The annual general meeting of state-controlled power producer ČEZ proved to be a contentious one, lasting a record 14 hours and into the wee hours of Saturday. In the end, it saw the ouster of three ČEZ supervisory board members, including its chairman, in a political power play. The AGM also agreed on a dividend pay-out which fell short of demands by some influential minority shareholders.
Before being named chairman of ČEZ’s 12-member supervisory board, respected scientist Václav Pačes headed a government commission tasked with formulating a long-term energy strategy. But when a new government comes to power, heads tend to roll at the energy giant, of which the Czech state is ČEZ’s majority owner.
Prime Minister-designate Adrej Babiš wants to install supervisory board members who share his views on what ČEZ’s priorities should be, and his politics. Mr Pačes was appointed when Mr. Babiš was finance minister and his ANO party a junior partner in a Social Democrat-led coalition government. Now the power balance has flipped, hence the reshuffling of the supervisory board to tilt more in his favour.
The other drama arising from ČEZ’s AGM centred on how big a dividend to pay out on 2017 profits. ČEZ’s management pushed through a CZK 33 per share dividend, the same as last year. Minority shareholders are angry that the value of their assets has not risen along with electricity prices, says energy sector analyst Michal Šnobr, who represents investors close to the powerful J&T group who control over 1% of ČEZ. A CZK 35 dividend would have been in order, Mr Šnobr says:
"For us, it would be a symbolic step, even if not an insignificant one – with ČEZ, a 2-crown difference in the dividend amounts to a billion crowns. But the main thing we’ve been pointing out is that apart from cash flow outlook, there are many key criteria for determining a dividend: for example, the amount of debt and respective interest rate. But as shareholders, above all we have not been satisfied with the management of ČEZ’s assets in recent years. The return on equity, its profitability, has declined steadily for eight years, dropping to a third its original value."
While not opposed to the agreed dividend price, the prime minister, too, has long been critical of how ČEZ is being run. Mr. Babiš also opposes plans to split off ČEZ’s coal-fired and nuclear arms and squeeze out minority shareholders giving them shares in a new company grouping its renewables, distribution, and energy services assets.
CEO Daniel Beneš argues doing so would allow a 100% state-owned ČEZ to build more nuclear plants. If Mr Babiš remains in power long enough, that is unlikely to happen. And since the ČEZ supervisory board appoints and recalls the board of directors, a management shake-up could be on the cards, seeing more heads roll.
According to media reports, Mr. Babiš is willing to repeat the vote and give some seats to the Social Democrats – and the Communists – whose support he will need to win a confidence vote in parliament in mid-July.