Czech nuclear utility CEZ may rescue Germany?

Concorde said CEZ, second only to Électricité de France SA in terms of export volume, is going to benefit from the German shutdown via increased production and last week upped its recommendation on the utility to “overweight” from neutral and maintains a target price of 1,002 koruna.

To make up for the loss of 20% of their electricity, Germany is already planning to construct twenty new dirty coal-fired plants. Plus, of course, to waste vast sums on “renewables”. This makes Germany an outcast in the community of nations who are striving to decarbonize their economies – e.g., the UK who is doing hard lifting, not just feel-good gestures.

To avoid becoming the black sheep of the EU, it seems to me that Germany and Switzerland have two options:

  1. reverse their policies to fast-build nuclear (instead of killing off their biggest zero carbon base load energy)
  2. or, buy green nuclear electricity from their more intelligent neighbors

France is already supplying nuclear electricity to Germany. Ditto Sweden. But what about CEZ, the Czech power company? Their shares have been hammered by the anti-nuclear hysteria. Could CEZ be a sound and green investment? Here’s a bit of background on CEZ at WSJ:

Panicky investors, worried about euro-zone debt, global economic gloominess and plunging stock markets, may have let recent antinuclear sentiment and the hunt for havens get the best of them.

Analysts say shares in Czech-based power company CEZ AS, central Europe’s biggest producer of nuclear power, have fallen too much amid the recent German-led backlash against atomic energy. They predict the stock price will recover later this year as the furor over nuclear energy dies down and the Europe Union discusses exemptions to regulations covering carbon-dioxide emissions.

Antinuclear sentiment following the tsunami-related shutdown of Japan’s Fukushima Daiichi reactor in March led Germany to shut down eight of its own nuclear reactors and phase out the remaining plants by 2022. The Swiss and the Italians also froze plans for nuclear-reactor construction.

The German action initially led to a spike in electricity prices and allowed CEZ to boost electricity exports. Yet some investors feared the company could succumb to the pressure to abandon nuclear generation, meaning the end of a $25 billion plan to build up to five new reactors.

The Czech government, which holds 70% of CEZ shares, said it was committed to nuclear power, and CEZ said plans to build more reactors are on track.

Another dent is a European Commission inquiry into the Czech utility for possible anticompetitive behavior, a charge CEZ denies. Such a finding could result in a forced asset sale or fines.

Between May 13 and July 18, CEZ shares fell 13%, sharply underperforming the 6.3% fall posted by the Prague Stock Exchange’s PX index in the same period. It has since recovered somewhat.

“Some international investors may not pay attention to [the] Czechs still supporting nuclear power. These investors might think Germans are against nuclear, so Europe will be against it, too,” said Teresa Schinwald, an analyst at Raiffeisen in Vienna who has a “buy” recommendation and target price of 1,050 Czech Koruna ($60.93) on CEZ. “It seems like a perception problem rather than a practical one.”

The CEZ listing page on Prague exchange.