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CEZ and MOL to create power JV

Deals

Czech electrical utility CEZ and Hungarian peer MOL agreed to set up a joint venture to leverage opportunities in a steadily growing electricity market in Central and South Eastern Europe, the companies announced in a press release.

The two companies will have an equal equity interest and voting rights in the new business entity. Combined capacity to be installed by 2013 is 1760MW as a result of an investment of €1.4 billion ($2 billion). The JV will focus on gas-fired power generation in Slovakia and Hungary first, with further possibilities to be considered in the near future, especially in Croatia and Slovenia. CEZ and MOL will create a joint venture, in which each party will have 50% equity interest, equal voting rights and similar split of operational decision making. The JV plans to focus on gas-fueled power generation in four countries of Central and South Eastern Europe, including Slovakia, Hungary, Croatia and Slovenia, the statement reads.

The first major investment is the planned construction of combined cycle gas turbine power plants (CCGTs) at the refineries of MOL group in Bratislava (Slovakia) and Százhalombatta (Hungary). In both locations the installed capacity will be 800 MW. In addition, in Bratislava, the current thermal plant will be modernized and its capacity increased to 160 MW. The expected investment in both projects will be approximately €1.4 billion.

As a part of the JV agreement MOL will contribute its current heat plants and all related infrastructure at both sites. The financing plan for the venture is still subject to discussion but is intended to utilize project financing to the maximum extent possible. To strengthen the strategic alliance, CEZ will purchase 7,677,285 “A” series MOL shares (7% stake) at a Ft 30,000 price. Following the completion of the share sale transaction, MOL will have 1,392,734 “A” series and 578 “C” series ordinary shares.

At the same time CEZ is to sell an American call option with strike price of Ft 20,000 to MOL. The option can be exercised within 3 years from the date of signing. The strategic alliance with MOL brings new growth platform and diversification to the CEZ Group generation fleet via natural gas as low-CO2 fuel. Generation assets will be built in markets where CEZ has no asset presence so far (Slovakia, Hungary and potentially Slovenia and Croatia) and this strategic venture will therefore, in cooperation with MOL Group, significantly strengthen CEZ’s leadership in the power sector of Central and South Eastern Europe, the release reads. (press release)

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