Prague Stock Exchange chief warns: nationalizing ČEZ would be a heavy blow

A possible nationalization of energy giant ČEZ, which Prime Minister Andrej Babiš's current government is planning to carry out before its term ends, would deal a serious blow to the Prague Stock Exchange. That's the assessment of exchange chief Petr Koblic.

According to him, such a blow could have been fatal just two or three years ago, potentially relegating the Prague exchange to the ranks of minor players like the Bratislava bourse. "But we're a bit stronger now," Koblic noted.

The state currently holds 70 percent of ČEZ shares. One scenario under consideration involves buying out the remaining 30 percent from minority shareholders and subsequently delisting the company. ČEZ accounts for more than a fifth of the exchange's main index, and on some days trading in its shares makes up over half of total turnover. "No one is happy to lose their biggest client," the exchange chief admitted.

The previous Spolu-STAN coalition government had also considered nationalizing ČEZ but ultimately abandoned the idea. Koblic explained that at the time, buying out private investors risked dropping the Prague exchange's index from the so-called emerging markets category — which includes countries like China, Taiwan, Turkey and Hungary — down to the frontier markets tier, alongside Vietnam, Croatia, Kenya or Morocco. A resulting drop in investor interest could have triggered an outflow of several billion dollars from the Czech market.

The situation is different now, Koblic believes. Any decline in the index following ČEZ's departure from the exchange could be offset by listing its subsidiary ČEZ Energy, which handles energy distribution and trading, as well as a possible partial privatization of Prague Airport. The exchange chief also thinks other state enterprises would benefit from going public, citing ČD Cargo and the Budweiser Budvar brewery as examples.

The Prague Stock Exchange already has examples of companies that have significantly boosted their value in recent years. Arms manufacturer Colt, for instance, had a market capitalization of around 15 billion crowns two years ago, and today it's approaching 50 billion crowns.

Koblic called the ideal scenario one in which both ČEZ and its subsidiary ČEZ Energy remain listed on the exchange simultaneously. He noted that the government justifies ČEZ's nationalization on energy security grounds. However, in the exchange chief's view, minority shareholders don't pose nearly as serious an obstacle to completing new nuclear power plant units as Industry and Trade Minister Karel Havlíček (ANO) claims.

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Around Prague, based on reporting by novinky.cz