CEZ stake freeze in Luxembourg not to affect firm's activity-analysts

Prague, Oct 13 (CTK) - The freezing of stakes held by Czech semi-state energy group CEZ in Luxembourg-based companies through which CEZ owns gas distributor GasNet will have no significant impact on the firm's operations and its shares' price, according to analysts polled by CTK.

The Luxembourg court's decision to freeze the stakes stems from Czech-Swiss businessman Josef Stava seeking around CZK17bn in compensation from the state in the Diag Human case. CEZ said that the move by the Luxembourg authorities is unlawful and vexatious. The company said that it had nothing to do with the Diag Human case and that it will file lawsuits against the decision.

"This is not harassment, let alone harassment directed at CEZ, but the long-delayed enforcement of a creditor's rights against a debtor. The core of the problem is the conduct of the debtor, the Czech Republic, which refuses to meet its obligations as ordered by final judgments of an independent court," the law firm of Jan Kalvoda, which represents Diag Human in legal matters, told CTK today.

The Czech Finance Ministry is a party to the dispute with Diag Human before the Supreme Court in London over the annulment of an arbitral award issued in an international investment arbitration in spring 2022, which the Czech Republic disputes. The ministry told CTK today that it is not a party to the current proceedings in Luxembourg.

From an operational perspective, the impact on CEZ is practically zero, XTB analyst Tomas Maxa told CTK. The freeze applies exclusively to the exercise of ownership rights at the holding company level, which means that CEZ is currently unable to formally sell or transfer these stakes. According to Maxa, the situation could cause short-term nervousness and slight downward pressure on the shares, but CEZ has already announced immediate legal steps to defend itself, which could clarify the situation in its favour. In the longer term, Maxa does not expect the legal dispute to have a significant impact on the company's share price. The shares are rising today.

"The decision concerns only CEZ's Luxembourg assets. However, from our layman's perspective, it will have no impact on business in the Czech Republic. It should not in any way restrict the operations and cash flows of the companies," Komercni banka analyst Bohumil Trampota said. Diag Human has no legal claims against CEZ. These should be directed exclusively against the Czech Republic, not CEZ, Trampota added.

CEZ received notice from a Luxembourg bailiff regarding the issuance of two decisions concerning Czech Gas Networks S.a r.l. (CGN), in which CEZ holds a roughly 55 percent stake, and Czech Gas Networks Investments S.a r.l. (CGNI), which is wholly owned by CGN. CGNI owns Czech company Czech Grid Holding, which in turn owns GasNet and GasNet Sluzby. The Czech government is the majority owner of CEZ, with a stake of about 70 percent.

According to CEZ, the decisions follow steps taken by Diag Human in Luxembourg in connection with the compensation it is seeking from the Czech state. "According to the notice, these decisions restrict CGN and CGNI from disposing of assets belonging to the Czech Republic and CEZ that are held by these companies," CEZ said.

The Diag Human case broke out in 1991, when the Czech Health Ministry announced a tender for blood plasma processing. It reached a preliminary agreement with Novo Nordisk and Conneco, which later became Diag Human. In 1992, the then Health Minister Martin Bojar informed Novo Nordisk that it had not won the tender, and a letter from the ministry to Novo Nordisk expressed doubts about Conneco's reliability. Stava has been in litigation with the Czech Republic ever since. A London court ruling last year upheld Stava’s claim.

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