ČEZ sees higher than expected 2015 profit but still suffers from low power prices

The Czech Republic’s biggest energy company ČEZ wound up what’s been a difficult 2015 with the announcement of its full year results on Tuesday. The good news is that the final net profit figure came in 700 million crowns ahead of its latest expectations at 27.7 billion crowns. The bad news is that the golden goose company now looks like its producing pretty ordinary eggs with its profits still undermined by falling electricity prices.

Photo: ČT24

Already low wholesale electricity prices, basically the prices for electricity on the open market, have fallen by a third over the last year to average at around 21.5 euros/MWh in February. Cast your mind back not so long ago and those prices were around 80 euros/MWh, around four times as high.

It could, of course, have been worse. ČEZ pulled out the stops at its coal-fired power plants last year to make up for the long time shutdowns of its nuclear plants, especially Dukovany. The final electricity production figure for 2015 was as a result just a modest 3.0 percent lower at 60.9 TWh.

Photo: Ladislav Bába, Czech Radio

For 2016, ČEZ predicts its overall group electricity production will climb to 67.8 TWh but it expects electricity prices to remain low. Most of that increase will come from coal fired power plants with output seen rising 14% to 33.2 TWh. Production from nuclear power plants should climb 12% to 30.0 TWh with most of the problems from 2015 now solved. As a result, final net profit for this year is expect to slide even further to 18 billion crowns.

As far as forward prices for electricity are a guide to the future, ČEZ’s hedged sales for both 2017 and 2018 average out 31.5 euros/MWh before rising to 34.5 euros/MWh in 2019 and 38.5 euros/MWh, albeit with pre-sold volumes for the last two years just above 10 percent of the volumes earmarked.

Photo: Kristýna Maková, Czech Radio - Radio Prague

ČEZ points out in its latest results that it is still performing better than most of its European peers thanks to lower debt level, good housekeeping, and cost cutting. But it is still casting for ways to boost its turnover and profits for the future.

With that in mind, the company announced that it has set aside and extra 50-60 billion crowns for investments in new energy, mostly wind and solar, from 2016 to 2020 with acquisitions targeted in particular for the stable German market. It now says it wants to become a major player in the European renewables market in terms of both the capacity owned and profitability of facilities.