(Company corrects throughout comments on seeing profits
possibly rising back to record 2009 levels in 2012 not 2011)
(For other news from the summit click on
http://www.reuters.com/summit/GlobalEnergy10?pid=500)
* Higher power prices could boost 2012 profits
* Nuclear power, profits from abroad could help 2011
* Carbon permits to rise to 20 eur/tonne possibly this year
* 2012 power prices to rise on coal, gas, carbon permit
* CEZ interested in Evonik's power plant in Iskenderun
(Adds comments from executive, background, details)
By Peter Dinkloh
LONDON, May 27 (Reuters) - Czech utility CEZ <>,
the largest listed company in central Europe, believes operating
more efficiently could help stabilize profits in 2011 while
higher power prices could boost 2012 results.
A higher share of profitable nuclear power and a growing
contribution from units abroad could also help stabilize 2011
earnings before potentially rising back toward record levels in
2012, said Alan Svoboda, executive director for sales and
trading.
"If electicity prices rise, then it means that from 2012 we
can expect that the results will grow further, and therefore
return to the level of this so-far-record year 2009," Svoboda
told Reuters.
As the Prague-based power producer has already sold 70
percent of the electricity it will generate in 2011 -- and
bought the necessary commodities -- profit from its main
business are very much fixed, he said.
For 2012 CEZ sees a much clearer trend after it pre-sold
most of its 2011 power at prices around 2 to 3 euros per
megawatt hour lower than what it has booked for 2010.
"We will benefit from higher proportion of nuclear
production, further cost cutting and contributions form abroad,
which means that the year 2011 will be very much similar to the
2010," he said.
The company is holding back from selling power it will
produce in 2012 in order to be able to benefit from that
expected increase in prices, he said.
CEZ generated record earnings before interest, taxes,
depriciation and amortization (EBITDA) of 91.1 billion Czech
crowns ($4.37 billion) in 2009 and forecasts EBITDA to drop 3
percent this year.
Utilities in Europe -- and their investors -- have to rely
on rising prices to escape the fall in power consumption that
has hit the industry since 2009.
Earnings in the sector have remained broadly stable as
companies sell most of their power up to three years before it
is produced but investors anticipate a drop in earnings once
lower prices and demand feed through.
While other sectors are recovering already, power providers
are still struggling with a drop in industrial production to
levels last seen 10 years ago.
CEZ is betting on higher prices driven by higher costs for
commodities to escape that downturn.
Emissions certificates -- allowances to emit the greenhouse
gas carbon dioxide -- could rise to 20 euros for each tonne of
carbon dioxide "soon", Svoboda said, without being more
specific. That would be a 30 percent increase to Thursday's
price of 15.57 euros <CFI2Zc1>.
Gas prices will also pick up as more liquefied natural gas
will go to Asia -- instead of Europe, ending the oversupply
there and as gas providers such as GDF Suez <GSZ.PA> renegotiate
their contracts with suppliers, reflecting lower demand, Svoboda
said.
TAKEOVER OPPORTUNITIES OF THE DOWNTURN
The downturn of the sector might lead to opportunities for
takeovers.
The sales of stakes in Polish utilities Enea <ENAE.WA>, PAK
and Energy by the Polish government might be interesting for CEZ
as there are few bidders, Svoboda said.
CEZ, like other utilities, is looking at expanding in the
growing Turkish power market and is looking at the power plant
in the southern Turkish city of Iskenderun which the German
conglomerate Evonik [] is selling, Svoboda said.
The plant is interesting as there are few bidders for it,
while the other businesses from the former coal miner are of no
interest to CEZ, he said.
(Additional reporting by Michael Kahn and Jan Korselt in
Prague, Daniel Fineren in London; Writing by Peter Dinkloh)
