UPDATE 2-Balkan worries, power prices stifle CEZ outlook
* Q2 net profit CZK 10.79 bln vs CZK 10.58 bln seen in poll
* Holds off on change to guidance until asset tests
* Chance of writedowns hangs
* But better results boost shares (Adds CFO on guidance, Temelin delay, shares)
By Jan Korselt
PRAGUE, Aug 13 (Reuters) - Czech electricity producer CEZ opted not to deliver an expected increase to 2013 profit guidance on Tuesday, reflecting concerns that it may have to write down the value of some of its Balkan operations in the second half.
Analysts had expected majority state-owned CEZ to lift its guidance on the back of a near 2 billion-crown ($103 million) one-off gain on the EBITDA measure of profit due to its agreeing the sale of its Chvaletice thermal plant earlier this year.
"We are leaving a certain reserve just for these possible items ... which means we are keeping our outlook, and in the third or fourth quarter we will see how the situation develops," Chief Financial Officer Martin Novak said.
He declined to say what those items were, but analysts said the main risks when CEZ reevaluates its balance sheet later this year were to its Romanian and Bulgarian operations.
That means that, even after beating expectations for second quarter profits on Tuesday, CEZ is still set for a fourth year of falling earnings due to sinking electricity prices and slack demand in recession-hit markets including the Czech Republic.
Net profit is seen at 37.5 billion crowns this year - down by about a quarter since a record 2009 - while earnings before interest, tax, depreciation and amortisation (EBITDA) should fall to 81 billion.
In Romania, the government has delayed paying subsidies for renewable energy projects which may impact the market value of a 600 MW wind farm CEZ operates there. While a cut in distribution fees in Bulgaria may also reduce the value of its business in the Balkan country.
"The risk of a writedown will last the rest of the year and I would not expect they will raise the outlook for this year next (quarter)," Komercni Banka analyst Josef Nemy said.
Analysts have also said a writedown could come from CEZ's gas-fired Pocerady plant but CEZ officials said on Tuesday they did not expect one this year.
Second-quarter attributable net profit fell 16 percent to 10.79 billion crowns ($555.26 million), a touch better than the average estimate in a Reuters poll of 10.58 billion. Revenue also beat expectations at 53.13 billion crowns.
The better-than-expected headline figures helped boost CEZ shares, down almost 35 percent this year, by 1.4 percent.
Like other European utilities, majority state-owned CEZ is grappling with wholesale power prices that have roughly halved since the start of the euro zone crisis.
Germany's biggest utility E.ON warned on Tuesday that plunging prices and competition from renewable energy would continue to gnaw at its profits after it posted a 15 percent drop in first-half core earnings.
But CEZ is also battling regulatory issues in some foreign subsidiaries and prospects of higher taxes if a centre-left government takes power after an election seen later this year.
Uncertainty, too, is growing over the expansion of its Temelin nuclear power plant, the country's largest ever energy investment expected to cost more than $10 billion.
The company has delayed picking a winner this year to build the two new units and said on Tuesday a final decision on Temelin could be a matter of years. Chief Executive Daniel Benes said he could not say if that means one or two years.
CEZ has been unable to agree a scheme with the state to effectively fix the price for Temelin's output and ensure it recoups its investment, which CEZ says is a necessary condition. Analysts have said the investment could hit dividends in the future.
Previously central Europe's biggest listed company, CEZ's market capitalisation has fallen from $50 billion before the 2008 financial crisis to just $12.3 billion. ($1 = 19.4324 Czech crowns) (Additional reporting by Jason Hovet, Jan Lopatka and Robert Mueller; Editing by Patrick Graham)