Analysts: Czech government comments on nationalizing ČEZ may be behind share slump

Comments by members of the Czech government confirming their willingness to nationalize the company may be behind the decline in shares of partly state-owned ČEZ, whose price today fell by the most in several years. Analysts contacted by the Czech News Agency (ČTK) agreed. They said the imminent arrival of Czechoslovak Group shares on the Amsterdam stock exchange may also have played a role. ČEZ shares were down almost 12 percent after 15:00 today, following a 4.3 percent decline on Monday.

The trigger for the slump was a report by Morgan Stanley, which recommended reducing the shares in portfolios and set a target price of Kč 880, XTB analyst Tomáš Cverna told ČTK. When the report was published, ČEZ shares were priced at Kč 1280 on the Prague Stock Exchange. The market's reaction to the ministers' comments may seem paradoxical, he said, given that investors had previously driven share prices higher in anticipation of the state buying shares from investors.

Several factors may be behind the share decline, according to Wood & Company broker Vladimír Vávra. First, Industry Minister Karel Havlíček (ANO) confirmed the government's plan to nationalize the company over the weekend. He also said the entire process could take 18 to 24 months.

"That may have made some investors, particularly speculators, nervous. If the government wanted to begin the process this year, the individual steps would have to be put to a vote at the annual general meeting in June," he noted.

Investors may have interpreted the information to mean that no dividend would be paid this year, added Fio banka broker Pavel Hadroušek.

According to Vávra, another factor may be the Czechoslovak Group share offering. Although it will take place on the Amsterdam stock exchange, some regional investors may be freeing up funds for a possible participation by selling the most liquid Czech stock.

ČEZ shares saw their biggest fall today since the end of June 2023, when they first traded without entitlement to a record dividend, Trinity Bank analyst Lukáš Kovanda noted. In his view, the exceptional decline cannot be attributed solely to Morgan Stanley's negative assessment on Monday or to the generally bearish mood in markets toward European stocks amid the threat of a new round of trade war between Europe and the US.

The state holds around 70 percent of ČEZ shares through the Ministry of Finance, with the remainder owned by minority shareholders. By buying out the minority shareholders' stake, the state would become the sole owner. The current government, made up of ANO, SPD and Motorists, says in its policy statement that it will take steps to gain full control over power generation within the ČEZ group.

"We will not delay this; we have a specific plan prepared for how to proceed," Havlíček said on Sunday.

The process will begin in the coming months, he said. "It is a process that will take a year and a half to two years. The main work will not take place in 2026, but that does not mean specific preparatory steps will not begin," he added. The government will provide information about specific steps later, according to Havlíček. He does not want to disclose details because such information could affect the share price on the stock exchange and lead to speculation.