CEZ May Seek Investor for $10 Billion Temelin Reactor Project

27.01.2012 10:32

Bloomberg: CEZ AS (CEZ), the largest power producer in central and eastern Europe, will consider bringing in an investment partner to help finance a $10 billion project to build two reactors at the Temelin nuclear power station.
“It’s one of the options we are actually assessing,” Martin Novak, the chief financial officer of CEZ, said yesterday in an interview in his Prague office. “We are definitely looking at models of how nuclear plants are built today in Europe. We are looking at forms of sharing the risk.”
The Prague-based utility is in the process of choosing a supplier to build two reactors in Temelin from Westinghouse Electric Corp., France’s Areva (AREVA) SA, and a Russian-Czech consortium led by Rosatom Corp.’s unit Atomstroyexport. The winner of the tender will be picked by the end of next year and construction should start no later than 2016, Novak said.
The reactors are intended to replace CEZ’s aged coal-fired plants, reduce carbon dioxide emissions and solidify the Czech Republic’s position as a regional power exporter. CEZ increased sales to Germany last year after Chancellor Angela Merkel ordered the shutdown of some of the country’s oldest reactors following the Fukushima disaster in Japan.
The shares rose as much as 1.9 percent and were up 1.2 percent to 760 koruna at 1:58 p.m. in Prague, rebounding from a three-day slump.
While CEZ is capable of financing the construction of Temelin units 3 and 4 on its own through a combination of cash flow and debt, inviting another investor remains an option because it would leave the Czech utility a freer hand to invest in other projects, according to the executive.
Set Aside Cash
“Companies might prefer diversification of their portfolios, so they better do such projects with somebody,” Novak said. “They set aside cash for good acquisition opportunities such as when distressed companies are selling assets.”
Cash flow remains the main source for financing the Temelin project, he said. CEZ, whose current debt-to-earnings ratio is about 1.8, plans to raise cash on the bond market and bring the debt level up to 2.3 later in the decade to fund the construction, he said.
The debt level will initially drop between now and 2016 as the company’s spending on conventional power plants at Tusimice, Ledvice and Pocerady eases off and the plants begin to generate cash, Novak said.
“We are already the least indebted power utility in Europe, and after we go through our capex program by 2016 we’ll have a much lower debt,” Novak said. “If you want to enter such a lengthy project that doesn’t generate any cash flow until it’s fully commissioned, you need to be in perfect shape before you start.”
Retain Rating
The company’s aim is to retain its A debt rating and pay out dividends while building the Temelin reactors. CEZ is also examining forms of potential government support such as feed-in tariffs for nuclear energy that would reduce investment risk and create conditions for stable income from the new reactors, he said.
“We are looking at models that are being used in Europe and the U.S. for such projects,” Novak said. “There are many options. We are just at the beginning, there is no one single way to go.”
CEZ is also carrying out a feasibility study to build another reactor at its Dukovany nuclear plant, though not before completing Temelin, the director said. The company has also commissioned a feasibility study for additional reactors at the Slovak nuclear plant Jaslovske Bohunice through a joint venture with Slovak state nuclear company Javys.
reporter on this story: Ladka Bauerova in Paris
editor responsible for this story: Will Kennedy