Milking the CEZ beast
ČEZ is expected to announce record 2009 net profit tomorrow, but Jan Ondřich of Candole Partners says in an enlightening (and expensive) new research report that ČEZ's future profitability is at risk. Protracted, costly extensions or renewals of domestic energy sources may burden its free cash flow, Ondřich said, parts of which are tied up in underperforming foreign acquisitions. ČEZ is making most of its profit at home, but its domestic production fleet is languishing. As if this weren't enough, word is that ČEZ is now coming under pressure from Supervisory Board Chair Martin Kocourek of ODS to invest heavily into solar power. The idea is to pay Kč 80m per MW of solar capacity, giving an instant profit of Kč 20-30m per MW to well-connected politician-investors. More money for solar means less money for nuclear and coal, and for the related interest groups. ČEZ is a cash cow for many people. For the first time, there's a real risk that overmilking will lead to a perceptible medium-term decline in the beast's net output.
Glossary of difficult words
discloser - Erik Best of the Fleet Sheet provided limited input to Candole Partners' research report about ČEZ but has no financial interest in it;to milk - to exploit or defraud, usually by taking regular small amounts of money over a period of time;
protracted - lasting for a long time or longer than expected or usual;
to burden - to put pressure on; to cause hardship or distress;
free cash flow - cash available after financing operations and investments;
underperforming - performing less well than expected;
to languish - to decline, deteriorate;
cash cow - a business, investment or product that provides a steady income or profit;
to overmilk - to milk or extract too much from something.