September 22, 2017 / 4:38 PM / 9 months ago

Czech officials ask state controlled CEZ to look at spliting the company

PRAGUE, Sept 22 (Reuters) - Top Czech government officials have asked electricity producer CEZ to look closely into the possibility of spinning off distribution and renewable assets with the government taking full control of nuclear and coal plants, sources close to the process said.

The government, which owns a 70 percent stake in CEZ , has been looking into how to finance the construction of new nuclear units which CEZ has refused to build without government backing given the high cost and low power prices.

Splitting CEZ, the biggest publicly traded Czech firm with a market capitalisation of $10.8 billion, would allow the government to press ahead with nuclear construction under the part of the firm that would be fully state-owned after the transaction.

“There is a task for CEZ to work on the option of a split and sale of the non-production part,” said one source, who was present at a meeting of senior government officials on Monday.

The government has been working with three options - either a CEZ subsidiary would build new nuclear units, with some form of state backing; or the government would buy a small CEZ unit to build the plants; the third option is carving out a bigger part of CEZ.

The last option would mean the firm’s distribution, sales, energy services and renewable plants could be spun off and anything up to 100 percent could be sold to private investors, a presentation for the meeting seen by Reuters said.

Officials at the meeting, which included several cabinet members and Prime Minister Bohuslav Sobotka, asked CEZ to prepare details on the spin-off option by the end of the year, one source said, in line with a timeline suggested in the presentation seen by Reuters.

There has been no formal cabinet request for CEZ to work on the plan. A government committee for nuclear energy is expected to discuss the matter on Sept. 27.

A spokesman for CEZ had no comment. The prime minister’s spokesman did not comment beyond saying the government was taking steps in line with an overall nuclear energy strategy. The Industry Ministry and Finance Ministry had no comment.

While working on the split option shows it is being given serious consideration, any decision will only be made by the next cabinet after an election due on October 20-21.

The party likely to win the most votes is the ANO movement of Andrej Babis, who has been critical of CEZ’s current management and in the past said CEZ could pay for new nuclear units itself.

The presentation seen by Reuters said the overall CEZ transformation could raise 100 billion crowns for government coffers if all of the new distribution and renewables unit is sold to investors. It also listed scenarios under which the government would keep some share in the spun-off firm. (Reporting by Jan Lopatka and Robert Muller; Editing by Elaine Hardcastle)

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