Jiří Filip Price ceilings on energy commodities certainly arouse a lot of interest. XTB analyst Jiří Tyleček answers whether the government is going in the right direction, what are the risks of the proposals and what effects can CEZ shareholders expect.
In recent days, the Czech government has set price limits on electricity and gas prices. Do you think this is a step in the right direction?
The measures are certainly going in the right direction. Households and companies must be supported in times of crisis, and the population must be freed from fear of the future. Unfortunately, there is still no definite form of support. Legislation still needs to be changed to pass the package of changes.
Price ceilings for electricity and gas, however, also mean a blank check to the state treasury. Aren't you afraid of high debt?
It is certainly true that if the situation on the energy market calms down, the state should withdraw from subsidies. Experience shows that canceling benefits is very politically sensitive, and it's true, I'm afraid that we won't run into high budget deficits for years to come.
A number of economists also warn that any price ceiling can trigger a dangerous situation of a sudden shortage of the given product. Are these concerns valid and could there be other risks with this measure?
Price ceilings are non-market measures that often have high costs. In the short term, its introduction may be beneficial in extreme situations, but in the long term it is a road to hell. A cap can prolong the crisis, even ultimately make it worse. The government has to be very careful.
How much can capping the price of electricity affect the economy and CEZ shares?
This is a good question, and unfortunately there is no clear answer yet. It is still not certain how big a cash cow the state will make of České Budějovice. According to the latest documents, the European solution to ceiling prices for producers should also mean the impossibility of introducing additional taxation, the so-called windfall tax. The ceiling of €180/MWh for electricity produced without gas is still much higher than what the company has sold electricity for this year and next year. And the retroactive taxation of this year is also still uncertain. But to sum it up, so far it looks like the impact on the company's finances will probably be smaller than expected. But until everything is black and white, there is no certainty.
So do you think that the CEZ share price can still function as such an alternative to the general energy growth?
Unfortunately, Čez shares have suffered greatly in recent months due to the uncertainty surrounding state intervention in the energy sector. I myself hedged against rising energy prices with ČEZ shares in the fall of last year. Although I didn't fare as badly as the peasants at chlumka, I dare say that without the upcoming regulation, their current value would be tens of percent higher. In the upcoming online broadcast on the subject of the Energy Crisis I would like to ask our guests whether it still makes sense to hold CEZ shares, or would it be better to get rid of them.
How could the situation develop in the coming winter?
I trust that we will avoid the critical scenario of a mass shutdown of industry, even if there are more corporate failures. We will manage to overcome the crisis, but we will continue to pay high amounts for energy, either on invoices from suppliers or through an increase in the state budget deficit.
Jiří Tyleček, XTB analyst
He became a fan of financial markets during his studies at university, when he executed his first trades on the stock exchange. After several work experiences, he started working as a financial market analyst at XTB, focusing on commodity trading, led by oil and gold. Within a few years, he expanded his interests to include central banking. He got into Energies through the shares of ČEZ. His current work includes fundamental analysis of currency pairs, commodities, shares and stock indices. Intellectually, he transformed himself from a staunch supporter of the free market to a determined liberal.
