* Volume of eurobond issues similar to last year
* CEZ to offer buyback of bonds maturing in 2012, 2013
* Net debt to rise towards 2.5xEBITDA in the next few years
* Prepares for a longer period of low power prices
By Jan Korselt
PRAGUE, Jan 14 (Reuters) - Czech electricity producer CEZ
<> plans to tap the eurobond market again for an
approximate net 1.25 billion euros ($1.68 billion), to help fund
its pared-down investment strategy.
In an interview with Reuters, CEZ Chief Financial Officer
Martin Novak also fleshed out plans to raise debt as a
proportion of earnings.
CEZ's debt is one of the lowest among large power utilities
in Europe, which are slowly recovering from the economic crisis
that dampened demand for electricity.
CEZ has slashed its investments plans for the next five
years by around one third due to falling electricity prices,
that deteriorated profits and cash generation, while it still
plans to keep up borrowing.
Novak said in the interview on Thursday that CEZ would raise
debt by an equivalent of up to one year's EBITDA in the next few
years to help finance its 300 billion crown ($16.56 billion)
investment plan.
He said CEZ, the biggest central European listed company
with market capitalisation of $24 billion, would raise the net
debt/EBITDA ratio to 2.3 to 2.5 from the current 1.5, towards
the upper end of its 2.0-2.5 target.
According to data provided by CEZ, the average debt ratio in
the European power industry is 2.7 times EBITDA.
The firm has forecast profit before interest, tax,
depreciation and amortisation (EBITDA) at 88.7 billion crowns
for 2010. Results are due on Feb. 28.
"We will certainly issue some bonds this year... it will
probably be eurobonds, which is a natural hedge for our revenues
in euros," Novak said. "We expect issuance volume like last
year. Timing will depend on the market."
Novak said CEZ would likely stick to its usual size of
500-750 million euros per issue. He said issuance may be higher
if many investors take up the planned buyback offer.
"We will gradually shift to the optimum (level of debt) in
the next few years, as the investment programme is implemented,"
Novak said.
"We have a large room there thanks to our low indebtedness."
CEZ, rated A- by Standard & Poor's, issued 1.5 billion euro
bonds last year, partly to cover a buyback of 246 million euros.
Novak said CEZ would offer to buy back this year its debt
maturing in 2012 and 2013.
CEZ stock traded at 834 crowns on Friday, above its 19 month
low at 736 crowns in November 2010. The shares have dropped by 9
percent over the past 12 months, underperforming a 4 percent
rise in Prague bourse's PX index <>.
INVESTMENTS CUT, PRICE RECOVERY SLOW
CEZ has backed away from ambitious acquisition plans,
withdrawing from tenders for assets in Poland and Germany, and
gave up on 9.15 stake in a consortium planning to build two
nuclear reactors at Romania's Cernavoda plant.
Last year, CEZ postponed a tender for expansion of its
nuclear plant Temelin, due to uncertainty on power markets.
The new investment plans focus on modernising coal plants in
the northern Czech Republic and building gas-fired power
stations in the Czech Republic, Slovakia and Hungary.
Novak said baseload electricity prices, despite a slight
rise over the past weeks above 50 euros per megawatthour, were
still relatively low.
Electricity prices in the region are driven by marginal
production costs in gas-fired plants in Germany, depressed by a
surplus on the natural gas market. That has also pressured
prices of CO2 emission credits.
"The downside is substantially lower than the upside, that
is clear," he said, but added he saw no quick rise.
"Now it looks it (the recovery) will rather happen over the
medium term. It seems the bottom will be longer."
He said in the longer run, power and gas prices should
regain links with oil from which they have decoupled in the
economic crisis.
CEZ has sold most of its 2011 baseload capacity for an
average of 52 euros, down from 54 euros in 2010.
(Editing by Erica Billingham)
