Czech Equity Daily: 01/12/10; CEZ, NWR

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Index PX: 1,107 points (down 1.1% d/d); volume: CZK 2,417m (USD 128m)

Market comment
Activity on the Prague Stock Exchange was quite high yesterday with total traded volumes amounting to almost CZK 2.5bn. This was mainly due to CME with nice CZK 1.1bn on the back of a removal of the stock from the MSCI index. CME eventually closed up 1.7% (CZK 356) while other blue chips were mostly declining. CEZ lost 1.6% (CZK 751), Erste Bank declined by 1.5% (CZK 749) and Komercni banka -1.6% (CZK 4,050). Telefonica O2 CR managed to close slightly in the black, up 0.1% (CZK 371.5). Unipetrol grew by 0.5% (CZK 195) and Fortuna by 4.0% (CZK 93.4). The PX Index closed down 1.1%.

NWR: Neutral (Analyst: Bohumil Trampota)
NWR announced that its offer for Bogdanka was not successful as the 75% acceptance threshold was not met. The offer period ended on Monday 29 November. The takeover bid (PLN 100.75/share) had triggered very strong opposition and Bogdanka's biggest shareholders as well as its management had rejected the bid as too low. According to NWR's spokesperson, the company has no intention to submit a new bid but will continue to invest in its Polish projects and will monitor investment opportunities in Poland and Ukraine. Given the rejection of the offer by main shareholders, potential success of the acquisition was very uncertain and was not even expected by the market, in our opinion. The positive factor is that the offer was not raised. NWR's shares grew by over 2% after the announcement yesterday but these gains were not sustained and the stock closed down 0.5%.

CEZ: Neutral (Analyst: Bohumil Trampota)
CEZ issued 20-year eurobonds, pursuant to the German law, worth EUR 40m carrying a 4.5% coupon. The issue is a part of an exchange of existing bonds (EUR 400m, 4.624%, 2011 and EUR 500m, 5.125%, 2012 and EUR 500m, 4.125%, 2013) announced last week. CEZ is planning to exchange the bonds for new ones, or to carry out a simple buyback without any exchange. The acceptance of a buyback offer is conditioned by success of the new issue. The aim of the transaction is to refinance existing bonds. We consider the news neutral.

The regulator announced average electricity prices for next year. For households the average price should be up 4.6% while the wholesale price should increase by 5.2%, provided solar subsidies are cut. The relevant amendment has been already passed by the Lower House and must now go through the Senate and be signed by President. If the amendment is not passed, electricity prices for households will go up 11.2% next year and for companies by 14.5%, on average. This is however not expected and the bill should be enacted without any problems. PM Necas has indicated several times that a year-on-year increase in prices should reach 5.5% at the most. We consider the regulator's decision neutral.