EZ: Conference call after 3Q results – insight, restructuring, tender, foreign tax and dividends

Insights into the year: The main reasons for the external insight of EBITDA are the better than two budgeted results from trading, better results in sales and distribution and the availability of nuclear resources. Certain profit was not taken into account due to the influence of extraneous taxes. CFO made a certain profit in the original range, even if it went towards the upper limit of the spread.

Potential restructuring: EZ currently does not see an active discussion about possible restructuring. The management would see it as necessary to move the construction of nuclear power plants to the site, if they are to be built, they will give you large blocks in addition to the currently planned one block in Dukovany.

Dukovansk tender: EZ will evaluate the received offers by November 2024 and submit them for approval. The current contract with the government ends at the end of 2024, by which time the contract with the supplier and the subsequent contract for financing and CfD/PPA from the government should be signed.

Special day: However, I have no information that the government is working on changes to the salary legislation (WFT salary until 2025). M&A: EZ confirmed the acquisition of natural gas distributor GasNet due to potential synergies, but did not give details.

Dividends: The CFO stated that it is too early to talk about an official dividend policy (60-80% payout ratio), but EZ would again call for a high dividend payment in case of high cash flow and small investments. EZ usually targets the upper limit of the valid range.

According to us, the discussion on the outlook for the whole year 2023 confirmed that the EZ’s profit would reach the upper limit of the tariff range (K37 billion) by the end of the third quarter. While the management does not comply with the change in the dividend payout ratio, the government usually takes 100% of the dividends from certain profits. According to our estimate, this would mean a five-year dividend of K69 per share. The restructuring of the company does not seem to be too bad at the moment. The new block in Dukovany is a very important project. EZ should, as soon as possible, focus on the accelerated construction of gas sources to replace aging coal and negotiate support for this construction in the form of capacity payments from EPS.

Petr Brtek, analyst