CEZ to Complete Acquisitions in Ukraine and Russia

CEO Martin Roman of CEZ AS, the Czech Republic’s biggest power company said yesterday the acquisitions will be closed soon, in “not too many months.” CEZ was in negotiations with VS Energy (VSE) to acquire stakes in eight Ukrainian regional electricity distribution companies (oblenergos). CEZ plans to spend all its free cash until 2009 on acquisitions in central and southeastern Europe. Alexander Paraschiy: The only problem for CEZ in completing the transaction is the price: CEZ is rumored to have proposed USD 400-450 mln for stakes in VSE Oblenergos, while Mikhail Spector, head of VSE Ukraine, valued these stakes at USD 800 mln. We believe the final price will be much lower than VSE’s asking price, since we expect a significant decrease in the profitability of VSE’s key assets in 2008: Kirovogradoblenergo (KION: HOLD), Zhytomiroblenergo (ZHEN: BUY), and Sevastopolenergo (SMEN: HOLD).