ČEZ sees slide in second half results and ongoing nuclear problems

Falling electricity prices and more outages from nuclear plants was the rather sombre takeaway from Czech electricity producer ČEZ’s half year results on Tuesday.

Photo: Michal Malý, ČRo

But there was good news, compared with its power generating European peers ČEZ might not appear to be doing that badly with ratings agency Standard and Poor’s keeping its evaluation at A minus with stable outlook. ČEZ highlighted the fact that only France’s Ėlectricité de France has a better rating among the big energy companies.

But back to the nitty gritty and half year operating profit around seven percent lower at 33.1 billion crowns, net profit down around 10 percent at 13.8 billion crowns, and net profit with exceptional factors removed down around four percent at 14.8 billion crowns.

ČEZ produced almost as much electricity as during the first six months of 2015, just one percent lower at 31.8 TWh. Distribution to customers, mostly in the Czech Republic, slightly increased although that was compensated by a fall in total sales to other final customers. Put simply, with market prices for electricity still sliding, currently around 27 euros/MWh, ČEZ is suffering along with the rest of the energy sector, although thankfully with a lower debt profile than many other companies.

The Czech power company is now predicting net profit for the whole of 2016 at 18 billion crowns. That’s down yet again on the 20.5 billion for 2015, boosted to a final 27.7 billion to take account of exceptional earnings.

Looking ahead, ČEZ has pre-sold around 80 percent of its expected electricity production for 2017 at an average price of 31 euros/MWh, a healthy margin above current market prices. Around half of production for 2018 has also been hedged, although at the lower price of 29.5 euros/MWh with 2019 advances sales covering just over a quarter of production expectations and prices rebounding back to the levels being commanded for next year. So, some signs of a firmer market at least there.

But ČEZ is dealing with other headaches as well, most notably the stepped up safety checks caused by past flawed supervision of welds at its oldest Dukovany nuclear power plant. Prolonged outages due to new checks and the fact that it’s now seeking a renewal of the operating license for the second unit at Dukovany have cut its estimate for nuclear power produced this year to 26.4 TWh from May’s forecast of 28.7 TWh. The checks are being carried out at Temelín as well though not connected with any pressing licensing issues. And at Dukovany the licensing issues and safety checks will continue into 2017 with the third and fourth units being the main focus of attention. Much of the shortfall of power production will be covered by ČEZ’s coal fired power plants with one bit of good news the pending completion of the modernisation of three units at Prunéřov adding a further 40 MW of power capacity at each.

Meanwhile, ČEZ casts around for new investment opportunities, mostly renewables. The new Polish government has made negative noises about its support for the sector so the prospects there could be less promising but Germany still appears a safe bet.