ČEZ becomes bountiful dividend payer

15-05-2015

ČEZ has ditched its long held dividend policy to become a much more generous payer to its shareholders. Different arguments are advanced, but the basic one is that this is what the finance minister wants.

Daniel Beneš, photo: Filip JandourekDaniel Beneš, photo: Filip Jandourek The bosses of most big companies are consummate actors and have no doubt gone through the public presentation courses.

ČEZ boss Daniel Beneš is no exception to the rule. But when he started to explain the change in the company’s dividend policy at a media press conference this week, the words somehow didn’t match up with the body language.

State-controlled ČEZ says it is upping its dividend payments from the previous norm of 50-60 percent of net profits to the new higher level of 60-80 percent. Actually, the recommendation going forth to the next general meeting of shareholders is that 2014’s dividend comes in at 73 percent.

Beneš and his board point out that ČEZ is one of the least indebted European energy companies and can well afford the new found largesse in its pay-out policy. There are no acquisition targets on the near horizon that would cause the cash to be stored on the company account rather than being paid out, they add. Even so, they admit that there was a long and hard discussion before the latest dividend proposal was arrived at.

Comparisons with the dividend payouts of European energy peers are rolled out. The main message from these seem to suggest that ČEZ was rather mean with its shareholders before and is now seeking to be near the top of the table as regards payments. Only one of the other nine power giants, Finland’s Fortum has an upper dividend payment policy as high as 80 percent and its gives itself a lower floor of 50 percent.

ČEZ new found generosity rings a bit false on two counts. Electricity prices are still low and forward sales for the next three year ahead give no indication of a significant recovery so the company’s net profits are set to stay at around the same level of around 27 billion crowns predicted for this year. And the horizon clear of acquisitions, well ČEZ admitted that Swedish power company Vattenfall could put some its German power plants up for sale in the autumn and possible future role in Slovakia’s Slovenskė Elektrárne is also being counted on.

Of course, the elephant in the room at Tuesday’s press conference was finance minister Andrej Babiš, Babis famously suggested that 100 percent of ČEZ’s profits could be handed over to shareholders in the form of dividends. This year’s proposed dividend is around half way towards what he was calling for compared with past policy though it’s a moot point whether Babiš will philosophically find that beer glass half full or half empty.

The funny thing is that Babiš will probably have to countersign the Czech Republic’s new energy policy in a week or two. That will call for more nuclear construction and in all likelihood ČEZ will be recruited to push through the construction and contribute cash to at least some of it. So the dividend windfall could start eroding pretty quick if that scenario plays out.

15-05-2015