it expected net profit before minorities to drop 8 percent to 37 billion crowns ($1.89 billion) this year -- its lowest level since 2006 -- from 40.2 billion crowns last year.

But it left room to revise the outlook upward if it agreed a new supply deal with bitter rival Czech Coal, with which it has battled over coal prices. Without a deal, CEZ predicted output at its Czech power plants would fall 6 percent in 2013.

Chief Executive Daniel Benes reiterated that the two sides were "very close" to a deal on a new long-term contract.

"If we sign (a deal) then of course we will adjust the use of our plants and the whole situation will be different. It will have a positive impact on the figures," he said.

CEZ, majority owned by the Czech state, has seen its shares sink this month to levels last seen at the start of the 2008 global financial crisis and faces an economy in a record-long recession, troubles in its Balkan markets and an EU probe.

CEZ shares led losses on the Prague bourse on Thursday, falling 1.7 percent to trade at 586.90 crowns.

The company met its revised 2012 guidance although net profit fell 1.5 percent last year because of weak power prices and losses in Albania, where pricing disputes with the state led to CEZ's forced exit last month.

CEZ trimmed its profit outlook in November due to losses at its Albanian distributor. Following its exit, CEZ is now seeking damages from the Balkan state through international arbitration.

The problems in Albania were the biggest drag on the company's core profit last year, Chief Financial Officer Martin Novak said, causing CEZ to lose 5.8 billion crowns in the country on this level.

The power group posted a 2 percent overall fall in core profit - earnings before interest, tax, depreciation and amortisation (EBITDA) - to 85.5 billion crowns in 2012. It said it expected a fall of 6 percent in 2013 to around 80 billion.

While the Albania exit is expected to help earnings next year, CEZ faces a new battle over its distribution licence in Bulgaria, where it has been caught in the middle of protests over high electricity bills in the EU's poorest member.

Bulgarian regulators have started a process to strip CEZ of its licence, saying it has evaded public procurement law among other malpractices. CEZ has denied wrongdoing and said it would defend its licence by all legal means.

Since posting a record 51.9 billion crown profit in 2009, CEZ has struggled to keep up with long-term power contract prices that have dropped by more than half as Europe battles a debt crisis and economic slowdown.

CEZ shares have lost 28 percent in the past year, a slightly bigger fall than stock in Gemran energy firm E.ON and deeper than the 16 percent drop seen by RWE.

Some analysts say that, on top of the weak economy, CEZ is losing investor confidence due to its problems abroad, police investigations at home into some of its past deals and slow progress in ending an EU probe in anti-competitive behavior. ($1 = 19.5572 Czech crowns) (Writing by Jason Hovet; editing by Mark Potter and Keiron Henderson)

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