February 3, 2017 / 9:50 AM / in a year

UPDATE 1-CEZ chief says company might split into two -Lidove Noviny

(Adds further company comment, minister comment, Europe examples)

PRAGUE, Feb 3 (Reuters) - Czech electricity producer CEZ could split into two parts in the future, one responsible for enlarging nuclear power plants, and the other focusing on new sources of energy, Chief Executive Daniel Benes told Lidove Noviny newspaper.

European utilities have struggled as a result of weak wholesale electricity prices, forcing some such as German groups E.ON or RWE to hive off healthier parts of their businesses.

CEZ’s profits have declined since the global economic crisis of 2008-09 and it has been making a push into renewable and other new energy businesses while also selling older coal-fired plants and focusing on upgraded units.

It is also looking to expand its nuclear power fleet but has run into financing issues after failing to secure price guarantees from the state, its 70 percent owner.

Benes told Lidove Noviny that talks with the government on a possible future structure of CEZ, central Europe’s largest listed utility, were only just starting.

“Either we find a compromise and we will fulfill all the targets in an optimal way, or the shareholders come to a conclusion that it is better to follow the path on which the company could split for example,” Benes was quoted as saying in the article published on Friday.

“This debate with politicians is only just beginning and it is not clear at all, how it will end.”

A CEZ spokesman said there was no time frame yet.

“We have presented possibilities to them (government)... it can even stay as it is now, eventually,” spokesman Ladislav Kriz said.

Talks on CEZ’s future shape could take more than a year based on the German experience. Komercni Banka analysts said they did not expect any decisions before national elections in October.

Benes cited RWE and E.ON as one model and said the state could hold a smaller majority stake in the new energy business.

Industry Minister Jan Mladek, a member of Social Democrat party, supported the idea of a split, according to the paper.

Finance Minister Andrej Babis, whose ministry controls the state’s holding in CEZ and who is leader of the ANO party that looks on course to win in the October elections, did not answer the paper’s request for comment. Babis has said in the past CEZ should finance its nuclear power expansion.

CEZ cancelled a multi-billion dollar tender to enlarge its Temelin nuclear power plant in 2014 because of financing risks after the government refused to provide power price guarantees.

Both CEZ and the state are looking to expand the country’s existing nuclear plants in the future but have not yet agreed on how to finance this. (Reporting by Robert Muller Writing by Jason Hovet. Editing by Jane Merriman)

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