(Bloomberg) -- Shares in the Czech Republic’s dominant power utility CEZ AS dropped to the lowest level in almost four months, pulled down by continued political maneuvering around the state-controlled company.
CEZ shares closed down 2% in Prague on Wednesday, extending losses triggered by signals from the government that it’s no longer considering ending a windfall tax before its original expiration date. The biggest traded electricity producer in eastern Europe has declined 10% this year, trimming its market value by the equivalent of about $2.3 billion to current $21 billion.
“CEZ is a great company, but it’s burdened by irrationally high windfall tax, which represents around 10% of its revenue,” said Michal Semotan, an equity analyst at J&T Investicni Spolecnost AS in Prague. “You don’t have many reasons to buy at the current price. The end of the windfall tax is too far away.”
The utility has long been engulfed in political interference, which centered around efforts to boost state control over energy assets, plans to build more nuclear reactors and secure extra funding for the budget. The latest blow came from Finance Minister Zbynek Stanjura, who said he no longer plans to propose the earlier abolition of the special levy that was approved for the largest energy companies and banks for 2023-2025.
While Stanjura had floated an idea to end the windfall tax one year earlier, he said last week that the levy must stay in place because the overall revenue from the measure still hasn’t covered the state’s expenditure on mitigating the impact of Europe’s energy crisis.
The government is trying to balance rising spending on infrastructure projects and defense with a promise to cut the fiscal deficit, and the windfall tax represents a significant portion of extra budget revenue.
CEZ, in which the state holds about 70%, contributes by far the largest part of the government’s income from the windfall tax, which has triggered clashes between the Finance Ministry and private investors.
(Updates with closing price in second paragraph.)
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